Exhibit 10.17
CREDIT AGREEMENT
among
NELNET LOAN SERVICES, INC.
NELNET, INC.
and
BANK OF AMERICA, N.A.,
dated
as of
January 11, 2002
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS...................................................................... 1
Section 1.1. Definitions................................................................ 1
Section 1.2. Other Definitional Provisions.............................................. 12
Section 1.3. Accounting Terms and Determinations........................................ 12
ARTICLE II. LOANS........................................................................... 12
Section 2.1. Commitment................................................................. 12
Section 2.2. Note....................................................................... 13
Section 2.3. Repayment of Loans......................................................... 13
Section 2.4. Interest................................................................... 13
Section 2.5. Borrowing Procedure........................................................ 13
Section 2.6. Prepayments................................................................ 14
Section 2.7. Conversions and Continuations of Loans..................................... 14
Section 2.8. Minimum Amounts............................................................ 14
Section 2.9. Certain Notices............................................................ 14
Section 2.10. Use of Proceeds............................................................ 15
Section 2.11. Facility Fee............................................................... 15
Section 2.12. Computations............................................................... 15
Section 2.13. Termination or Reduction of Commitment..................................... 15
ARTICLE III. PAYMENTS....................................................................... 15
Section 3.1. Method of Payment.......................................................... 15
Section 3.2. Application of Proceeds of Collateral...................................... 16
Section 3.3. Borrowers' Acknowledgment of Benefit and Liability......................... 16
Section 3.4. Joint and Several Obligations Absolute..................................... 17
ARTICLE IV. YIELD PROTECTION AND ILLEGALITY................................................. 17
Section 4.1. Increased Cost and Reduced Return.......................................... 17
Section 4.2. Limitation on Types of Loans............................................... 18
Section 4.3. Illegality................................................................. 19
Section 4.4. Treatment of Affected Loans................................................ 19
Section 4.5. Compensation............................................................... 19
Section 4.6. Taxes...................................................................... 20
ARTICLE V. CONDITIONS PRECEDENT............................................................. 21
Section 5.1. Initial Loan............................................................... 21
Section 5.2. All Loans.................................................................. 22
ARTICLE VI. REPRESENTATIONS AND WARRANTIES.................................................. 23
Section 6.1. Corporate Existence........................................................ 23
Section 6.2. Financial Statements....................................................... 23
Section 6.3. Corporate Action; No Breach................................................ 23
Section 6.4. Operation of Business...................................................... 24
Section 6.5. Litigation and Judgments................................................... 24
Section 6.6. Rights in Properties; Liens................................................ 24
Section 6.7. Enforceability............................................................. 24
Section 6.8. Approvals.................................................................. 24
Section 6.9. Debt....................................................................... 24
Section 6.10. Taxes...................................................................... 25
Section 6.11. Margin Securities.......................................................... 25
Section 6.12. ERISA...................................................................... 25
Section 6.13. Disclosure................................................................. 25
Section 6.14. Subsidiaries............................................................... 25
Section 6.15. Agreements................................................................. 25
Section 6.16. Compliance with Laws....................................................... 26
Section 6.17. Investment Company Act..................................................... 26
Section 6.18. Public Utility Holding Company Act......................................... 26
Section 6.19. Environmental Matters...................................................... 26
Section 6.20. Labor Disputes and Acts of God............................................. 26
Section 6.21. Solvency................................................................... 26
ARTICLE VII. POSITIVE COVENANTS............................................................. 26
Section 7.1. Reporting Requirements..................................................... 26
Section 7.2. Maintenance of Existence; Conduct of Business.............................. 28
Section 7.3. Maintenance of Properties.................................................. 28
Section 7.4. Taxes and Claims........................................................... 28
Section 7.5. Insurance.................................................................. 29
Section 7.6. Inspection Rights.......................................................... 29
Section 7.7. Keeping Books and Records.................................................. 29
Section 7.8. Compliance with Laws....................................................... 29
Section 7.9. Compliance with Agreements................................................. 29
Section 7.10. Further Assurances; Subsidiary Joinder; New Securitization Residual........ 29
Section 7.11. ERISA...................................................................... 29
Section 7.12. Servicing Performance...................................................... 29
ARTICLE VIII. NEGATIVE COVENANTS............................................................. 30
Section 8.1. Debt....................................................................... 30
Section 8.2. Limitation on Liens........................................................ 31
Section 8.3. Mergers, etc............................................................... 33
Section 8.4. Restricted Payments........................................................ 33
Section 8.5. Investments................................................................ 34
Section 8.6. Transactions With Affiliates............................................... 36
Section 8.7. Disposition of Property.................................................... 36
Section 8.8. Lines of Business.......................................................... 36
Section 8.9. Environmental Protection................................................... 36
Section 8.10. Prepayment or Payment of Debt.............................................. 36
Section 8.11. Portfolio Default Rates.................................................... 37
ARTICLE IX. FINANCIAL COVENANTS............................................................. 37
Section 9.1. Consolidated Tangible Net Worth............................................ 37
Section 9.2. Maximum Leverage Ratio..................................................... 37
Section 9.3. Interest Coverage Ratio.................................................... 37
Section 9.4. Pro Forma Fixed Charge Coverage Ratio...................................... 37
ARTICLE X. DEFAULT.......................................................................... 38
Section 10.1. Events of Default.......................................................... 38
Section 10.2. Remedies................................................................... 40
Section 10.3. Performance by the Bank.................................................... 40
Section 10.4. Continuance of Default..................................................... 41
Section 10.5. Setoff..................................................................... 41
ARTICLE XI. MISCELLANEOUS................................................................... 41
Section 11.1. Expenses................................................................... 41
Section 11.2. INDEMNIFICATION............................................................ 41
Section 11.3. Limitation of Liability.................................................... 42
Section 11.4. No Duty.................................................................... 42
Section 11.5. No Fiduciary Relationship.................................................. 42
Section 11.6. Equitable Relief........................................................... 42
Section 11.7. No Waiver; Cumulative Remedies............................................. 42
Section 11.8. Successors and Assigns..................................................... 43
Section 11.9. Survival................................................................... 43
Section 11.10. ENTIRE AGREEMENT........................................................... 43
Section 11.11. Amendments................................................................. 43
Section 11.12. Maximum Interest Rate...................................................... 44
Section 11.13. Notices.................................................................... 44
Section 11.14. Governing Law; Submission to Jurisdiction.................................. 45
Section 11.15. Counterparts............................................................... 45
Section 11.16. Severability............................................................... 45
Section 11.17. Headings................................................................... 45
Section 11.18. Construction............................................................... 45
Section 11.19. Independence of Covenants.................................................. 45
Section 11.20. Tri-Party Accounts......................................................... 45
Section 11.21. WAIVER OF JURY TRIAL....................................................... 45
INDEX TO EXHIBITS
Exhibit Description of Exhibit Section
------- ---------------------- -------
"A" Form of Note 2.2
"B" Matters to be Addressed by Opinion of Counsel 5.1(1)
"C" Borrowing Request 2.5
"D" Compliance Certificate 7.1(c)
"E" Guaranty 5.1(g)
"F" Subsidiary Joinder Agreement 1.1
"G" Security Agreement 5.1(h)
INDEX TO SCHEDULES
Schedule Description of Schedule
-------- -----------------------
6.14 Subsidiaries
8.1 Existing Debt
8.2 Existing Liens; Restrictions on Subsidiaries
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "AGREEMENT"), dated as of January 11, 2002,
is among NELNET LOAN SERVICES, INC., a corporation duly organized and validly
existing under the laws of the State of Nebraska ("NLSI"), NELNET, INC., a
corporation duly organized and validly existing under the laws of the State of
Nevada ("NELNET" and NELNET and NLSI, herein individually a "BORROWER" and
collectively "BORROWERS"), and BANK OF AMERICA, N.A., a national banking
association (the "BANK").
RECITALS:
Borrowers have requested that the Bank consider making loans to
Borrowers from time to time. The Bank is willing to make such loans to Borrowers
upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"ADJUSTED EBITDA" means, for any period (the "SUBJECT PERIOD"), the
total of the following calculated on a consolidated basis without duplication
for such period: (a) Borrowers' EBITDA; plus (b) only to the extent approved by
the Bank and on a pro forma basis, the pro forma EBITDA for each Prior Target
or, as applicable, the EBITDA attributable to the assets acquired from each such
Prior Target, which in either case is approved for inclusion in the definition
of Adjusted EBITDA by the Bank, for any portion of such Subject Period occurring
prior to the date of the acquisition of such Prior Target or the related assets;
minus (c) the EBITDA of each Prior Company and, as applicable the EBITDA
attributable to all Prior Assets, in each case for any portion of the Subject
Period occurring prior to the date of the disposal of such Prior Companies or
Prior Assets; minus (d) restricted cash flow held in Asset Securitizations, net
of effective taxes; minus (e) Permitted Principal Payments paid during the
Subject Period; minus (f) the amount paid during the Subject Period under the
terms of all the participation agreements either Borrower or any of the
Subsidiaries have entered into pursuant to which such party has sold to a third
Person participation interests in student loans it owns; plus or minus (g) other
adjustments approved by the Bank.
"ADJUSTED LIBOR RATE" means, for any Libor Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Bank to be equal to the quotient obtained
by dividing (a) the Libor Rate for such Libor Loan for such Interest Period by
(b) 1 minus the Reserve Requirement for such Libor Loan for such Interest
Period.
"ADVANCE TERMINATION DATE" means January 10, 2003.
"AFFECTED LOAN" has the meaning specified in SECTION 4.4.
"AFFECTED TYPE" has the meaning specified in SECTION 4.4.
"AFFILIATE" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds ten percent (10%) or more of
the voting stock of such Person; or (c) ten percent (10%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by the
Person in question. The term "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event shall the Bank be deemed
an Affiliate of either Borrower or any of their respective Subsidiaries.
"APPLICABLE LENDING OFFICE" means for each Type of Loan, the lending
office of the Bank (or of an Affiliate of the Bank) designated for such Type of
Loan below its name on the signature pages hereof or such other office of the
Bank (or of an Affiliate of the Bank) as the Bank may from time to time specify
to Borrowers as the office by which its Loans of such Type are to be made and
maintained.
"APPLICABLE RATE" has the meaning specified in Section 2.4.
"ASSET DISPOSITION" means the disposition of any of the assets of
either Borrower or any of their respective Subsidiaries, including without
limitation, the disposition of the Equity Interests of any Subsidiary.
"ASSET SECURITIZATION" means the process of monetizing assets through
debt securities or ownership interests issued by a special purpose vehicle and
backed by the assets in a transaction designed to separate the credit quality of
the assets from the credit risk of any entity (other than a credit enhancer)
involved in the transaction.
"BANKRUPTCY CODE" has the meaning specified in Section 10.1(e).
"BASE RATE" means, for any day, the rate per annum equal to the higher
of (a) the Federal Funds Rate for such day plus one-half of one percent (0.50%)
and (b) the Prime Rate for such day. Any change in the Base Rate due to a change
in the Prime Rate or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or Federal Funds Rate.
"BASE RATE LOANS" means the portions of the principal amounts
outstanding hereunder that bear interest at rates based upon the Base Rate.
"BORROWING REQUEST" means a request for the Loan in substantially the
form of EXHIBIT "C" properly completed and duly executed by a financial officer
of each Borrower authorized to deliver such request.
"BUSINESS DAY" means (a) any day on which commercial banks are not
authorized or required to close in Dallas, Texas; (b) with respect to all
borrowings, payments, Conversions, Continuations, Interest Periods, and notices
in connection with Libor Loans, any day which is a Business Day described in
clause (a) above and which is also a day on which dealings in Dollar deposits
are carried out in the London interbank market; and (c) with respect to the
determination of the Federal Funds Rate, any day which is a Business Day
described in clause (a) above and which is also a day on which such rate is
published by the Federal Reserve Bank of New York.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"CLOSING DATE" means January 11, 2002.
2
"CONTRACT RATE" has the meaning specified in Section 11.12.
"COLLATERAL" means the property in which Liens have been granted
pursuant to the Security Agreement, whether such Liens are now existing or
hereafter arise.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COMMITMENT" means the obligation of the Bank to make Loans hereunder
in an aggregate principal amount up to but not exceeding $30,000,000, as the
same may be reduced or terminated pursuant to Sections 2.13 or 10.2.
"COMPLIANCE CERTIFICATE" means a certificate in substantially the form
of EXHIBIT "D" properly completed and duly executed by a financial officer of
each Borrower authorized to deliver such certificate.
"CONSOLIDATED NET INCOME" means, for any period and any Person (a
"SUBJECT PERSON"), such Subject Person's consolidated net income (or loss)
determined in accordance with GAAP, but excluding any extraordinary,
nonrecurring, non-operating or non-cash gains, including without limitation or
in addition, the following:
(i) the income of any Person (other
than a subsidiary) in which the Subject Person or a subsidiary
has an ownership interest; provided, however, that (A)
Consolidated Net Income shall include amounts in respect of
the income of such Person when actually received in cash by
the Subject Person or such subsidiary in the form of dividends
or similar distributions and (B) Consolidated Net Income shall
be reduced by the aggregate amount of all investments,
regardless of the form thereof, made by the Subject Person or
any of its subsidiaries in such Person for the purpose of
funding any deficit or loss of such Person;
(ii) the income of any subsidiary or any
other income to the extent the payment of such income in the
form of a distribution or repayment of any Indebtedness to the
Subject Person or a subsidiary is not permitted, whether on
account of any restriction in by-laws, articles of
incorporation or similar governing document, any agreement
(including any Securitization Documents) or any law, statute,
judgment, decree or governmental order, rule or regulation
applicable to such subsidiary or such income;
(iii) the income of any Person acquired
by the Subject Person or a subsidiary for any period prior to
the date of such acquisition; and
(iv) any gains realized upon the sale or
refinancing of any asset, including, without limitation the
income from any sale of assets in which the accounting basis
of such assets had been the book value of any Person acquired
by the Subject Person or a subsidiary prior to the date such
Person became a subsidiary or was merged into or consolidated
with the Subject Person or a subsidiary.
3
"CONSOLIDATED TANGIBLE NET WORTH" means, at any date, the total of: (a)
stockholders' equity of Borrowers and their respective Subsidiaries at such date
determined in accordance with GAAP on a consolidated basis; minus (b) the amount
by which stockholders' equity has been increased by the write-up of any asset of
Borrowers and their respective Subsidiaries after September 30, 2001; minus (c)
the amount of intangible assets carried on the balance sheet of Borrowers and
their respective Subsidiaries at such date determined in accordance with GAAP on
a consolidated basis, including goodwill, patents, trademarks, trade names,
computer software development costs, or any other deferred charges; minus (d)
the amount of deferred income tax assets (less adjustments included in
Consolidated Net Income after September 30, 2001); minus (e) any capital stock
or debt security which is not readily marketable; minus (f) any cash held in a
sinking fund or other analogous fund established for the purpose of redemption,
retirement or prepayment of Equity Interests or Debt; minus (g) the amount at
which shares of capital stock of either Borrowers is contained among the assets
on the balance sheet of Borrowers and their respective Subsidiaries; minus (h)
to the extent included in clause (a) the amount properly attributable to the
minority interests, if any, of other Persons in the stock, additional paid-in
capital, and retained earnings of Subsidiaries.
"CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.7 of a Libor Loan from one Interest Period to
the next Interest Period.
"CONVERT," "CONVERSION," and "CONVERTED" shall refer to a conversion
pursuant to Section 2.7 OR ARTICLE IV of one Type of Loan into another Type of
Loan.
"DEBT" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments; (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business that are not past due by more than ninety (90) days; (d) all
Capital Lease Obligations of such Person; (e) all Debt or other obligations of
others Guaranteed by such Person; (f) all obligations secured by a Lien existing
on property owned by such Person, whether or not the obligations secured thereby
have been assumed by such Person or are non-recourse to the credit of such
Person; (g) all reimbursement obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, bankers' acceptances, surety or
other bonds and similar instruments; (h) all obligations of such Person in
respect of mandatory redemption or mandatory dividend rights on Equity Interests
but excluding dividends payable solely in additional Equity Interests; (i) all
obligations and liabilities of such Person under Hedging Agreements; (j) all
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (k) all obligations of such Person, contingent or otherwise, for the
payment of money under any non-compete, consulting or similar agreement or any
other similar arrangements providing for the deferred payment of the purchase
price for an acquisition; (l) all obligations of such Person to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which lease is
required or is permitted to be classified and accounted for as an operating
lease under GAAP but which is intended by the parties thereto for tax,
bankruptcy, regulatory, commercial law, real estate law and all other purposes
as a financing arrangement; (m) all other amounts required to be reflected as a
liability on a consolidated balance sheet of such Person in accordance with GAAP
other than accruals, taxes, time deposits, and unfunded commitment to make
student loans. The Debt of any Person shall include the Debt of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Debt provide that such Person is not liable therefor. The amount
of the obligations of either Borrower or any Subsidiary in respect of any
Hedging Agreement shall, at any time of determination and for all purposes under
this Agreement, be the maximum aggregate amount (giving effect to any netting
agreements) that such Borrower or such Subsidiary would be required to pay if
such Hedging Agreement were terminated at such time giving effect to current
market conditions notwithstanding any contrary treatment in accordance with
GAAP.
4
"DEFAULT" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"DEFAULT RATE" means a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of two percent
(2.00%) plus the Applicable Rate for Base Rate Loans as in effect from time to
time (provided, that if such amount in default is principal of a Libor Loan and
the due date is a day other than the last day of an Interest Period therefor,
the "Default Rate" for such principal shall be, for the period from and
including the due date and to but excluding the last day of the Interest Period
therefor, two percent (2.00%) plus the Libor Rate applicable to such Interest
Period plus two and one quarter percent (2.25%), and, thereafter, the rate
provided for above in this definition).
"DEPOSIT OBLIGATIONS" means all obligations, indebtedness, and
liabilities of either Borrower or any of their respective Subsidiaries, or any
one of them, to the Bank or any Affiliate of the Bank arising pursuant to any
deposit, lock box or cash management arrangements entered into by the Bank or
any Affiliate of the Bank with either Borrower or any of their respective
Subsidiaries, whether now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligation, indebtedness, and liabilities of either Borrower or any of their
respective Subsidiaries, or any one of them, to repay any credit extended in
connection with such arrangements, interest thereon, and all fees, costs, and
expenses (including attorneys' fees and expenses) provided for in the
documentation executed in connection therewith.
"DOE" means the United States Department of Education and any successor
thereto.
"DOLLARS" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any period and any Person, the total of the
following each calculated without duplication for such Person on a consolidated
basis for such period: (a) Consolidated Net Income; plus (b) any provision for
(or less any benefit from) income or franchise taxes included in determining
Consolidated Net Income; plus (c) interest expense deducted in connection with
any Permitted Debt in determining Consolidated Net Income; plus (d) amortization
and depreciation expense deducted in determining Consolidated Net Income; minus
(e) any other after-tax extraordinary, non-cash, non-recurring or non-operating
income or gains not already deducted in determining Consolidated Net Income.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
as such laws, regulations, and requirements may be amended or otherwise modified
from time to time.
"EQUITY INTERESTS" means any capital stock, partnership interests,
membership interests, beneficial interests in trust or other ownership or equity
interests of any Person and any interests therein or relating thereto, including
without limitation, any options, warrants or other rights to acquire any
interest therein or thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as either Borrower or is under common control
(within the meaning of Section 414(c) of the Code) with either Borrower.
"EVENT OF DEFAULT" has the meaning specified in Section 10.1.
5
"F&M FACILITY" means the revolving line of credit evidenced by that
certain Line of Credit Agreement dated as of November 15, 2001, by and between
Farmers & Merchants Investment Inc. and NELNET.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to the Bank on such
day on such transactions as determined by the Bank.
"FIXED CHARGES" means, for any period, the sum of following calculated
for Borrowers and their respective Subsidiaries on a consolidated basis without
duplication: (i) pro forma interest expense relating to Permitted Debt; plus
(ii) that portion of the long term Debt that should be classified as current in
accordance with GAAP as of the first day of such period but excluding, to the
extent included, the outstanding principal amount of Permitted Debt (but
including Debt under the F&M Facility if a notice of non-renewal of the F&M
Facility has been received by NELNET) and any Debt to be assumed in connection
with a Proposed Acquisition; plus (iii) (a) .25 multiplied by (b) the sum of (1)
the principal amount of the Permitted Debt outstanding on the date of
determination (which has not been included in (ii) above) plus (2) the amount of
the Loan requested plus (3) the principal amount of the Debt to be assumed in
connection with a Proposed Acquisition. Pro forma interest expense shall be
determined in good faith by a financial officer of Borrower and when calculating
pro forma interest expense with respect to any Debt bearing interest at a
floating rate, the interest expense on such Debt shall be calculated at the
average interest rate applicable to the Loans in the immediately preceding
fiscal quarter for the entire period and as if the accrued interest thereon is
payable as of the end of each fiscal quarter.
"FRAUDULENT TRANSFER LAWS" has the meaning specified in Section 3.4.
"FUNDED DEBT" means, at the time of determination, all the Debt of
Borrower and the Subsidiaries determined on a consolidated basis other than the
Debt permitted pursuant to the permissions of SECTION 8.1(e) (i.e., Debt secured
by student loans and representing commitments to fund student loans).
"FUNDING OBLIGOR" has the meaning specified in Section 3.5.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government, including without limitation, the DOE.
"GUARANTY" means the Guarantee of the Obligations by the Regular
Subsidiaries in favor of the Bank, as agent for the Secured Parties, in
substantially the form of Exhibit "E" hereto, as the same may be modified
6
pursuant to one or more Subsidiary Joinder Agreements and as the same may be
otherwise amended or otherwise modified from time to time.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing the payment or
performance of any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise); and (b) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect the obligee against loss
in respect thereof (in whole or in part and including without limitation, any
agreement binding on a Person to make Investments in or otherwise transfer funds
to or for the benefit of another Person for purposes of assuring such other
Person's financial liquidity, assuring such other Person's compliance with the
capital adequacy requirements imposed by agreement or applicable law or
otherwise assuring such other Person's compliance with financial covenants or
other financial statement conditions); provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "GUARANTEE" used as a verb has a corresponding meaning.
"HAZARDOUS MATERIAL" means any material which is or becomes listed,
regulated, or addressed under any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest, security, currency exchange rate or commodity price hedging
arrangement.
"HEDGING OBLIGATIONS" means all obligations, indebtedness, and
liabilities of either Borrower or any of their respective Subsidiaries, to the
Bank or any Affiliate of the Bank, arising pursuant to any Hedging Agreements
entered into by the Bank or Affiliate with either Borrower or any of their
respective Subsidiaries, whether now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, all fees, costs, and expenses (including attorneys' fees and
expenses) provided for in such Hedging Agreements.
"HIGHER EDUCATION ACT" means the Higher Education Act of 1965, as
amended, together with any rules, regulations and interpretations thereunder of
DOE or the applicable guaranty agent
"INTEREST PERIOD" means, with respect to a Libor Loan, each period
commencing on the date such Libor Loan is made or Converted from a Base Rate
Loan or the last day of the next preceding Interest Period with respect to such
Libor Loan, and ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as Borrowers may select as
provided in Sections 2.5 or 2.7 hereof, except that each such Interest Period
which commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (a) each Interest Period which
would otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or if such succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); (b) any Interest
Period which would otherwise extend beyond the Maturity Date shall end on the
Maturity Date; (c) no more than three (3) Interest Periods shall be in effect at
the same time; (d) no Interest Period shall have a duration of less than one (1)
month and, if the Interest Period would otherwise be a shorter period, such
Libor Loans shall not be available hereunder; and (e) no Interest Period may
extend beyond a principal repayment date unless, after giving effect thereto,
the aggregate principal amount of the Libor Loans having Interest Periods that
end after such principal payment date shall be equal to
7
or less than the aggregate principal amount of the Loans to be outstanding
hereunder after such principal payment date.
"INVESTMENTS" has the meaning specified in Section 8.5.
"LIBOR LOANS" means the portions of the principal amounts outstanding
hereunder that bear interest at rates based upon the Adjusted Libor Rate.
"LIBOR RATE" means, for any Libor Loan for any Interest Period
therefor, (a) the rate per annum equal to the rate determined by the Bank to be
the offered rate that appears on the page of the Telerate screen that displays
an average British Bankers Association Interest Settlement Rate for deposits in
Dollars (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period, determined as of approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period,
or (b) if the rate referenced in the preceding clause does not appear on such
page or service or such page or service shall cease to be available, the rate
per annum equal to the rate determined by the Bank to be the offered rate on
such other page or other service that displays an average British Bankers
Association Interest Settlement Rate for deposits in Dollars (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period, or (c) if the rates
referenced in the preceding clauses are not available, the rate per annum
determined by the Bank as the rate of interest (rounded upward to the next
l/l00th of 1%) at which deposits in Dollars for delivery on the first day of
such Interest Period in same day funds in the approximate amount of the LIBOR
Rate Loan being made, Continued or Converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank's London Branch to
major banks in the offshore Dollar market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period.
"LIEN" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"LOANS" means the advances made pursuant to SECTION 2.1.
"LOAN DOCUMENTS" means this Agreement, any Note, the Guaranty, the
Security Agreement and all assignments, other guaranties, and other agreements
executed and delivered pursuant to or in connection with this Agreement, as such
agreements may be amended or otherwise modified from time to time.
"LOAN OBLIGATIONS" means all obligations, indebtedness, and liabilities
of Borrowers to the Bank, arising pursuant to any of the Loan Documents, now
existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several, including, without limitation, the obligation of Borrowers to repay the
Loans, interest on the Loans, and all fees, costs, and expenses (including
reasonable attorney's fees) provided for in the Loan Documents.
"MATERIAL ADVERSE EFFECT" means the occurrence of any event or the
existence of any condition that reasonably could be expected to have a material
adverse effect on (a) the business, assets, liabilities (actual or contingent),
operations, or condition (financial or otherwise) of Borrowers and their
respective Subsidiaries, taken as a whole, (b) the ability of Borrowers to pay
and perform the Obligations when due, or (c) the validity or enforceability of
any of the Loan Documents or the rights and remedies of the Bank thereunder. In
determining whether any individual event could reasonably be expected to result
in a Material Adverse Effect, notwithstanding that such event does not itself
have such effect, a Material Adverse Effect shall be deemed to
8
have occurred if the cumulative effect of such event and all other then existing
events could reasonably be expected to result in a Material Adverse Effect.
"MATURITY DATE" means January 9, 2004,
"MAXIMUM RATE" means the maximum non-usurious interest rate, if any,
that any time or from time to time may be contracted for, taken, reserved,
charged, or received with respect to the Note or on other amounts, if any,
payable to the Bank pursuant to this Agreement or any other Loan Document, under
laws applicable to the Bank which are presently in effect, or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable laws now
allow. The Maximum Rate shall be calculated in a manner that takes into account
any and all fees, payments, and other charges in respect of the Loan Documents
that constitute interest under applicable law. Each change in any interest rate
provided for herein based upon the Maximum Rate resulting from a change in the
Maximum Rate shall take effect without notice to either Borrower at the time of
such change in the Maximum Rate.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by either Borrower
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"NET PROCEEDS" means with respect to any disposition of assets, the
cash proceeds received by either Borrower or any of their respective
Subsidiaries from such disposition (including payments under notes or other debt
securities received in connection with any such disposition) net of (a) the
costs of such disposition (including professional fees and expenses,
underwriting discounts, commissions and taxes (to the extent actually paid), in
each case attributable to such disposition) and (b) amounts applied to repayment
of Debt (other than the Obligations) secured by a lien, security interest, claim
or encumbrance on the asset or property sold.
"NOTE" means the promissory note provided for by SECTION 2.2 hereof,
and all extensions, renewals, and modifications thereof and all substitutions
therefor.
"OBLIGATED PARTY" means the Regular Subsidiaries and any other Person
(exclusive of Borrowers) who is or hereafter becomes party to any agreement that
guarantees or secures payment and performance of the Obligations or any part
thereof.
"OBLIGATED PARTY OBLIGATIONS" has the meaning specified in SECTION 3.6.
"OBLIGATIONS" means all Loan Obligations, Deposit Obligations, and
Hedging Obligations.
"OTHER TAXES" has the meaning specified in SECTION 4.6.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERMITTED ACQUISITION" means an acquisition of a Person or its assets
in a transaction complying with the conditions set out in SECTION 8.5(i).
"PERMITTED DEBT" means Debt described in SECTION 8.1(a)(b), (i), (j)
AND (k) and the SLIMS.
"PERMITTED PRINCIPAL PAYMENT" means for any period any payment of
principal made or scheduled to be made on Permitted Debt during such period.
9
"PERSON" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
"PLAN" means any employee benefit or other plan established or
maintained by either Borrower or any ERISA Affiliate and which is covered by
Title IV of ERISA.
"PRIME RATE" means the per annum rate of interest established from time
to time by the Bank as its prime rate, which rate may not be the lowest rate of
interest charged by the Bank to its customers.
"PRINCIPAL OFFICE" means the office of the Bank, presently located at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"PRIOR ASSETS" means assets that have been disposed of by a division or
branch of either Borrower or any of their respective Subsidiaries in a
transaction with an unaffiliated third party approved in accordance with this
Agreement which would not make the seller a "Prior Company" but constitute all
or substantially all of the assets of such division or branch.
"PRIOR COMPANY" means any Subsidiary whose Equity Interests has been
disposed of, or all or substantially all of whose assets have been disposed of,
in each case, in a transaction with an unaffiliated third party approved in
accordance with this Agreement.
"PRIOR FOUR QUARTER PERIOD" has the meaning specified in the definition
of Pro Forma Fixed Charge Coverage Ratio.
"PRIOR TARGET" means a Target who has been acquired or whose assets
have been acquired in a transaction permitted by Section 8.5.
"PRO FORMA FIXED CHARGE COVERAGE RATIO" means, as of any date of
determination the ratio of Adjusted EBITDA, excluding therefrom the effect of
income taxes, as calculated for the four (4) fiscal quarter period then most
recently ended for which financial statements are available (the "Prior Four
Quarter Period") to the Fixed Charges calculated for the four (4) fiscal
quarters immediately following the Prior Four Quarter Period.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"PURCHASE PRICE" has the meaning specified in Section 8.5(i)(ii).
"QUARTERLY PAYMENT DATE" means the last Business Day of each March,
June, September, and December of each year, the first of which shall be March
29, 2002.
"REGULAR SUBSIDIARY" means any Subsidiary that has not been established
as a Single Purpose Vehicle.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
10
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
Liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any category
of liabilities which includes deposits by reference to which the Adjusted Libor
Rate is to be determined, or (ii) any category of extensions of credit or other
assets which include Libor Loans. The Adjusted Libor Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
"SECURED PARTIES" means the Bank and each Affiliate of the Bank who is
owed any portion of the Obligations.
"SECURITY AGREEMENT" means that certain Security Agreement in
substantially the form of EXHIBIT "G" hereto among Borrowers, the Obligated
Parties and the Bank, as agent for the Secured Parties, as the same may be
amended or otherwise modified from time to time.
"SECURITIZATION DOCUMENTS" means, with respect to any Asset
Securitization, all documentation entered into to evidenced or govern the Asset
Securitization, as the same may be amended or otherwise modified from time to
time.
"SECURITIZATION RESIDUAL" means, with respect to any Asset
Securitization, (i) the interest in the securitized assets remaining after all
securities (whether debt or equity interests) backed by such assets have been
paid or (ii) if applicable, with respect to any Person, the interest in all
subordinate securities (whether debt or equity interests) which are backed by
the securitized assets and held by such Person that remain outstanding after all
securities which are backed by such assets and are senior to such subordinate
securities have been paid.
"SLIMS" means student loan interest margin securities or any similar
instrument heretofore or hereafter issued by or on behalf of the Borrowers or
any of their Subsidiaries.
"SPECIAL PURPOSE VEHICLE" means any Person established to facilitate
the financing of student loans pursuant to an Asset Securitization or similar
financing arrangement and who requires ownership of the assets to be securitized
and/or issues the asset-backed securities relating thereto.
"STUDENT LOAN" means loans or other financial accommodations to Persons
who have, or anticipate having, expenses directly or indirectly related to
obtaining an education for themselves or other Persons.
"STUDENT LOAN GUARANTY AGREEMENT" means an agreement pursuant to which
a third party guarantees student loans under the Higher Education Act or
otherwise.
"SUBSIDIARY" means any corporation or other entity of which at least a
majority of the outstanding shares of stock or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of
directors (or Persons performing similar functions) of such corporation or
entity (irrespective of whether or not at the time, in the case of a
corporation, stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by either Borrower or one or
more of the Subsidiaries or by either Borrower and one or more of the
Subsidiaries.
11
"SUBSIDIARY JOINDER AGREEMENT" means an agreement which has been or
will be executed by a Regular Subsidiary adding it as a party to the Guaranty
and the Security Agreement in substantially the form of Exhibit "F" hereto, as
the same may be amended or otherwise modified.
"TARGET" means the Person to be acquired or whose assets are to be
acquired with the proceeds of the Loan requested in a transaction permitted by
Section 8.5
"TAXES" has the meaning specified in Section 4.6.
"TYPE" means any type of Loan (i.e., Base Rate Loan or Libor Loans).
"UCC" has the meaning specified in the Security Agreement.
Section 1.2. Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "Hereof", "Herein", and "Hereunder" and
words of similar import referring to this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. Terms
used herein that are defined in the UCC, unless otherwise defined herein, shall
have the meanings specified in the UCC.
Section 1.3. Accounting Terms and Determinations. All accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Bank hereunder shall be prepared, in accordance with GAAP, on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 6.2 hereof. All calculations made for the purposes of determining
compliance with the provisions of this Agreement shall be made by application of
GAAP, on a basis consistent with those used in the preparation of the financial
statements referred to in Section 6.2 hereof; provided that compliance with the
covenants set forth in ARTICLE IX shall be calculated with reference to GAAP as
in effect in the date hereof. To enable the ready and consistent determination
of compliance by Borrowers with their obligations under this Agreement,
Borrowers will not change the last day of its fiscal year from December 31, or
the last days of the first three fiscal quarters of Borrowers in each of its
fiscal years from March 31, June 30, and September 30, respectively.
ARTICLE II
LOANS
Section 2.1. Commitment. Subject to the terms and conditions of
this Agreement (including, without limitation, the satisfaction of the Pro Forma
Fixed Charge Coverage Ratio test set forth in Section 5.2(f)), the Bank agrees
to make advances to Borrowers from time to time from and including the Closing
Date to but excluding the Advance Termination Date in an aggregate principal
amount up to but not exceeding the Commitment as then in effect. Subject to the
foregoing limitations, and the other terms and provisions of this Agreement,
Borrowers may borrow, prepay, and reborrow the amount of the Commitment and may
establish Base Rate Loans and Libor Loans thereunder and, until the Maturity
Date, Borrowers may Continue Libor Loans or Convert Loans of one Type into Loans
of the other Type. Loans of each Type made by the Bank shall be established and
maintained at the Bank's Applicable Lending Office for Loans of such Type.
12
Section 2.2. Note. Upon the request of the Bank, the Loans shall
be evidenced by a single promissory note jointly and severally made by Borrowers
in substantially the form of Exhibit "A" hereto, payable to the order of the
Bank in a principal amount equal to the Commitment as originally in effect and
otherwise duly completed.
Section 2.3. Repayment of Loans. Borrowers shall, jointly and
severally, pay to the Bank the aggregate principal amount of the Loans
outstanding on the Advance Termination Date in installments as follows:
(a) Three (3) quarterly principal installments due and
payable on March 31, 2003, June 30, 2003 and September 30, 2003, each
installment in an aggregate principal amount equal to the quotient obtained by
dividing the aggregate principal amount of the Loans outstanding on the Advance
Termination Date by sixteen (16); and
(b) One final installment in the amount of all unpaid
principal of the Loans due and payable on the Maturity Date.
Section 2.4. Interest.
(a) Interest Rate. Borrowers shall, jointly and
severally, pay to the Bank interest on the unpaid principal amount outstanding
hereunder, at a fluctuating rate per annum equal to the Applicable Rate. The
term "Applicable Rate" means: (i) with respect to each Base Rate Loan, the Base
Rate; and (ii) with respect to each Libor Loan, the Adjusted Libor Rate plus two
and one quarter percent (2.25%).
(b) Payment Dates. Accrued interest on the Loans shall be
due and payable as follows:
(i) in the case of accrued interest on Base Rate
Loans, on each Quarterly Payment Date;
(ii) in the case of accrued interest on each
Libor Loan, on the last day of the Interest Period with respect thereto and, in
the case of an Interest Period greater than three months, at three-month
intervals after the first day of such Interest Period;
(iii) in the case of the accrued interest on the
principal amount of any Libor Loan being prepaid, upon such prepayment of
principal; and
(iv) on the Maturity Date.
(c) Default Interest. Notwithstanding the foregoing,
Borrowers, jointly and severally, will pay to the Bank interest at the
applicable Default Rate on any principal of any Loan, and (to the fullest extent
permitted by law) on any other amount payable by Borrowers under this Agreement
or any other Loan Document to or for the account of the Bank which is not paid
in full when due (whether at stated maturity, by acceleration, or otherwise),
for the period from and including the due date thereof to but excluding the date
the same is paid in full. Interest payable at the Default Rate shall be payable
from time to time on demand.
Section 2.5. Borrowing Procedure. Borrowers shall give the Bank
notice of each requested borrowing hereunder in accordance with Section 2.8 and
Section 2.9 pursuant to the delivery of a Borrowing Request The amount requested
to be borrowed shall, subject to the terms and conditions of this Agreement, be
made available to Borrowers not later than 1:00 p.m. Dallas, Texas time on the
date specified for such borrowing, in immediately available funds, to the
account as designated by Borrowers from time to time.
13
Section 2.6. Prepayments.
(a) Mandatory Prepayments from Asset Dispositions. Within
five (5) Business Days after receipt by either Borrower or any of their
respective Subsidiaries of the Net Proceeds from any single Asset Disposition or
series of related Asset Dispositions, which Net Proceeds equal or exceed Three
Million Dollars ($3,000,000), Borrowers shall, jointly and severally, prepay the
Loans in an amount which would cause the Pro Forma Fixed Charge Coverage Ratio,
calculated after giving effect to the Asset Disposition to be no less than 1.50
to 1.00, and Borrowers shall have delivered to the Bank on or before the date of
the scheduled prepayment, a certificate duly completed and executed showing the
calculations demonstrating compliance with this Section 2.6(a).
(b) Optional Prepayments. Subject to Section 2.8,
Borrowers shall have the right from time to time to optionally prepay the Loans
in full or in part, upon prior notice to the Bank in accordance with Section
2.9.
(c) Application of Prepayments. All prepayments of the
Loans shall be without premium or penalty and shall be accompanied with accrued
interest on the amount prepaid to the date of prepayment. All prepayments of the
Loans made after the Advance Termination Date shall be applied to the
installments due under the Loans in the inverse order of maturity. Libor Loans
may be repaid or prepaid only on the last day of the Interest Period applicable
thereto unless Borrowers pay to the Bank any amounts due under Section 4.5
hereof as a result of such prepayment or repayment
Section 2.7. Conversions and Continuations of Loans. Subject to
Section 2.8, Borrowers may Convert all or part of a Loan of one Type into a Loan
of another Type or Continue Libor Loans as Libor Loans, provided that: (a)
Borrowers shall give the Bank notice of each such Conversion or Continuation as
provided in Section 2.9, (b) Libor Loans may only be Converted on the last day
of the Interest Period, and (c) except for Conversions into Base Rate Loans, no
Conversions or Continuations shall be made while a Default exists.
Section 2.8. Minimum Amounts. Except for Conversions and
prepayments pursuant to Article IV and Conversions into Libor Loans, each
Conversion and each optional prepayment of principal of the Loans shall be in an
amount at least equal to One Million Dollars ($1,000,000) (prepayments or
Conversions of or into Loans of different Types or, in the case of Libor Loans,
having different Interest Periods at the same time hereunder to be deemed
separate Conversions and prepayments for purposes of the foregoing, one for each
Type or Interest Period). Anything in this Agreement to the contrary
notwithstanding, the aggregate principal amount of Libor Loans having the same
Interest Period shall be at least equal to Five Million Dollars ($5,000,000).
The aggregate amount of Loans made by the Bank under Section 2.1 on any date
shall be in minimum amount equal to Five Million Dollars ($5,000,000).
Section 2.9. Certain Notices. Notices by Borrowers to the Bank of
the borrowing of Loans and of the Conversions, Continuations and prepayments of
Loans shall be irrevocable and shall be effective only if received by the Bank
not later than 11:00 a.m. Dallas, Texas, time on the Business Day of the
borrowing of, Conversion to or prepayment of a Base Rate Loan and two (2)
Business Days prior to the date of the borrowing of, Conversion to, Continuation
as or prepayment of a Libor Loan. Each such notice of borrowing, Conversion,
Continuation, or prepayment shall specify the Loans to be borrowed, Converted,
Continued, or prepaid and the amount (subject to Section 2.8 hereof) and Type of
the Loans to be borrowed, Converted, Continued or prepaid (and, in the case of a
Conversion, the Type of Loans to result from such Conversion) and the date of
borrowing, Conversion, Continuation, or prepayment (which shall be a Business
Day). Each such notice applicable to a Libor Loan shall specify the duration of
the applicable Interest Period. In the event Borrowers fail to select the Type
of Loan, or the duration of any Interest Period for any Libor Loan, within the
time period and otherwise as provided in this Section 2.8, such Loan (if
outstanding as a Libor
14
Loan) will be automatically Converted into a Base Rate Loan on the last day of
the preceding Interest Period for such Loan or (if outstanding as a Base Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Base Rate
Loan. Borrowers may not Convert any Loans into Libor Loans, or Continue any
Loans as Libor Loans if the interest rate for such Libor Loan would exceed the
Maximum Rate or if a Default exists.
Section 2.10. Use of Proceeds. The proceeds of Loans shall be used
by Borrowers to pay the purchase price for Permitted Acquisitions and for other
lawful general corporate purposes.
Section 2.11. Facility Fee. Borrowers agree, jointly and severally,
to pay to the Bank a facility fee: (i) for the period from and including the
Closing Date through the Advance Termination Date, on the amount of the
Commitment and (ii) for periods after the Advance Termination Date to and
including the Maturity Date, the amount of the outstanding Loans. The facility
fee payable under this Section 2.11 shall be calculated at a per annum rate
equal to one-quarter of one percent (0.25%). Accrued facility fees under this
Section 2.11 shall be payable in arrears on each Quarterly Payment Date
beginning March 29,2002 and on the Maturity Date.
Section 2.12. Computations. Interest payable by Borrowers hereunder
and under the other Loan Documents and the facility fee payable under Section
2.11 shall be computed as follows: (i) with respect to Libor Loans and the
facility fee payable under Section 2.11, on the basis of a year of 360 days and
the actual number of days elapsed (including the first day but excluding the
last day) occurring in the period for which payable unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be; (ii) with respect to
Base Rate Loans when the Base Rate is determined based on the Prime Rate and
Loans accruing interest at the Default Rate, on the basis of a year of 365 or
366 days and the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which payable; and (iii)
with respect to any other interest payable hereunder, on the basis of a year of
360 days and the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which payable unless such
calculation would result in a usurious rate, in which case such fees shall be
calculated on the basis of a year of 365 or 366 days, as the case may be.
Section 2.13. Termination or Reduction of Commitment. Borrowers
shall have the right to terminate fully or to reduce in part the unused portion
of the Commitment at any time and from time to time, provided that: (a)
Borrowers shall give the Bank at least three (3) Business Days notice of each
such termination or reduction; and (b) each partial reduction shall be in an
aggregate amount at least equal to Five Million Dollars ($5,000,000). The
Commitment may not be reinstated after it has been terminated or reduced.
ARTICLE III.
PAYMENTS
Section 3.1. Method of Payment. All payments of principal,
interest, and other amounts to be made by Borrowers under this Agreement and the
other Loan Documents shall be made to the Bank at the Principal Office in
Dollars and in immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 a.m., Dallas, Texas time on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
The applicable Borrower shall, at the time of making each such payment, specify
to the Bank the sums payable by Borrowers under this Agreement and the other
Loan Documents to which such payment is to be applied (and in the event that a
Borrower fails to so specify, or if an Event of Default exists, the Bank may
apply such payment to the Obligations in such order and manner as it may elect
in its sole discretion, subject to Section 3.2 hereof). Each payment received by
the Bank under this Agreement or any other Loan Document for the account of a
Secured Party shall be paid promptly to such Secured Party, in immediately
15
available funds, and, with respect to the Bank, for the account of the Bank's
Applicable Lending Office. Whenever any payment under this Agreement or any
other Loan Document shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of the
payment of interest.
Section 3.2. Application of Proceeds of Collateral. All proceeds
received by the Bank from the sale or other liquidation of the Collateral shall
first be applied as payment of the accrued and unpaid fees and expenses of the
Bank hereunder and then any remaining amount of such proceeds shall be
distributed:
(i) first, to the Loan Obligations, until all
the Loan Obligations have been paid and satisfied in full or cash
collateralized;
(ii) second, to the Secured Parties, pro rata in
accordance with the respective unpaid amounts of Hedging Obligations, until all
Hedging Obligations have been paid and satisfied in full or cash collateralized;
(iii) third, to the Secured Parties, pro rata in
accordance with the respective unpaid amounts of the Deposit Obligations, until
all Deposit Obligations have been paid and satisfied in full or cash
collateralized; and
(iv) fourth, to the Secured Parties, pro rata in
accordance with the respective unpaid amounts of the remaining Obligations.
After all the Obligations (including without limitation, all contingent
Obligations) have been paid and satisfied in full, the Commitment terminated and
all other obligations of either Borrower or any Obligated Party to any Secured
Party otherwise satisfied, any proceeds of Collateral shall be delivered to the
Person entitled thereto as directed by Borrowers or as otherwise determined by
applicable law or applicable court order.
Section 3.3. Borrowers' Acknowledgment of Benefit and Liability.
Each Borrower expressly acknowledges that it has benefited and will benefit,
directly and indirectly, from each and every Loan, whether or not such Borrower
is or was the actual borrower in respect of such Loan, and hereby acknowledges
and undertakes, together with the other Borrower, joint and several liability
for the punctual payment when due, whether at stated maturity, by acceleration
or otherwise, of all Obligations. Each Borrower hereby acknowledges that this
Agreement is the independent and several obligation of each Borrower and may be
enforced against each Borrower separately, whether or not enforcement of any
right or remedy hereunder has been sought against the other Borrower. Each
Borrower further agrees that its liability hereunder and under any other Loan
Document shall be absolute, unconditional, continuing and irrevocable. Each
Borrower expressly waives any requirement that the Bank exhaust any right, power
or remedy and proceeds against the other Borrower under this Agreement, or any
other Loan Document, or against any other Person under any guaranty of, or
security for, any of the Obligations.
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Section 3.4. Joint and Several Obligations Absolute. If
acceleration of the time for payment of any amount payable by a Borrower under
the Obligations is stayed upon the insolvency, bankruptcy, or reorganization of
another Borrower, all such amounts otherwise subject to acceleration under the
terms of this Agreement shall nonetheless be payable by the other Borrower
hereunder forthwith on demand by the Bank. Each Borrower hereby agrees that its
joint and several liability for the Obligations of the other Borrower (the
"Other Obligations") under this Agreement shall not be released, discharged,
diminished, impaired, reduced, or affected for any reason or by the occurrence
of any event, including, without limitation, one or more of the following
events, whether or not with notice to or the consent of either Borrower: (a) the
taking or accepting of collateral as security for any or all of the Other
Obligations or the release, surrender, exchange, or subordination of any
collateral now or hereafter securing any or all of the Other Obligations; (b)
any partial release of the liability of the other Borrower hereunder; (c) any
disability of the other Borrower, or the dissolution, insolvency, or bankruptcy
of the other Borrower or any other party at any time liable for the payment of
any or all of the Other Obligations; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Other Obligations or
any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Other Obligations; (e) any adjustment, indulgence,
forbearance, waiver, or compromise that may be granted or given by the Bank to
the other Borrower or any other party ever liable for any or all of the Other
Obligations; (f) any neglect, delay, omission, failure, or refusal of the Bank
to take or prosecute any action for the collection of any of the Other
Obligations or to foreclose or take or prosecute any action in connection with
any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Other Obligations; (g) the unenforceability or
invalidity of any or all of the Other Obligations or of any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Other Obligations; (h) any payment by the other Borrower or any other
party to the Bank is held to constitute a preference under applicable bankruptcy
or insolvency law or if for any other reason the Bank is required to refund any
payment or pay the amount thereof to someone else; (i) the settlement or
compromise of any of the Other Obligations; (j) the non-perfection of any
security interest or lien securing any or all of the Other Obligations; (k) any
impairment of any collateral securing any or all of the Other Obligations; (l)
the failure of the Bank to sell any collateral securing any or all of the Other
Obligations in a commercially reasonable manner or as otherwise required by law;
(m) any change in the corporate existence, structure, or ownership of the other
Borrower; or (n) any other circumstance which might otherwise constitute a
defense available to, or discharge of, the other Borrower (other than payment of
the Other Obligations).
ARTICLE IV.
YIELD PROTECTION AND ILLEGALITY
Section 4.1. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any
applicable law, rule, or regulation, or any change in any applicable law, rule,
or regulation, or any change in the interpretation or administration thereof by
any Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such Governmental Authority, central bank, or
comparable agency:
(i) shall subject the Bank (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any Libor
Loans, its Note, or its obligation to make Libor Loans, or change the basis of
taxation of any amounts payable to the Bank (or its Applicable Lending Office)
under this Agreement or its Note in respect of any Libor Loans (other than taxes
imposed on the overall net income of the Bank by the jurisdiction in which the
Bank has its principal office or such Applicable Lending Office);
17
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, compulsory loan, or similar requirement
(other than the Reserve Requirement utilized in the determination of the
Adjusted Libor Rate) relating to any extensions of credit or other assets of, or
any deposits with or other liabilities or commitments of, the Bank (or its
Applicable Lending Office), including the Commitment of the Bank hereunder; or
(iii) shall impose on the Bank (or its Applicable
Lending Office) or on the London interbank market any other condition affecting
this Agreement or its Note or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to the Bank (or
its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Libor Loans or its commitment to make Libor Loans or to reduce
any sum received or receivable by the Bank (or its Applicable Lending Office)
under this Agreement or the Note with respect to any Libor Loans or its
commitment to make Libor Loans, then Borrowers shall jointly and severally, pay
to the Bank on demand such amount or amounts as will compensate the Bank for
such increased cost or reduction. If the Bank requests compensation by Borrowers
under this Section 4.1(a), Borrowers may, by notice to the Bank, suspend the
obligation of the Bank to make or Continue Libor Loans or to Convert Base Rate
Loans into Libor Loans, until the event or condition giving rise to such request
ceases to be in effect (in which case the provisions of Section 4.4 shall be
applicable); provided that such suspension shall not affect the right of the
Bank to receive the compensation so requested as to any Libor Loans that remain
outstanding as the date of such request
(b) If, after the date hereof, the Bank shall have
determined that the adoption of any applicable law, rule, or regulation
regarding capital adequacy or any change therein or in the interpretation or
administration thereof by any Governmental Authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such Governmental Authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of the Bank or any corporation controlling the Bank as a consequence of
the Bank's obligations hereunder to a level below that which the Bank or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand Borrowers shall jointly and
severally, pay to the Bank such additional amount or amounts as will compensate
the Bank for such reduction.
(c) The Bank shall promptly notify Borrowers of any event
of which it has knowledge, occurring after the date hereof, which will entitle
the Bank to compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of the Bank, be
otherwise disadvantageous to it. The Bank shall furnish to Borrowers a statement
setting forth the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining such
amount, the Bank shall use reasonable averaging and attribution methods.
Section 4.2. Limitation on Types of Loans. If on or prior to the
first day of any Interest Period for any Libor Loan:
(a) (a) the Bank determines (which determination
shall be conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the Libor
Rate for such Interest Period; or
18
(b) (b) the Bank determines (which determination
shall be conclusive) that the Adjusted Libor Rate will not adequately and fairly
reflect the cost to the Bank of funding Libor Loans for such Interest Period;
then the Bank shall give Borrowers prompt notice thereof and so long as such
condition remains in effect, the Bank shall be under no obligation to make
additional Libor Loans, Continue Libor Loans, or to Convert Loans of any other
Type into Libor Loans and Borrowers shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Libor Loans, either prepay such
Loans or Convert such Loans into another Type of Loan in accordance with the
terms of this Agreement.
Section 4.3. Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for the Bank or its
Applicable Lending Office to make, maintain, or fund Libor Loans hereunder, then
the Bank shall promptly notify Borrowers thereof and the Bank's obligation to
make or Continue Libor Loans and to Convert other Types of Loans into Libor
Loans shall be suspended until such time as the Bank may again make, maintain,
and fund Libor Loans (in which case the provisions of Section 4.4 shall be
applicable).
Section 4.4. Treatment of Affected Loans. If the obligation of the
Bank to make a Libor Loan or to Continue, or to Convert Loans of any other Type
into, Libor Loans shall be suspended pursuant to Section 4.1 or 4.3 hereof
(Loans of such Type being herein called "Affected Loans" and such Type being
herein called the "Affected Type"), the Bank's Affected Loans shall be
automatically Converted into Base Rate Loans on the last day(s) of the then
current Interest Period(s) for Affected Loans (or, in the case of a Conversion
required by Section 4.3 hereof, on such earlier date as the Bank may be required
to effect a Conversion and specifies to Borrowers with a copy to the Agent) and,
unless and until the Bank gives notice as provided below that the circumstances
specified in Section 4.1 or 4.3 hereof that gave rise to such Conversion no
longer exist:
(a) to the extent that the Bank's Affected Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to the Bank's Affected Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued
by the Bank as Libor Loans shall be made or Continued instead as Base Rate
Loans, and all Loans of the Bank that would otherwise be Converted into Libor
Loans shall be Converted instead into (or shall remain as) Base Rate Loans.
Section 4.5. Compensation. Upon the request of the Bank, Borrowers
shall, jointly and severally, pay to the Bank such amount or amounts as shall be
sufficient (in the reasonable opinion of the Bank) to compensate it for any
loss, cost, or expense (including loss of anticipated profits) incurred by it as
a result of:
(a) any payment, prepayment, or Conversion of a Libor
Loan for any reason (including, without limitation, the acceleration of the
Loans pursuant to Section 10.2) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by either Borrower for any reason
(including, without limitation, the failure of any condition precedent specified
in Article V to be satisfied) to borrow, Convert, Continue, or prepay a Libor
Loan on the date for such borrowing, Conversion, Continuation, or prepayment
specified in the relevant notice of borrowing, prepayment, Continuation, or
Conversion under this Agreement.
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Section 4.6. Taxes.
(a) Any and all payments by Borrowers or the Obligated
Parties to or for the account of the Bank hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, taxes imposed
on the Bank's overall income, gross receipts, capital or gains and franchise or
similar taxes, in each case, imposed on it by the jurisdiction under the laws of
which the Bank (or its Applicable Lending Office) or the Agent (as the case may
be) is organized or any political subdivision thereof (all such non-excluded
taxes, duties, levies, imposts, deductions, charges, withholdings, and
liabilities being hereinafter referred to as "Taxes"). If either Borrower or any
Obligated Party shall be required by law to deduct any Taxes from or in respect
of any sum payable under this Agreement or any other Loan Document to the Bank,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 4.6) the Bank receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the applicable Borrower or
Obligated Party shall make such deductions, (iii) Borrowers shall, jointly and
severally, pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law, and (iv) Borrowers shall
furnish to the Bank the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, Borrowers, jointly and severally, agree
to pay any and all present or future stamp or documentary taxes and any other
excise or property taxes or charges or similar levies which arise from any
payment made under this Agreement or any other Loan Document or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Borrowers, jointly and severally, agree to indemnify
the Bank for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 4.6) paid by the Bank and any liability
(including penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) If a Borrower or Obligated Party is required to pay
additional amounts to or for the account of the Bank pursuant to this Section
4.6, then the Bank will agree to use reasonable efforts to change the
jurisdiction of its Applicable Lending Office so as to eliminate or reduce any
such additional payment which may thereafter accrue if such change, in the
judgment of the Bank, is not otherwise disadvantageous to the Bank.
(e) Within thirty (30) days after the date of any payment
of Taxes, Borrowers shall furnish to the Bank the original or a certified copy
of a receipt evidencing such payment.
(f) Without prejudice to the survival of any other
agreement of Borrowers hereunder, the agreements and obligations of Borrowers
contained in this Section 4.6 shall survive the termination of the Commitment
and the payment in full of the Note.
(g) If the Bank shall become aware that it is entitled to
claim a refund from, or to a tax credit on any tax return filed by the Bank
with, a Governmental Authority in respect of Taxes or Other Taxes as to which it
has been indemnified by Borrowers, or with respect to which Borrowers have paid
additional amounts, pursuant to this Section 4.6, it shall promptly notify
Borrower of the availability of such refund claim or right to a tax credit and
shall, within thirty (30) days after receipt of a request by Borrowers, make a
claim to such Governmental Authority for such refund, or claim such credit on
the next such tax return filed by it, in each case, at Borrowers' expense. If
the Bank receives a refund (including pursuant to a claim for
20
refund made pursuant to the preceding sentence) in respect of any Taxes or Other
Taxes as to which it has been indemnified by Borrowers or with respect to which
Borrowers have paid additional amounts pursuant to this Section 4.6 or receives
benefit from such tax credit, it shall within thirty (30) days from the date of
the receipt of such refund or such benefit pay over such refund or an amount
equal to such benefit to Borrowers (but only to the extent of indemnity payments
made, or additional amounts paid, by Borrowers under this Section 4.6 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Bank and without interest (other than interest
paid by the relevant Governmental Authority with respect to such refund);
provided, however, that Borrowers, upon the request of the Bank, jointly and
severally, agree to repay the amount paid over to Borrowers (plus penalties,
interest or other charges) to the Bank in the event such Bank is required to
repay such refund to such Governmental Authority.
ARTICLE V.
CONDITIONS PRECEDENT
Section 5.1. Initial Loan. The obligation of the Bank to make its
initial Loan is subject to the condition precedent that the Bank shall have
received on or before, or shall receive simultaneously with, the day of any such
Loan all of the following, each dated (unless otherwise indicated) the Closing
Date, in form and substance satisfactory to the Bank:
(a) Resolutions. Resolutions of the Board of Directors of
each Borrower and each Obligated Party certified by its Secretary or an
Assistant Secretary which authorize its execution, delivery, and performance of
the Loan Documents to which it is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency
for each Borrower and each Obligated Party certified by its Secretary or an
Assistant Secretary certifying the name of each of its officers (i) who is
authorized to sign the Loan Documents to which it is or is to be a party
(including the certificates contemplated herein) together with specimen
signatures of each such officer and (ii) who will, until replaced by other
officers duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications in
connection with the Loan Documents and the transactions contemplated hereby;
(c) Certificate of Incorporation. The certificate of
incorporation of each Borrower and each Obligated Party certified by the
Secretary of State of the state of its incorporation and dated a current date;
(d) Bylaws. The bylaws of each Borrower and each
Obligated Party certified by its Secretary or an Assistant Secretary;
(e) Governmental Certificates. Certificates of the
appropriate government officials of the state of incorporation of each Borrower
and each Obligated Party as to their respective existence, authority to do
business and good standing, as applicable, in such states, each dated a current
date;
(f) Note. If requested by the Bank, the Note executed by
each Borrower,
(g) Guaranty. The Guaranty executed by each Regular
Subsidiary in existence as of the Closing Date;
(h) Security Agreement. The Security Agreement executed
by NLSI, UCC, tax and judgment Lien search reports listing all documentation on
file against each Borrower in each jurisdiction in
21
which such party is organized and has its chief executive office; and such
executed documentation as the Bank may deem necessary to perfect or protect its
Liens, including, without limitation: (i) financing statements under the UCC and
other applicable documentation under the laws of any jurisdiction with respect
to the perfection of Liens; and (ii) such consents and/or lien acknowledgements,
as the Bank may require to ensure the attachment, perfection and priority of the
Liens of the Agent in the Collateral;
(i) Termination of Liens. Duly executed UCC-3 termination
statements and such other documentation as shall be necessary to terminate or
release all Liens other than those permitted by Section 8.2 hereof;
(j) Fees. The fees payable to the Bank on the Closing
Date;
(k) Attorneys' Fees and Expenses. Evidence that the costs
and expenses (including reasonable attorneys' fees) referred to in SECTION 12.1
hereof, to the extent incurred and invoiced, have been, or will be with the
proceeds of the initial Loan, paid in full;
(1) Opinion of Counsel. A favorable opinion of legal
counsel to Borrowers and the Obligated Parties, as to the matters set forth in
EXHIBIT "B" hereto, and such other matters as the Bank may reasonably request;
and
(m) Intercreditor Agreement. An Intercreditor Agreement
executed by Borrowers, Bank, and Farmers & Merchants Investment Inc., relating
to the limitations on payment of the F&M Facility.
Section 5.2. All Loans. The obligation of the Bank to make any
Loan (including the initial Loan) is subject to the following additional
conditions precedent:
(a) No Default. No Default shall have occurred and be
continuing, or would result from such Loan;
(b) Representations and Warranties. All of the
representations and warranties contained in Article VI hereof and in the other
Loan Documents shall be true and correct in all material respects on and as of
the date of such Loan with the same force and effect as if such representations
and warranties had been made on and as of such date except to the extent that
such representations and warranties relate specifically to another date;
(c) Absence of Legal Action. No order, judgment or decree
of any court, arbitrator or Governmental Authority nor any action, suit,
investigation or other proceeding before any court, arbitrator or Governmental
Authority shall purport or threaten to enjoin or restrain any of the
transactions contemplated by the Loan Documents or any acquisition to be
financed with the proceeds of the Loan requested;
(d) No Material Adverse Effect. Since September 30,2001,
no event has occurred that has, or would have, a Material Adverse Effect, or if
such Loan is to pay the purchase price for a Permitted Acquisition, that would
have a material adverse effect on the business, assets, liabilities (actual or
contingent) operations, condition (financial or otherwise) or prospects of the
applicable Target;
(e) Acquisition Conditions. The conditions precedent
under Section 8.5 applicable to the Permitted Acquisition to be funded with the
Loan requested shall have been satisfied;
(f) Pro Forma Fixed Charge Coverage Ratio. The Pro Forma
Fixed Charge Coverage Ratio, calculated after giving effect to the Loan
requested and the acquisition of the Target or its assets to be financed with
the proceeds thereof, shall be no less than 1.50 to 1.00 and Borrowers shall
have delivered to
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the Bank a Borrowing Request duly completed and executed showing, among the
other things required thereby, the calculations demonstrating compliance with
this clause (f).
(g) Additional Documentation. The Bank shall have
received such additional approvals, opinions, or documents as the Bank or its
legal counsel may reasonably request.
The notice of borrowing by Borrowers hereunder shall constitute a representation
and warranty by Borrowers that the conditions precedent set forth in Sections
5.2 have been satisfied (both as of the date of such notice and, unless
Borrowers otherwise notify the Bank prior to the date of such borrowing, as of
the date of such borrowing).
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, Borrowers, jointly and
severally, represent and warrant to the Bank that:
Section 6.1. Corporate Existence. Borrowers and each Subsidiary
(a) is a corporation (or other entity as specified on Schedule 6.14) duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or organization; (b) has all requisite power
and authority to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
Each Borrower and each Obligated Party has the corporate power and authority and
legal right to execute, deliver, and perform its obligations under the Loan
Documents to which it is or may become a party.
Section 6.2. Financial Statements. Borrowers have delivered to the
Bank: (i) audited consolidated financial statements of NLSI as at and for the
fiscal years ended December 31,1998,1999, and 2000; (ii) audited consolidated
financial statements of NELNET as at and for the fiscal years ended December
31,1998, 1999 and 2000; and (iii) unaudited consolidated financial statements of
NLSI and the Subsidiaries as at and for the fiscal quarter and nine (9) month
period ended September 30, 2001. Such financial statements are complete and
correct, have been prepared in accordance with GAAP, and fairly and accurately
present, on a consolidated basis, the financial condition of the Persons the
subject thereof as of the respective dates indicated therein and the results of
operations for the respective periods indicated therein. Neither Borrower nor
any of their respective Subsidiaries has any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments, or unrealized
or anticipated losses from any unfavorable commitments except as referred to or
reflected in such financial statements. There has been no material adverse
change in the business, assets, liabilities (actual or contingent), operations,
condition (financial or otherwise) or prospects of Borrowers or any of their
respective Subsidiaries since the effective date of the most recent financial
statements referred to in this Section 6.2; provided that up to $16,000,000 of
servicing conversion expenses incurred since September 30, 2001 shall not be
deemed to create a material adverse change.
Section 6.3. Corporate Action; No Breach. The execution, delivery,
and performance by each Borrower and each Obligated Party of the Loan Documents
to which it is or may become a party and compliance with the terms and
provisions hereof and thereof have been duly authorized by all requisite
corporate action on the part of each Borrower and each Obligated Party and do
not and will not (a) violate or conflict with, or result in a breach of, or
require any consent under (i) the certificate of incorporation or bylaws of
either Borrower, any Obligated Party or any of the other Subsidiaries, (ii) any
applicable standards,
23
guidelines or requirements of the Higher Education Act or any other law, rule,
or regulation or any order, writ, injunction, or decree of any Governmental
Authority or arbitrator, or (iii) any agreement or instrument (including,
without limitation, any Securitization Documents, student loan purchase or
servicing agreements or any Student Loan Guarantee Agreement) to which either
Borrower, any Obligated Party or any of the other Subsidiaries is a party or by
which any of them or any of their property is bound or subject, or (b)
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the property of either Borrower,
any Obligated Party or any other Subsidiary except for the Liens created under
the Loan Documents.
Section 6.4. Operation of Business. Borrowers and each of their
respective Subsidiaries possess all licenses, permits, franchises, patents,
copyrights, trademarks, and tradenames, or rights thereto (including, without
limitation, all DOE licenses and approvals and all licenses, permits and
approvals required under the Higher Education Act) necessary to conduct their
respective businesses substantially as now conducted and as currently proposed
to be conducted without Material Adverse Effect and Borrowers and each of their
respective Subsidiaries are not in violation in any material respect of any
valid rights of others with respect to any of the foregoing.
Section 6.5. Litigation and Judgments. There is no action, suit,
investigation, or proceeding before or by any Governmental Authority (including
without limitation, the DOE) or arbitrator pending, or to the knowledge of
either Borrower, threatened against or affecting either Borrower or any
Subsidiary which, if adversely determined, could have a Material Adverse Effect.
There are no unstayed or undischarged judgments against either Borrower or any
Subsidiary which would constitute an Event of Default under SECTION 10.1(h).
Section 6.6. Rights in Properties: Liens. Borrowers and each of
their respective Subsidiaries have good and indefeasible title to or valid
leasehold interests in their respective properties, real and personal, including
the properties and leasehold interests reflected in the financial statements
described in Section 6.2, and none of the properties or leasehold interests of
either Borrower or any Subsidiary is subject to any Lien, except as of the
Closing Date, the Liens disclosed on SCHEDULE 8.2 and at all times after the
Closing Date, as permitted by Section 8.2.
Section 6.7. Enforceability. This Agreement constitutes, and the
other Loan Documents to which each Borrower is party, when executed and
delivered, shall constitute the legal, valid, and binding obligations of the
applicable Borrower, enforceable against it in accordance with their respective
terms, except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditors' rights and general
principles of equity. The Loan Documents to which each Obligated Party is party,
when executed and delivered, shall constitute the legal, valid, and binding
obligations of such Obligated Party, enforceable against such Obligated Party in
accordance with their respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditors' rights and general principles of equity.
Section 6.8. Approvals. No authorization, approval, or consent of,
and no filing or registration with, any Governmental Authority or third party is
or will be necessary for the execution, delivery, or performance by either
Borrower or any Obligated Party of the Loan Documents to which it is or may
become a party or for the validity or enforceability thereof except for such
approvals or consents which have been obtained or made and disclosed on Schedule
1.2 to the Security Agreement.
Section 6.9. Debt. Borrowers and their respective Subsidiaries
have no Debt, except, as of the Closing Date, as reflected on Schedule 8.1 and,
at any time after the Closing Date, Debt otherwise permitted by Section 8.1.
24
Section 6.10. Taxes. Borrowers and each Subsidiary have filed all
tax returns (federal, state, and local) required to be filed, including all
income, franchise, employment, property, and sales tax returns, and have paid
all of their respective liabilities for taxes, assessments, governmental
charges, and other levies that are due and payable except for those liabilities
whose amount, applicability, or validity is being contested in good faith by
appropriate proceedings being diligently pursued, and for which adequate
reserves have been established. Neither Borrower knows of any pending
investigation of either Borrower or any Subsidiary by any taxing authority or of
any pending but unassessed material tax liability of either Borrower or any
Subsidiary.
Section 6.11. Margin Securities. Neither Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations T, U, or X of the Board of Governors of
the Federal Reserve System), and no part of the proceeds of any Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock.
Section 6.12. ERISA. Borrowers and each Subsidiary are in
compliance in all material respects with all applicable provisions of ERISA.
Neither a Reportable Event nor a Prohibited Transaction has occurred and is
continuing with respect to any Plan. No notice of intent to terminate a Plan has
been filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither Borrower nor any ERISA Affiliate has completely or
partially withdrawn from a Multiemployer Plan. Borrower and each ERISA Affiliate
have met their minimum funding requirements under ERISA with respect to all of
their Plans, and the present value of all vested benefits under each Plan do not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
ERISA. Neither Borrower nor any ERISA Affiliate has incurred any liability to
the PBGC under ERISA.
Section 6.13. Disclosure. No statement, information, report,
representation, or warranty made by either Borrower or any Obligated Party in
any Loan Document or furnished to the Bank in connection with this Agreement or
any transaction contemplated hereby, other than projections concerning the
Borrowers and the Subsidiaries that have been delivered to the Bank prior to the
date hereof, contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements herein or therein not
misleading in light of the circumstances under which such statement,
information, report, representation or warranty was provided. There is no fact
known to either Borrower which has had a Material Adverse Effect, or which could
have a Material Adverse Effect in the future that has not been disclosed to the
Bank.
Section 6.14. Subsidiaries. As of the date hereof, Borrowers have
no Subsidiaries other than those listed on SCHEDULE 6.14, and Schedule 6.14 sets
forth the type of entity, the jurisdiction of incorporation or organization of
each Subsidiary, Borrowers' or the Subsidiaries' percentage interest of the
ownership of each Subsidiary listed thereon, the authorized, issued, and
outstanding Equity Interests of each such Subsidiary and whether or not such
Subsidiary is a Regular Subsidiary. All of the outstanding Equity Interests of
each Subsidiary listed on Schedule 6.14 has been validly issued, is fully paid,
and is non-assessable. There are no outstanding subscriptions, options,
warrants, calls, or rights (including preemptive rights) to acquire, and no
outstanding securities or instruments convertible into, Equity Interests of any
Subsidiary listed on Schedule 6.14 except as specified on Schedule 6.14.
Section 6.15. Agreements. Neither Borrower nor any Subsidiary is a
party to any indenture, loan, or credit agreement, or any servicing or purchase
agreement or to any lease or other agreement or instrument (including, without
limitation, any servicing or purchase agreement or any Student Loan Guaranty
Agreement), or subject to any charter or corporate restriction that could have a
Material Adverse Effect in absence of a default thereunder. Neither Borrower nor
any Subsidiary is in default in any material respect in the performance,
25
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
Section 6.16. Compliance with Laws. Neither Borrower nor any
Subsidiary is in violation in any material respect of any applicable standards,
guidelines or requirements of the Higher Education Act or any other applicable
law, rule, regulation (including, without limitation, any Environmental Law),
order, or decree of any Governmental Authority (including without limitation,
the DOE) or arbitrator.
Section 6.17. Investment Company Act. Neither Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 6.18. Public Utility Holding Company Act. Neither Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 6.19. Environmental Matters. Except for instances of
noncompliance with or exceptions to the following that could not have,
individually or in the aggregate, a Material Adverse Effect: (i) no Hazardous
Materials exist on, about, or within or have been used, generated, stored,
transported, disposed of on, or released from any of the properties of either
Borrower or any Subsidiary except in compliance with applicable Environmental
Laws and (ii) the use which either Borrower and the Subsidiaries make and intend
to make of their respective properties will not result in the use, generation,
storage, transportation, accumulation, disposal, or release of any Hazardous
Material on, in, or from any of their properties except in compliance with
applicable Environmental Laws.
Section 6.20. Labor Disputes and Acts of God. Neither the business
nor the properties of either Borrower or any Subsidiary are affected by any
fire, explosion, accident, strike, lockout, or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or other
casualty (whether or not covered by insurance) that is having or could have a
Material Adverse Effect.
Section 6.21. Solvency. As of and from and after the date of this
Agreement and after giving effect to the consummation of the transactions
contemplated by the Loan Documents and any transaction permitted hereby,
Borrowers and each of their respective Subsidiaries individually and on a
consolidated basis: (a) owns and will own assets the fair saleable value of
which are (i) greater than the total amount of their consolidated liabilities
(including contingent liabilities) and (ii) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured considering all financing alternatives and potential
asset sales reasonably available to it; (b) has capital that is not unreasonably
small in relation to its business as presently conducted or any contemplated or
undertaken transaction; and (c) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due.
ARTICLE VII.
POSITIVE COVENANTS
Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Bank has any commitment or other
obligation hereunder, each Borrower will perform and observe the following
positive covenants unless the Bank otherwise agrees:
Section 7.1. Reporting Requirements. Borrowers will furnish to the
Bank:
26
(a) Annual Financial Statements. As soon as available,
and in any event within ninety (90) days after the end of each fiscal year of
Borrowers, beginning with the fiscal year ending December 31, 2001, a copy of
the annual audit report of Borrowers and their respective Subsidiaries for such
fiscal year containing, on a consolidated basis, balance sheets and statements
of income, stockholders' equity, and cash flow as at the end of such fiscal year
and for the twelve (12) month period then ended, in each case setting forth in
comparative form the figures for the preceding fiscal year, all in reasonable
detail and audited and certified without qualification by independent certified
public accountants of recognized standing acceptable to the Bank, to the effect
that such report has been prepared in accordance with GAAP;
(b) Quarterly Financial Statements. As soon as available,
and in any event within forty-five (45) days after the end of each of the
quarters of each fiscal year of Borrowers, a copy of an unaudited financial
report of Borrowers and their respective Subsidiaries as of the end of such
fiscal quarter and for the portion of the fiscal year then ended containing, on
a consolidated and consolidating basis, balance sheets and statements of income,
stockholders' equity, and cash flow, in each case setting forth in comparative
form the figures for the corresponding period of the preceding fiscal year, all
in reasonable detail certified by the chief financial officer of Borrowers to
have been prepared in accordance with GAAP and to fairly and accurately present
(subject to year-end audit adjustments) the financial condition and results of
operations of Borrowers and their respective Subsidiaries, on a consolidated and
consolidating basis, at the date and for the periods indicated therein;
(c) Compliance Certificate. Concurrently with the
delivery of each of the financial statements referred to in Subsections 7.1(a)
and 7.1(b), a Compliance Certificate;
(d) Management Letters. Promptly upon receipt thereof, a
copy of any management letter or written report submitted to either Borrower or
any Subsidiary by independent certified public accountants with respect to the
business, assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of either Borrower or any Subsidiary;
(e) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any Governmental
Authority or arbitrator affecting either Borrower or any Subsidiary which, if
determined adversely to either Borrower or such Subsidiary, could have a
Material Adverse Effect;
(f) Notice of Default. As soon as possible and in any
event within five (5) days after either Borrower becomes aware of any Default, a
written notice setting forth the details of such Default and the action that
Borrowers have taken and proposes to take with respect thereto;
(g) ERISA Reports, (i) Upon Bank's request, copies of all
reports, including annual reports, and notices which either Borrower or any
Subsidiary files with or receives from the PBGC or the U.S. Department of Labor
under ERISA; and (ii) as soon as possible and in any event within five (5) days
after either Borrower has determined that any Reportable Event or Prohibited
Transaction has occurred with respect to any Plan or that the PBGC or within
five (5) days after either Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, a
certificate of the chief financial officer of such Borrower setting forth the
details as to such Reportable Event or Prohibited Transaction or Plan
termination and the action that Borrowers propose to take with respect thereto;
(h) Reports to Other Creditors. Promptly after the
furnishing thereof, copies of any statement or report furnished by either
Borrower or any Regular Subsidiary to any other party pursuant to the terms of
any indenture, loan, or credit or similar agreement and not otherwise required
to be furnished to the Bank pursuant to any other clause of this Section;
27
(i) Notice of Material Adverse Effect. As soon as
possible and in any event within five (5) days after either Borrower becomes
aware of occurrence thereof, written notice of any matter that could have a
Material Adverse Effect;
(j) Proxy Statements, etc. Upon Bank's request, as soon
as available, one copy of each financial statement, report, notice or proxy
statement sent by either Borrower or any Subsidiary to its security holders
generally and one copy of each regular, periodic or special report, registration
statement, or prospectus filed by either Borrower or any Subsidiary with any
securities exchange or the Securities and Exchange Commission or any successor
agency;
(k) Student Loan Reporting.
(i) As soon as available, and in any event
within forty-five (45) days after the end of each of the quarters of each fiscal
year of Borrowers, a report on Borrowers' and the Subsidiaries' student loan
portfolio, which shall include an identification of each type of student loan
outstanding, the performance of each such student loan and the default rates
applicable thereto; and
(ii) Promptly upon the receipt thereof, and in
any event on at least an annual basis, the audited financial statements, the SAS
70 report provided to either Borrower or any Subsidiary by the servicers (who
are not a Subsidiary) of the student loans of either Borrower or any Subsidiary
and such other information and reports as the Bank may request to determine
compliance with Section 7.12; and
(1) DOE Audit Materials. Within forty-five (45) days
after the last day of each fiscal quarter, notice of all DOE audits of, or any
other actions of a material nature by, the DOE with respect to, either Borrower,
any Subsidiary or any Affiliate thereof and, to the extent that it has knowledge
thereof, of any servicer or student loan guarantor applicable to any student
loans owned by either Borrower or any Subsidiary, and, in each case, notice of
the results thereof (including, but not limited to, the rate of reimbursement by
the DOE for such student loan guarantors to the extent that such rate is below
the maximum permitted under the Higher Education Act); and
(m) General Information. Promptly, such other information
concerning either Borrower or any Subsidiary as the Bank may from time to time
reasonably request.
Section 7.2. Maintenance of Existence: Conduct of Business. Except
as permitted by SECTION 8.3, Borrowers will, and will cause each Subsidiary to,
preserve and maintain its corporate existence and all of its leases, privileges,
licenses, permits, franchises, qualifications, and rights (including, without
limitation, all authorizations, licenses and approvals provided by the DOE or
otherwise under the Higher Education Act) that are necessary or desirable in the
ordinary conduct of its business. Borrowers will, and will cause each Subsidiary
to, conduct its business in an orderly and efficient manner in accordance with
good business practices.
Section 7.3. Maintenance of Properties. Borrowers will, and will
cause each Subsidiary to, maintain, keep, and preserve all of its properties
necessary or useful in the proper conduct of its business in good repair,
working order, and condition and make all necessary repairs, renewals,
replacements, betterments, and improvements thereof.
Section 7.4. Taxes and Claims. Borrowers will, and will cause each
Subsidiary to, pay or discharge at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its property, and (b) all lawful claims
for labor, material, and supplies, which, if unpaid, might become a Lien upon
any of its property, Provided.
28
however, that neither Borrower nor any Subsidiary shall be required to pay or
discharge any tax, levy, assessment, or governmental charge or claim for labor,
material, or supplies whose amount, applicability, or validity is being
contested in good faith by appropriate proceedings being diligently pursued and
for which adequate reserves have been established.
Section 7.5. Insurance. Borrowers will, and will cause each
Subsidiary to, keep insured by financially sound and reputable insurers all
property of a character usually insured by Persons engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such Persons and carry such other
insurance as is usually carried by such Persons.
Section 7.6. Inspection Rights. Prior to the occurrence of a
Default, each Borrower will, and will cause each Subsidiary to, permit
representatives of the Bank, during normal business hours and upon no less than
two (2) Business Days prior notice, to examine, copy, and make extracts from its
books and records, to visit and inspect its properties, and to discuss its
business, operations, and financial condition with its officers, employees, and
independent certified public accountants. If a Default exists, each Borrower
will, and will cause each Subsidiary to, permit representatives of the Bank,
during normal business hours but without prior notice, to examine, copy, and
make extracts from its books and records, to visit and inspect its properties,
and to discuss its business, operations, and financial condition with its
officers, employees, and independent certified public accountants.
Section 7.7. Keeping Books and Records. Borrowers will, and will
cause each Subsidiary to, maintain proper books of record and account in which
full, true, and correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to its business and activities.
Section 7.8. Compliance with Laws. Borrowers will, and will cause
each Subsidiary to, comply in all material respects with all applicable
standards, guidelines or requirements of the Higher Education Act and all other
applicable laws, rules, regulations, orders, and decrees of any Governmental
Authority or arbitrator.
Section 7.9. Compliance with Agreements. Borrowers will, and will
cause each Subsidiary to, comply in all material respects with all agreements,
contracts, and instruments binding on it or affecting its properties or
business, including, without limitation, all Securitization Documents, all
student loan servicing and purchase agreements and all Student Loan Guarantee
Agreements.
Section 7.10. Further Assurances; Subsidiary Joinder; New
Securitization Residual. Borrowers will, and will cause each Subsidiary to,
execute and deliver such further documents and take such further action as may
be requested by the Bank to carry out the provisions and purposes of this
Agreement and the other Loan Documents. Without limiting the generality of the
forgoing, within forty-five (45) days after the end of each fiscal quarter or,
in connection with an acquisition, as of the date of the acquisition, Borrowers
shall cause each Subsidiary that is not a Special Purpose Vehicle and that is
created or acquired during the fiscal quarter then ending or, in the case of
acquisition, then being acquired, to execute and deliver to Bank a Subsidiary
Joinder Agreement and such other documentation as the Bank may reasonably
request to cause such Subsidiary to enter into and implement the guaranty for
the repayment of the Obligations contemplated by the Guaranty.
Section 7.11. ERISA. Borrowers will, and will cause each Subsidiary
to, comply with all minimum funding requirements and all other material
requirements of ERISA, if applicable, so as not to give rise to any liability
under ERISA or any Plan.
Section 7.12. Servicing Performance. Borrowers will, and will cause
each Subsidiary and each servicer of student loans in which it or any Subsidiary
has an ownership interest to maintain annual error rates
29
applicable to its servicing of student loans lower that the DOE thresholds which
would reduce the guarantee applicable to such student loans to an amount below
ninety-eight percent (98%).
ARTICLE VIII.
NEGATIVE COVENANTS
Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Bank has any commitment or other
obligation hereunder, it will perform and observe the following negative
covenants unless the Bank otherwise agrees:
Section 8.1. Debt Borrowers will not, and will not permit any
Subsidiary to, incur, create, assume, or permit to exist any Debt, except:
(a) Debt to the Bank pursuant to the Loan Documents;
(b) Existing Debt in the amount disclosed on SCHEDULE 8.1
(including any advances made on or after the Closing Date pursuant to the
commitments to lend disclosed on Schedule 8.1) hereto and any extensions,
renewals or refinancing of such existing Debt so long as (i) the principal
amount of such Debt after such renewal, extension or refinancing shall not
exceed the principal amount of such Debt which was outstanding immediately prior
to such renewal, extension or refinancing, and (ii) such Debt shall not be
secured by any assets other than assets securing such Debt, if any, prior to
such renewal, extension or refinancing;
(c) Debt of either Borrower to any Subsidiary or of any
Subsidiary to either Borrower or another Subsidiary; provided that (i) the
obligations of each Subsidiary that is an Obligated Party for the Debt created
thereby shall be subordinated in right of payment to such Subsidiary's
Obligations under the Loan Documents from and after such time as any portion of
such Obligations shall become due and payable (whether at stated maturity, by
acceleration or otherwise); and (ii) no Default exists or would result
therefrom;
(d) Debt under Hedging Agreements entered into to
mitigate the interest rate risk of Debt actually incurred; provided that each
counterparty shall be rated in one of the three highest rating categories of
Standard & Poor's Rating Group or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) Debt of a Subsidiary incurred in the ordinary course
of its student loan operations, provided that (i) the repayment of principal and
interest of such Debt is fully secured by student loans or (ii) such Debts
represents unfunded commitments to provide student loans;
(f) Guaranties given in the ordinary course of business
with respect to indemnification obligations arising in connection with the
issuance of Debt described in Section 8.1(e) and surety and appeal bonds,
performance and return-of-money bonds and other similar obligations (other than
for borrowed money);
(g) Debt constituting obligations to reimburse worker's
compensation insurance companies for claims paid by such companies on either
Borrower's or a Subsidiary's behalf in accordance with the policies issued to
either Borrower and their respective Subsidiaries;
(h) Guarantees by either Borrower or any Subsidiary of
Debt of a Subsidiary permitted hereby or of operating leases of a Subsidiary
entered into in the ordinary course of business;
30
(i) Debt (including Capital Lease Obligations) secured by
purchase money Liens permitted by Section 8.2(f); provided that (x) the purchase
of the asset financed thereby is permitted by Section 9.4; and (y) at the time
of the incurrence, creation, or assumption of any of such Debt, no Default shall
have occurred and be continuing;
(j) Debt of any Person (or any of such Person's
subsidiaries) existing at the time such Person becomes a Subsidiary (or is
merged into or consolidated with any Subsidiary), but only to the extent that
such Debt was not incurred in connection with, as a result of or in
contemplation of such Person becoming a Subsidiary (or being merged into or
consolidated with any Subsidiary) and any Guarantee of such Debt given by either
Borrower or any Subsidiary as a condition to the acquisition of such Person,
Provided, However, that (i) after giving pro forma effect to such Debt, the Pro
Forma Fixed Charge Coverage Ratio shall be no less than 1.50 to 1.00 and (ii)
immediately after such acquired Person becomes a Subsidiary (or is merged into
or consolidated with any Subsidiary), no Default exists; and
(k) Not exceeding $5,000,000 outstanding principal amount
of Debt in addition to the Debt described in clauses (a) through (j) above,;
Provided, However, that (i) after giving pro forma effect to such Debt, the Pro
Forma Fixed Charge Coverage Ratio shall be no less than 1.50 to 1.00 and (ii)
immediately after such Debt is incurred, no Default exists.
Section 8.2. Limitation on Liens. Borrowers will not, and will not
permit any Subsidiary to, incur, create, assume, or permit to exist any Lien
upon any of its property, whether now owned or hereafter acquired, except the
following, none of which (other than as disclosed on Schedule 8.2) shall attach
to or otherwise encumber: (i) the Collateral, or (ii)any Securitization Residual
other than in connection with any SLIM:
(a) Liens disclosed on Schedule 8.2 hereto, and Liens
created and existing in connection with any extensions, renewals or refinancings
of the Debt secured by such Liens as permitted under Section 8.1(b), provided
that (i) no such Lien is expanded to cover any additional property (other than
after acquired title in or on such property and proceeds of the existing
collateral and other than property having no greater fair market value than the
existing collateral for which such property is being substituted as new
collateral) after the date hereof; and (ii) no such Lien is spread to secure any
additional Debt after the date hereof;
(b) Encumbrances consisting of easements, zoning
restrictions, or other restrictions on the use of real property that do not
(individually or in the aggregate) materially affect the value of the property
encumbered thereby or materially impair the ability of either Borrower or the
Subsidiaries to use such property in their respective businesses, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(c) Liens (other than Liens relating to liabilities
resulting from the violation of Environmental Laws or ERISA) for taxes,
assessments, or other governmental charges that are not delinquent or which are
being contested in good faith and for which adequate reserves have been
established;
(d) Liens of mechanics, materialmen, warehousemen,
carriers, or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business or which are being
contested in good faith and for which adequate reserves have been established;
(e) Liens resulting from good faith deposits to (i)
secure payments of workmen's compensation or other social security programs, and
(ii) secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, contracts (other than for payment of Debt), or leases made in the
ordinary course of business;
31
(f) Purchase-money Liens on any property hereafter
acquired or a Lien incurred in connection with any conditional sale or other
title retention agreement or Capital Lease Obligation; provided that:
(i) any property subject to the foregoing is
acquired by either Borrower or any Subsidiary in the ordinary course of its
business (and not in a Permitted Acquisition) and the Lien on the property
attaches concurrently or within sixty (60) days after the acquisition thereof;
(ii) the Debt secured by any Lien so created,
assumed, or existing shall not exceed the lesser of the cost or fair market
value at the time of acquisition of the property covered thereby;
(iii) each such Lien shall attach only to the
property so acquired; and
(iv) the Debt incurred is permitted by Section
8.1(i);
(g) Liens on student loans and fixed assets of a Person
existing at the time such Person becomes a Subsidiary (or such Person is merged
into or consolidated with any Subsidiary) in accordance with the provisions of
Section 8.5 hereof; Provided, However, that such Liens (i) only secure the Debt
permitted by Subsection 8.1(j) above, (ii) were in existence prior to such
acquired Person becoming a Subsidiary (or prior to the contemplation of such
merger or consolidation), (iii) do not cover any property other than the
property of such acquired Person which is subject to such Liens prior to such
acquired Person becoming a Subsidiary (or prior to the contemplation of such
merger or consolidation) and (iv) do not cover Collateral;
(h) Any extension, renewal or replacement of any of the
Liens described in Clauses (d) through (g), provided that Liens permitted
thereby shall not be spread to cover any additional Debt or property (other than
after acquired title in or on such property and proceeds of the existing
collateral and other than property having no greater fair market value than the
existing collateral for which such property is being substituted as collateral);
(i) Any attachment or judgment Lien not constituting an
Event of Default;
(j) Liens against equipment arising from precautionary
UCC financing statement filings regarding operating leases which are not Debt
entered into by Borrowers and their respective Subsidiaries in the ordinary
course of business;
(k) Liens on student loans, the proceeds thereof, the
documents evidencing such student loans and all cash and other deposits relating
specifically thereto securing Debt permitted by clause (e) of Section 8.1; and
(l) Liens granted in favor of the Bank for the benefit of
the Secured Parties under the Loan Documents.
Neither Borrower nor any Regular Subsidiary shall enter into or assume any
agreement (other than the Loan Documents) prohibiting the creation or assumption
of any Lien upon its properties, whether now owned or hereafter acquired unless
such agreement permits the granting of Liens to secure the Obligations; provided
that, in connection with any Debt permitted to be incurred under Section 8.1
which is used to finance the acquisition of an asset, any Debt permitted to be
incurred under Section 8.1(e) and any Lien securing (the payment of either type
of such Debt permitted by this SECTION 8.2, either Borrower or the Subsidiary
may agree that it will not permit any other Liens to encumber the asset securing
the payment thereof. Except as provided herein, as may be provided in any
Securitization Documents, as disclosed in Schedule 8.2, and as may be imposed
32
by any applicable laws and regulations, Borrowers will not and will not permit
any Regular Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Regular Subsidiary to: (1) pay dividends or make
any other distribution on any of such Regular Subsidiary's Equity Interests
owned by either Borrower or any other Subsidiary; (2) subject to subordination
provisions, pay any Debt owed to either Borrower or any other Subsidiary; (3)
make loans or advances to either Borrower or any other Subsidiary; or (4)
transfer any of its property or assets to either Borrower or any other
Subsidiary.
Section 8.3. Mergers, etc. Borrowers will not, and will not permit
any Subsidiary to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets of a Person or the
assets of a division or branch of such Person or any shares, equity securities
or other evidence of beneficial ownership of any Person, or wind-up, dissolve,
or liquidate itself; provided that as long as no Default exists or would result
therefrom, Borrowers give the Bank prior written notice and NLSI takes all
action required hereby and by the Security Agreement to continue the perfection
and priority of the Liens created thereby:
(a) Borrowers or any other Regular Subsidiary may acquire
shares, equity securities or other evidence of beneficial ownership of a Person
(including a Subsidiary) or property of a Person (including a Subsidiary) in
accordance with the restrictions set forth in Section 8.5;
(b) A Regular Subsidiary may wind-up, dissolve or
liquidate if its assets are transferred to a Borrower or another Regular
Subsidiary or disposed of pursuant to Section 8.7 and any Subsidiary (other than
a Regular Subsidiary) may wind-up, dissolve or liquidate if its assets are
transferred to a Borrower or another Subsidiary or disposed of pursuant to
Section 8.7;
(c) Any Subsidiary may merge or consolidate with a
Borrower or a Guarantor (provided such Borrower or such Guarantor is the
surviving entity) and any Regular Subsidiary may merge or consolidate with any
other Regular Subsidiary and any Subsidiary other than a Regular Subsidiary may
merge or consolidate with any other Subsidiary;
(d) Either Borrower may merge with any Target in
connection with any acquisition permitted by Section 8.5 (provided the
applicable Borrower is the surviving entity) and any Subsidiary other than
NELNET may merge with any Target in connection with any acquisition permitted by
Section 8.5.
(e) Either Borrower or any Subsidiary may make any
Investment permitted pursuant to Section 8.5.
Section 8.4. Restricted Payments. NLSI (so long as it is the sole
shareholder of NELNET) or NELNET (so long as it is the sole shareholder of NLSI)
(such Person, the "Parent") will not declare or pay any dividends or make any
other payment or distribution (whether in cash, property, or obligations) on
account of its Equity Interests, or redeem, purchase, retire, or otherwise
acquire any of its Equity Interests, or permit any of the Subsidiaries to
purchase or otherwise acquire any Equity Interests of Parent, or set apart any
money for a sinking or other analogous fund for any dividend or other
distribution on its Equity Interests or for any redemption, purchase,
retirement, or other acquisition of any of its Equity Interests; provided,
HOWEVER, that if no Default exists or would result after giving pro forma effect
thereto, (a) Parent may declare and pay dividends on account of its Equity
Interests and (b) Parent may redeem, purchase, retire, or otherwise acquire its
Equity Interests, provided that the aggregate amount paid by Parent for the
redemption, purchase, retirement or other acquisition of its Equity Interests,
plus the aggregate amount of the prepayments made under the permissions of
Section 8.10 during the entire term of this Agreement, shall not exceed an
aggregate amount equal to One Million Dollars ($1,000,000).
33
Section 8.5. Investments. Borrowers will not, and will not permit
any Regular Subsidiary to, make or permit to remain outstanding any advance,
loan, extension of credit, or capital contribution to or investment in any
Person, or purchase or own any stock, bonds, notes, debentures, or other
securities of any Person, or be or become a joint venturer with or partner of
any Person or purchase all the properties of a Person or purchase properties of
a Person with a book value in excess of five percent (5%) of the book value of
all properties of such Person determined as of the date of acquisition (all such
transactions being herein called "Investments"), except:
(a) Borrowers and any Regular Subsidiary may make
Investments in readily marketable direct obligations of the United States of
America or any agency thereof or readily marketable direct obligations
guaranteed or insured as to principal and interest by the United States of
America or any agency thereof;
(b) Borrowers and any Regular Subsidiary may make
Investments in (i) fully insured certificates of deposit; and (ii) other
certificates of deposit issued by any commercial bank operating in the United
States of America having capital and surplus in excess of $500,000,000 and rated
in one of the four highest unsecured long-term debt ratings of Standard & Poor's
Rating Group or ▇▇▇▇▇'▇ Investors Service, Inc.;
(c) Borrowers and any Regular Subsidiary may make
Investments in commercial paper of a domestic issuer if at the time of purchase
such paper is rated in one of the two highest ratings of Standard & Poor's
Rating Group or ▇▇▇▇▇'▇ Investors Service, Inc;
(d) Borrowers and any Regular Subsidiary may own stock of
the Subsidiaries existing on the date hereof, Borrowers and any Regular
Subsidiary may make loans to Borrowers or other Subsidiaries and enter into
Guarantees, in each case, as permitted by Section 8.1 and, if no Default exists,
Borrowers and any Regular Subsidiary may make capital contributions to or
investments in, or purchase any stock or other equity securities of a Subsidiary
or a newly created Person organized by Borrowers or a Subsidiary that,
immediately after such investment or purchase, will be a Subsidiary provided
that the contributions, investments and purchases made under the permissions of
this clause (d) are made with cash or student loans and if made with cash, the
aggregate amount thereof after the Closing Date shall not exceed the amount
which is the sum of: (i) the amount determined in Borrower's reasonable business
judgment to be the necessary amount to facilitate tax planning and minimization
of Borrowers' and their respective Subsidiaries tax liability; (ii) the amount
necessary to finance the acquisition of Student Loans; and (iii) the amount
necessary to pay the reasonable expenses of any securities offering by such
Subsidiaries;
(e) Borrowers and any Subsidiary may in the ordinary
course of business make loans to officers, directors, agents and employees
provided that the aggregate amount of the loans made pursuant to this clause (e)
shall never exceed One Hundred Thousand Dollars ($100,000) in the aggregate at
any time;
(f) Borrowers and any Subsidiary may hold Investments
received in connection with the bankruptcy or reorganization of vendors,
suppliers and customers and in connection with the settlement of delinquent
obligations of, and disputes with, vendors, customers and suppliers arising in
the ordinary course of business;
(g) Borrowers and any Subsidiary may make extensions of
trade credit in the ordinary course of business;
(h) Borrowers and any Subsidiary may extend credit in the
form of student loans; and
34
(i) either Borrower or any other Regular Subsidiary may
acquire shares, other equity securities or other evidence of beneficial
ownership of a Person or, for purposes of Section 8.3, all or substantially all
of a Person's assets or the assets of a division or branch of such Person, or
become a joint venturer with or partner of any Person if, with respect to each
such transaction:
(i) Default. No Default exists or would result
therefrom;
(ii) Pro Forma Compliance. The Pro Forma Fixed
Charge Coverage Ratio, calculated after giving effect to the transaction shall
be no less than 1.50 to 1.00, and Borrowers shall have delivered to the Bank a
certificate duly completed and executed showing the calculations demonstrating
compliance with this clause (ii);
(iii) Delivery Requirements. Borrowers shall
provide the Bank fifteen (15) days prior to the consummation of the transaction
the following: (A) notice of the transaction, (B) the most recent financial
statements of the Target that Borrowers have available, (C) such other
documentation and information relating to the Target and the transaction as the
Bank may reasonably request, and (D) evidence certified by the chief executive
or chief financial officer of Borrowers that they shall be in compliance with
the covenants contained in Article IX on a pro forma basis for the four (4)
Fiscal Quarter period then most recently ending (assuming (1) the consummation
of the acquisition in question; (2) that the incurrence or assumption of any
Debt in connection therewith occurred on the first day of such period; (3) to
the extent such Debt bears interest at a floating rate, the rate in effect for
the entire period of calculation was the rate in effect at the time of
calculation; and (4) any sale of Subsidiaries or lines of business which
occurred during such period occurred on the first day of such period).
(iv) Diligence. Borrowers or the applicable
purchaser shall have completed due diligence on the Target or the assets to be
acquired;
(v) U.S. Acquisitions. The Target, joint
venture, or partnership is organized under the laws of a state in the United
States of America and is involved in the same type of business activities as
Borrowers and their respective Subsidiaries;
(vi) Structure. If the proposed acquisition is an
acquisition of the stock of a Target, the acquisition will be structured so that
the Target will become a wholly owned Subsidiary directly owned by either
Borrower. If the proposed acquisition is an acquisition of assets, the
acquisition will be structured so that either Borrower or a wholly owned
Subsidiary directly owned by either Borrower shall acquire the assets; and
(vii) No Hostile Acquisitions. The proposed
acquisition has been: (A) in the event a corporation or its assets is the
Target, either (x) approved by the Board of Directors of the corporation which
is the Target, or (y) recommended by such Board of Directors to the shareholders
of such Target, (B) in the event a partnership is the Target, approved by a
majority (by percentage of voting power) of the partners of the Target, or (C)
in the event an organization or entity other than a corporation or partnership
is the Target, approved by a majority (by percentage of voting power) of the
governing body, if any, or by a majority (by percentage of ownership interest)
of the owners of the Target; and
(j) Any Obligated Party may purchase (i) the assets of
Intuition Services, Inc.; provided the purchase price therefor does not exceed
$7,000,000, or such other amount consented to by Bank and (ii) the issued and
outstanding shares of stock of Idaho Financial Associates, Inc.; provided (w)
the purchase price therefor does not exceed $18,000,000, or such other amount
consented to by Bank, (x) the purchase occurs on or prior to March 31, 2002, (y)
after giving pro forma effect to such purchase, the Pro Forma Fixed Charge
35
Coverage Ratio shall be no less than 1.50 to 1.00 and (z) immediately after such
purchase occurs, no Default exists; and
(k) Other Investments which as of the date of incurrence,
when aggregated with the amount of other Investments previously made under this
Section 8.5(k) (each valued as the amount of such Investment when originally
made) does not exceed five percent (5%) of the then existing consolidated book
value of all properties of Borrowers and their Subsidiaries.
Section 8.6. Transactions With Affiliates. Borrowers will not, and
will not permit any Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate of either Borrower or such Subsidiary, except
(i) transactions among Obligated Parties and Special Purpose Vehicles; and (ii)
transactions in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to such Borrower or such Subsidiary than
would be obtained in a comparable arms-length transaction with a Person not an
Affiliate of such Borrower or such Subsidiary.
Section 8.7. Disposition of Property. Borrowers will not, and will
not permit any Subsidiary to, sell, lease, assign, transfer, or otherwise
dispose of any of its property, except (a) dispositions of student loans in the
ordinary course of business, including any sale or other transfer pursuant to an
Asset Securitization or similar transaction; (b) dispositions of assets
reasonably and in good faith determined by such Borrower or such Subsidiary to
be obsolete or no longer necessary to its business if no Default exists or would
result therefrom; (c) any sale, lease, assignment, transfer or other disposition
of assets of a Subsidiary as a result of a transaction permitted by Section 8.3;
(d) the sale, lease, assignment, transfer or other disposition of assets of (i)
a Regular Subsidiary or a Special Purpose Vehicle to either Borrower or any
other Regular Subsidiary or Special Purpose Vehicle, and (ii) a Subsidiary other
than a Regular Subsidiary to either Borrower or to another Subsidiary. Upon the
sale of any property by Borrowers or a Subsidiary under the permissions of this
Section 8.7 and delivery of the proceeds therefrom in accordance with the terms
of this Agreement, the Bank shall, without the requirement of any consent or
approval of any other Secured Party, execute and deliver to the buyer thereof
such documentation as may be necessary to evidence the termination of the Liens
of the Bank for the benefit of the Secured Parties therein and, if the stock of
a Subsidiary is sold, the release of such Subsidiary from the obligations
arising under the Loan Documents to which it is a party.
Section 8.8. Lines of Business. Borrowers will not, and will not
permit any Subsidiary to, engage in any line or lines of business activity other
than the businesses in which they are engaged on the date hereof and any
businesses reasonably related thereto.
Section 8.9. Environmental Protection. Borrowers will not, and
will not permit any Subsidiary to, (a) use (or permit any tenant to use) any of
its properties for the handling, processing, storage, transportation, or
disposal of any Hazardous Material except in compliance with applicable
Environmental Laws, (b) generate any Hazardous Material except in compliance
with applicable Environmental Laws, (c) conduct any activity that is likely to
cause a release or threatened release of any Hazardous Material in violation of
any Environmental Law, or (d) otherwise conduct any activity or use any of its
properties in any manner that is likely to violate any Environmental Law or
create any liabilities with respect thereto for which either Borrower or any of
the Subsidiaries would be responsible, except for circumstances or events
described in clauses (a) through (d) of this Section that could not have a
Material Adverse Effect.
Section 8.10. Prepayment or Payment of Debt. Neither Borrower shall
prepay, and shall not permit any Regular Subsidiary to prepay, any Debt, except
(i) the Obligations and (ii) if no Default exists or would result therefrom,
Borrowers and their respective Regular Subsidiaries may pay any Debt if the
aggregate amount of the payment made under the permissions of this Section 8.10
during the entire term of this Agreement plus the aggregate amount paid by
Borrowers for the redemption, purchase, retirement or other
36
acquisition of its Equity Interests under the permissions of Section 8.4 during
the entire term of this Agreement, shall not exceed an aggregate amount equal to
One Million Dollars ($1,000,000). In addition, provided that Borrowers deliver a
certificate to Bank certifying that no Default or Event of Default exists, and
showing the calculations demonstrating that after giving effect to any proposed
payment of Debt the Pro Forma Fixed Charge Coverage Ratio, calculated after
giving effect to such payment shall be no less than 1.50 to 1.00.
Section 8.11. Portfolio Default Rates. Borrowers shall not permit
the default rates applicable to the portfolio of student loans they and their
respective Subsidiaries own to exceed of fifteen percent (15%), calculated based
on the principal amount of such student loans in default to the aggregate
principal of the student loans owned and serviced.
ARTICLE IX.
FINANCIAL COVENANTS
Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or the Bank has any commitment or other
obligation hereunder, it will perform and observe the following financial
covenants unless the Bank otherwise agrees:
Section 9.1. Consolidated Tangible Net Worth. Borrowers will at
all times maintain Consolidated Tangible Net Worth in an amount not less than
the sum of (a) Forty Million Dollars ($40,000,000) plus (b) seventy-five percent
(75%) of the positive Consolidated Net Income of Borrowers for each fiscal
quarter to have completely elapsed since September 30,2001.
Section 9.2. Maximum Leverage Ratio. As of the end of each fiscal
quarter beginning with the fiscal quarter ending December 31,2001, Borrowers
will not permit the ratio of Funded Debt determined as of the end of such fiscal
quarter to Adjusted EBITDA calculated for the four (4) fiscal quarters then
ending to be greater than 3.00 to 1.00.
Section 9.3. Interest Coverage Ratio. As of the end of each fiscal
quarter beginning with the fiscal quarter ending December 31, 2001, Borrowers
will not permit the ratio of (a) Adjusted EBITDA of Borrowers, including,
without limitation, interest expense arising with respect to Asset
Securitizations, to (b) Borrowers' consolidated interest expense, including,
without limitation, interest expense arising with respect to Asset
Securitizations, both calculated for the four (4) fiscal quarters then ending,
to be less than 1.10 to 1.00.
Section 9.4. Pro Forma Fixed Charge Coverage Ratio. As of the end
of each fiscal quarter beginning December 30,2001, Borrowers will maintain a Pro
Forma Fixed Charge Coverage Ratio as of the end of such fiscal quarter of at
least 1.50 to 1.00.
37
ARTICLE X.
DEFAULT
Section 10.1. Events of Default. Each of the following shall be
deemed an "Event of Default":
(a) Either Borrower shall fail to pay (i) when due any
principal payable under any Loan Document or any part thereof; (ii) within three
(3) Business Days of the date due any interest or fees payable under the Loan
Documents or any part thereof; and (iii) within five (5) Business Days after the
date Borrowers receives written notice of the failure to pay when due any other
Obligation or any part thereof.
(b) Any representation, warranty or certification made or
deemed made by either Borrower or any Obligated Party (or any of their
respective officers) in any Loan Document or in any certificate, report, notice,
or financial statement furnished at any time in connection with this Agreement
shall be false, misleading, or erroneous in any material respect when made or
deemed to have been made.
(c) Either Borrower shall fail to perform, observe, or
comply with any covenant, agreement, or term contained in Article VIII or
Article IX of this Agreement. Either Borrower or any Obligated Party shall fail
to perform, observe, or comply with any other covenant, agreement, or term
contained in this Agreement or any other Loan Document (other than covenants to
pay the Obligations) and such failure shall continue for a period of ten (10)
days after the earlier of (i) the date the Bank provides Borrowers with notice
thereof or (ii) the date a Borrower should have notified the Bank thereof in
accordance with Section 7.1(g) hereof.
(d) Either Borrower, any Obligated Party or any other
Subsidiary shall admit in writing its inability to, or be generally unable to,
pay its debts as such debts become due.
(e) Either Borrower, any Obligated Party or any other
Subsidiary shall (i) apply for or consent to the appointment of, or the taking
of possession by, a receiver, rehabilitator, conservator, custodian, trustee,
liquidator or the like of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect, the "Bankruptcy Code"), (iv) institute any proceeding or
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or under any other such law, or
(vi) take any corporate or other action for the purpose of effecting any of the
foregoing.
(f) A proceeding or case shall be commenced, without the
application, approval or consent of either Borrower, any Obligated Party or any
other Subsidiary, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a receiver,
rehabilitator, conservator, custodian, trustee, liquidator or the like of either
Borrower, any Obligated Party or any other Subsidiary or of all or any
substantial part of its property, or (iii) similar relief in respect of either
Borrower, any Obligated Party or any other Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of sixty (60) or more days; or
an order for relief against either Borrower, any Obligated Party or any other
Subsidiary shall be entered in an involuntary case under the Bankruptcy Code.
38
(g) Either Borrower, any Obligated Party or any other
Subsidiary shall fail to discharge within a period of thirty (30) days after the
commencement thereof any unstayed attachment, sequestration, forfeiture, or
similar proceeding or proceedings involving an aggregate amount in excess of
Four Million Dollars ($4,000,000) against any of its properties.
(h) A final judgment or judgments for the payment of
money in excess of Four Million Dollars ($4,000,000) in the aggregate shall be
rendered by a court or courts against either Borrower, any Obligated Party or
any other Subsidiary and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall not be
procured, within thirty (30) days from the date of entry thereof and the
relevant Borrower, Obligated Party or Subsidiary shall not, within said period
of thirty (30) days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(i) Either Borrower, any Obligated Party or any other
Subsidiary shall fail to pay when due any principal of or interest on any Debt
(other than the Obligations) in excess of Four Million Dollars ($4,000,000), or
the maturity of any such Debt shall have been accelerated, or any such Debt
shall have been required to be prepaid in full prior to the stated maturity
thereof, or any event shall have occurred that permits (or, with the giving of
notice or lapse of time or both, would permit) any holder or holders of such
Debt or any Person acting on behalf of such holder or holders to accelerate the
maturity thereof or require any such prepayment.
(j) This Agreement or any other Loan Document shall cease
to be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by either
Borrower, any Obligated Party or any other Subsidiary or any of their respective
shareholders, or either Borrower or any Obligated Party shall deny that it has
any further liability or obligation under any of the Loan Documents, or any lien
or security interest created by the Loan Documents shall for any reason (other
than the negligence of the Bank or the release thereof in accordance with the
Loan Documents) cease to be a valid, first priority perfected security interest
in any of the Collateral purported to be covered thereby.
(k) Any of the following events shall occur or exist with
respect to either Borrower or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with respect to any
Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by the PBGC
of any such proceedings; or (v) complete or partial withdrawal under Section
4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization,
insolvency, or termination of any Multiemployer Plan; and in each case above,
such event or condition, together with all other events or conditions, if any,
have subjected or could in the reasonable opinion of the Bank subject either
Borrower or any Obligated Party to any tax, penalty, or other liability to a
Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination thereof)
which in the aggregate exceed or could reasonably be expected to exceed Four
Million Dollars ($4,000,000).
(l) So long as NLSI is the Parent, the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person
other than NLSI of any Equity Interest in NELNET; and so long as NELNET is the
Parent, the acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person other than NELNET of any Equity Interest in NLSI.
(m) The failure by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
to own, directly or indirectly (through Farmers & Merchants Investments Inc.,
Packers Service Group, Inc. or otherwise), beneficially and of record, Equity
Interests in Parent representing in the aggregate at least 51%, and
individually at least 15% of the aggregate ordinary voting power represented by
the issued and outstanding Equity Interests in Parent.
39
(n) Without limiting the provisions of Section 10.l(i),
an event of default or any other event shall have occurred under any
Securitization Document that permits (or, with the giving of notice or lapse of
time or both, would permit): (i) any holder or holders of the Debt issued
thereunder, or any Person acting on behalf of such holder or holders, to
accelerate the maturity thereof or require any prepayment thereof or (ii) any
holder or holders of the other securities issued thereunder, or any Person
acting on behalf of such holder or holders, to require the repurchase thereof;
provided that such event has a Material Adverse Effect on the value of the
Collateral or any Person asserts or otherwise attempts to create or claim any
liability on the part of either Borrower or any Regular Subsidiary for the
indebtedness, obligations, and liabilities evidenced by the Securitization
Documents.
(o) The F&M Facility shall mature, F&M shall give NELNET
notice of its intention not to renew the F&M Facility, shall fail to renew the
F&M Facility, or shall give NELNET notice that the Credit Limit (as defined
therein) shall be less than $30,000,000.
Section 10.2. Remedies. If any Event of Default exists, the Bank
may do any one or more of the following:
(a) Acceleration. By notice to Borrowers, declare all
outstanding principal of and accrued and unpaid interest on the Note, if any,
and all other amounts payable by Borrowers under the Loan Documents immediately
due and payable, and the same shall thereupon become immediately due and
payable, without any other notice, demand, presentment, notice of dishonor,
notice of acceleration, notice of intent to accelerate, protest, or other
formalities of any kind, all of which are hereby expressly waived by Borrowers.
(b) Termination of Commitments. Terminate the Commitment
without notice to either Borrower.
(c) Judgment. Reduce any claim to judgment.
(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Bank for the benefit of the Secured Parties to secure payment and
performance of the Obligations in accordance with the terms of the Loan
Documents.
(e) Rights. Exercise any and all rights and remedies
afforded by the laws of the State of Texas or any other jurisdiction, by any of
the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under Section
10.1(d); (e) or (f), the Commitment of the Bank shall automatically terminate,
and the outstanding principal of and accrued and unpaid interest on the Note, if
any, and all other amounts payable by Borrowers under the Loan Documents shall
thereupon become immediately due and payable without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, protest, or other formalities of any kind, all of which are hereby
expressly waived by Borrowers.
Section 10.3. Performance by the Bank. If either Borrower or any
Obligated Party shall fail to perform any covenant or agreement in accordance
with the terms of the Loan Documents, the Bank may perform or attempt to perform
such covenant or agreement on behalf of Borrowers or the applicable Obligated
Party. In such event, Borrowers shall, at the request of the Bank, promptly pay
any amount expended by the Bank in connection with such performance or attempted
performance to the Bank at the Principal Office, together with interest thereon
at the applicable Default Rate from and including the date of such expenditure
to but excluding the date such expenditure is paid in full. Notwithstanding the
foregoing, it is expressly
40
agreed that the Bank shall have no liability or responsibility for the
performance of any obligation of Borrowers or any Obligated Party under this
Agreement or any of the other Loan Documents.
Section 10.4. Continuance of Default. For purposes of all Loan
Documents, (a) a Default which is capable of being remedied shall be deemed to
exist until the Bank shall have actually received evidence reasonably
satisfactory to Bank that such Default shall have been remedied and (b) a
Default not capable of being remedied shall be deemed to exist until waived in
accordance with the Loan Document.
Section 10.5. Setoff. If an Event of Default exists, the Bank is
hereby authorized at any time and from time to time, without notice to either
Borrower (any such notice being hereby expressly waived by each Borrower), to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of either Borrower against any
and all of the Obligations, irrespective of whether or not the Bank shall have
made any demand under any Loan Document and although such Obligations may be
unmatured. The Bank agrees promptly to notify Borrowers after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application. The rights and remedies of the Bank
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Bank may have.
ARTICLE XI.
MISCELLANEOUS
Section 11.1. Expenses. Borrowers, jointly and severally, agree to
pay on demand: (a) all reasonable out-of-pocket costs and expenses of the Bank
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents and any and all amendments,
modifications, renewals, extensions, and supplements thereof and thereto,
including, without limitation, the reasonable fees and expenses of legal counsel
for the Bank, (b) all out-of-pocket costs and expenses of the Bank in connection
with any Default and the enforcement of this Agreement or any other Loan
Document, including, without limitation, the reasonable fees and expenses of
legal counsel for the Bank, (c) all transfer, stamp, documentary, or other
similar taxes, assessments, or charges levied by any Governmental Authority in
respect of this Agreement or any of the other Loan Documents, and (d) all other
reasonable out-of-pocket costs and expenses incurred by the Bank in connection
with any acquisition permitted hereby, any audit, appraisal or other valuation
of the Collateral or incurred in connection with any other mater relating to
this Agreement, any other Loan Document or any of the transactions contemplated
hereby or thereby.
Section 11.2. INDEMNIFICATION. BORROWERS SHALL INDEMNIFY THE BANK
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) TO WHICH ANY OF THEM
MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF
ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN
DOCUMENTS, INCLUDING WITHOUT LIMITATION, ANY ACQUISITION FINANCED OR OTHERWISE
PERMITTED HEREBY, (C) ANY BREACH BY EITHER BORROWER OR ANY OBLIGATED PARTY OF
ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF
THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL,
REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR
41
AFFECTING ANY OF THE PROPERTIES OF EITHER BORROWER OR ANY SUBSIDIARY, OR (E) ANY
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF
THE FOREGOING. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER
LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH
PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL (i) BE INDEMNIFIED FROM AND
HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF SUCH PERSON AND (ii) SHALL NOT BE INDEMNIFIED OR HELD HARMLESS
AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEY FEES) ARISING
OUT OF OR RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH
PERSON.
Section 11.3. Limitation of Liability. None of the Bank, or any
Affiliate, officer, director, employee, attorney, or agent thereof, shall have
any liability with respect to, and each Borrower and each Obligated Party hereby
waives, releases, and agrees not to ▇▇▇ any of them upon, any claim for any
special, indirect, incidental, consequential, exemplary or punitive damages
suffered or incurred by either Borrower or any Obligated Party in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents.
Section 11.4. No Duty. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by the Bank shall have the
right to act exclusively in the interest of the Bank and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to either Borrower, any Obligated Party, any other
Subsidiary or any of Borrowers' shareholders or any other Person.
Section 11.5. No Fiduciary Relationship. The relationship between
Borrowers and the Obligated Parties on the one hand and the Bank on the other is
solely that of debtor and creditor, and the Bank has no fiduciary or other
special relationship with either Borrower or any Obligated Party, and no term or
condition of any of the Loan Documents shall be construed so as to deem the
relationship between Borrowers and the Obligated Parties on the one hand and the
Bank on the other to be other than that of debtor and creditor. No joint venture
or partnership is created by this Agreement among Borrowers and the Obligated
Parties on the one hand and the Bank on the other.
Section 11.6. Equitable Relief. Each Borrower and each Obligated
Party recognizes that in the event either Borrower or any Obligated Party fails
to pay, perform, observe, or discharge any or all of their respective
obligations under the Loan Documents, any remedy at law may prove to be
inadequate relief to the Bank. Each Borrower and each Obligated Party therefore
agrees that the Bank shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 11.7. No Waiver; Cumulative Remedies. No failure on the
part of the Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement or
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power, or privilege under this Agreement or
any other Loan Document preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. The rights and remedies
provided for in this Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law.
42
Section 11.8. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Neither Borrower may assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Bank.
(b) The Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable Law, at any time
sell to one or more financial institutions (each a "Participant") participating
interests in the Loan Obligations. In the event of any such sale to a
Participant, (i) Bank's obligations under this Agreement shall remain unchanged,
(ii) Bank shall remain solely responsible for the performance thereof, (iii)
Bank shall remain the holder of the Loan Obligations for all purposes under this
Agreement, and (iv) Borrowers shall continue to deal solely and directly with
Bank in connection with Bank's rights and obligations under the Loan Documents.
Participants shall have no rights under the Loan Documents other than certain
voting rights as provided below. Subject to the following, Bank shall be
entitled to obtain (on behalf of its Participants) the benefits of Article
IV with respect to all participations in the Obligations outstanding from time
to time so long as Borrowers shall not be obligated to pay any amount in excess
of the amount that would be due to such Bank under Article IV calculated as
though no participation had been made. Bank shall not sell any participating
interest under which the Participant shall have any rights to approve any
amendment, modification, or waiver of any Loan Document, except to the extent
such amendment, modification, or waiver extends the due date for payment of any
amount in respect of principal, interest, or fees due under the Loan Documents,
reduces the interest rate or the amount of principal or fees applicable to the
Obligations (except such reductions as are contemplated by this Agreement), or
releases any Guaranty or Collateral, if any, for the Obligations.
Subject to giving prior notice to Borrowers and receiving Borrowers' consent,
which will not be unreasonably withheld, Bank may disclose to any Participant
and any prospective participant any and all financial and other information in
Bank's possession concerning Borrowers and their respective Subsidiaries and
affiliates which has been or may be delivered to Bank by or on behalf of either
Borrower in connection with this Agreement or any other Loan Document or Bank's
credit evaluation of Borrowers and their respective Subsidiaries.
Section 11.9. Survival. All representations and warranties made or
deemed made in this Agreement or any other Loan Document or in any document,
statement, or certificate furnished in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making of the Loans, and no investigation by the Bank or any
closing shall affect the representations and warranties or the right of the Bank
to rely upon them. Without prejudice to the survival of any other obligation of
Borrowers hereunder, the obligations of Borrowers under Article IV and Sections
11.1 and 11.2 shall survive repayment of the Note (if any) and termination of
the Commitment.
Section 11.10. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE (IF ANY),
AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
THERETO.
Section 11.11. Amendments. No amendment or waiver of any provision
of this Agreement, the Note (if any), or any other Loan Document to which either
Borrower is a party, nor any consent to any departure by either Borrower
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Bank and Borrowers, and each such waiver or consent shall be
effective only in the
43
specific instance and for the specific purpose for which given. No Affiliate of
the Bank that is a Secured Party shall have any right to consent or agree to any
changes to any Loan Document.
Section 11.12. Maximum Interest Rate.
(a) No interest rate specified in this Agreement or any
other Loan Document shall at any time exceed the Maximum Rate. If at any time
the interest rate (the "Contract Rate") for any Obligation shall exceed the
Maximum Rate, thereby causing the interest accruing on such Obligation to be
limited to the Maximum Rate, then any subsequent reduction in the Contract Rate
for such Obligation shall not reduce the rate of interest on such Obligation
below the Maximum Rate until the aggregate amount of interest accrued on such
Obligation equals the aggregate amount of interest which would have accrued on
such Obligation if the Contract Rate for such Obligation had at all times been
in effect.
(b) Notwithstanding anything to the contrary contained in
this Agreement or the other Loan Documents, none of the terms and provisions of
this Agreement or the other Loan Documents shall ever be construed to create a
contract or obligation to pay interest at a rate in excess of the Maximum Rate;
and the Bank shall never charge, receive, take, collect, reserve or apply, as
interest on the Obligations, any amount in excess of the Maximum Rate. The
parties hereto agree that any interest, charge, fee, expense or other obligation
provided for in this Agreement or in the other Loan Documents which constitutes
interest under applicable law shall be, ipso facto and under any and all
circumstances, limited or reduced to an amount equal to the lesser of (i) the
amount of such interest, charge, fee, expense or other obligation that would be
payable in the absence of this Section 11.12(b), or (ii) an amount, which when
added to all other interest payable under this Agreement or the other Loan
Documents, equals the Maximum Rate. If, notwithstanding the foregoing, the Bank
ever contracts for, charges, receives, takes, collects, reserves or applies as
interest any amount in excess of the Maximum Rate, such amount which would be
deemed excessive interest shall be deemed a partial payment or prepayment of
principal of the Obligations and treated hereunder as such; and if the
Obligations, or applicable portions thereof, are paid in full, any remaining
excess shall promptly be paid to the applicable Borrower. In determining whether
the interest paid or payable, under any specific contingency, exceeds the
Maximum Rate, Borrowers and the Bank shall, to the maximum extent permitted by
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate and spread in equivalent
unequal parts the total amount of interest throughout the entire contemplated
term of the Obligations, or applicable portions thereof, so that the interest
rate does not exceed the Maximum Rate at any time during the term of the
Obligations; provided that, if the unpaid principal balance is paid and
performed in full prior to the end of the full contemplated term thereof, and if
the interest received for the actual period of existence thereof exceeds the
Maximum Rate, the Bank shall refund to the applicable Borrower the amount of
such excess and, in such event, the Bank shall not be subject to any penalties
provided by any laws for contracting for, charging, receiving, taking,
collecting, reserving or applying interest in excess of the Maximum Rate.
Section 11.13. Notices. All notices and other communications
provided for in this Agreement and the other Loan Documents shall be given or
made in writing and telecopied, mailed by certified mail return receipt
requested, or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof and with respect to each
Obligated Party, at the address of Borrowers specified below its name on the
signature pages hereof; or, as to any party, at such other address as shall be
designated by such party in a notice to each other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
44
Section 11.14. Governing Law: Submission to Jurisdiction. This
Agreement, the Notes, the Guaranty, the Security Agreement and the other Loan
Documents shall be governed by, and construed in accordance with, the laws of
the State of Texas and applicable laws of the United States of America,
BORROWERS (AND BY EXECUTION OF THE LOAN DOCUMENT TO WHICH IT IS A PARTY, EACH
OBLIGATED PARTY) HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNTIED
STATES FEDERAL COURTS SITTING IN DALLAS COUNTY, TEXAS, FOR THE PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BORROWERS (AND BY
EXECUTION OF THE LOAN DOCUMENT TO WHICH IT IS A PARTY, EACH OBLIGATED PARTY)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH BORROWER AND EACH
OBLIGATED PARTY AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED OR
DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11.13 OF THIS AGREEMENT,
NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL AFFECT THE RIGHT OF
THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST EITHER BORROWER
OR ANY OBLIGATED PARTY OR WITH RESPECT TO ANY OF THEIR RESPECTIVE PROPERTIES IN
COURTS IN OTHER JURISDICTION. ANY ACTION OR PROCEEDING BY EITHER BORROWER OR ANY
OBLIGATED PARTY AGAINST THE BANK SHALL BE BROUGHT ONLY IN A FEDERAL COURT
LOCATED IN DALLAS COUNTY, TEXAS.
Section 11.15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 11.16. Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.17. Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 11.18. Construction. Each Borrower, each Obligated Party, and
the Bank acknowledges that each of them has had the benefit of legal counsel of
its own choice and has been afforded an opportunity to review this Agreement and
the other Loan Documents with its legal counsel and that this Agreement and the
other Loan Documents shall be construed as if jointly drafted by the parties
hereto.
Section 11.19. Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 11.20. Tri-Party Accounts. Borrowers agree that Chapter 346 of
the Texas Finance Code, as amended (which regulates certain revolving credit
loan accounts and revolving tri-party accounts), does not apply to the Loan
Obligation.
Section 11.21. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO (AND BY EXECUTION OF THE LOAN
45
DOCUMENT TO WHICH IT IS A PARTY, EACH OBLIGATED PARTY) HEREBY IRREVOCABLY AND
EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY
OR THE ACTIONS OF THE AGENT OR ANY BANK IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
46
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWERS:
NELNET LOAN SERVICES, INC.
NELNET, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇.▇▇▇.▇▇▇▇
Telecopy No.: ▇▇▇.▇▇▇.▇▇▇▇
Attention: Chief Financial Officer
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BANK OF AMERICA, N.A.,
as the Bank
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Principal
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Lending Office for Base Rate Loans and Libor Loans
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Signature Page
EXHIBIT "A"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Form of Note
Exhibit "A" to Credit Agreement - Cover Page
PROMISSORY NOTE
$30,000,000 January 11, 2002
FOR VALUE RECEIVED, the undersigned, NELNET LOAN SERVICES, INC. and
NELNET, INC. ("BORROWERS"), hereby, jointly and severally, promise to pay to the
order of BANK OF AMERICA, N.A. (the "BANK"), at the Principal Office of the
Bank, in lawful money of the United States of America and in immediately
available funds, the principal amount of Thirty Million Dollars ($30,000,000) or
such lesser amount as shall equal the aggregate unpaid principal amount of the
Loans made by the Bank to Borrowers under the Credit Agreement referred to
below, on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of each such Loan,
at such office, in like money and funds, for the period commencing on the date
of such Loan until such Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
Borrowers hereby authorize the Bank to record in its records the amount
and Type of each Loan made to Borrowers by the Bank and all Continuations,
Conversions, and payments of principal in respect to each such Loan, which
records shall, in the absence of manifest error, be conclusive as to the
outstanding principal amount of all such Loans; provided, however, that the
failure to make such records with respect to any such Loan or payment shall not
limit or otherwise affect the obligations of Borrowers under the Credit
Agreement or this Note.
This Note is the Note referred to in the Credit Agreement dated as of
January 11,2002, among Borrowers, and the Bank (such Credit Agreement, as the
same may be amended or otherwise modified from time to time, being referred to
herein as the "CREDIT AGREEMENT"), and evidences Loans made by the Bank
thereunder. The Credit Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the happening of certain stated
events and for prepayments of Loans prior to the maturity of this Note upon the
terms and conditions specified in the Credit Agreement. Capitalized terms used
in this Note have the respective meanings assigned to them in the Credit
Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas and the applicable laws of the United States of
America. This Note is performable in Dallas County, Texas. Borrowers and each
surety, guarantor, endorser, and other party ever liable for payment of any sums
of money payable on this Note jointly and severally waive notice, presentment,
demand for payment, protest, notice of protest and non-payment or dishonor,
notice of acceleration, notice of intent to accelerate, notice of intent to
demand, diligence in collecting, grace, and all other formalities of any kind
except for those specifically provided for in the Credit Agreement, and consent
to all extensions without notice for any period or periods of time and partial
payments, before or after maturity, and any impairment of any collateral
securing this Note, all without prejudice to the holder. The holder shall
similarly have the right to deal in any way, at any time, with one or more of
the foregoing parties without notice to any other party, and to grant any such
party any extensions of time for payment of any of said indebtedness, or to
release or substitute any such party or part or all of the collateral securing
this Note, or to grant any other indulgences or forbearances whatsoever, without
notice to any other party and without in any way affecting the personal
liability of any party hereunder.
NELNET LOAN SERVICES, INC.
NELNET, INC.
By: ___________________________________________
Name: _____________________________________
Authorized Officer for both Borrowers
Promissory Note, Solo Page
EXHIBIT "B"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Matters to be Addressed by Opinion of Counsel
1. Each Borrower and each Obligated Party is a corporation
validly existing and in good standing under the laws of the State of its
incorporation and is in good standing and is duly qualified to transact business
in the State of Nebraska and in all other jurisdictions in which the nature of
is business requires it to be so qualified.
2. Each Borrower and each Obligated Party has the corporate power
and authority to execute, deliver, and perform the Loan Documents to which it is
a party. The execution, delivery, and performance by each Borrower and each
Obligated Party of the Loan Documents to which it is a party and its compliance
with the terms and provisions thereof have been duly authorized by all requisite
corporate action on the part of each Borrower and each Obligated Party and do
not and will not violate, or result in a breach of, or require any consent under
(i) the certificate of incorporation or bylaws of either Borrower or any
Obligated Party or (ii) the Securitization Documentation or, to our knowledge,
any other agreement to which either Borrower or any Obligated Party is a party
or (iii) any applicable law, rule, or regulation or, to our knowledge, any
order, writ, injunction, or decree of any Governmental Authority or arbitrator
applicable to either Borrower or any Obligated Party.
3. The Loan Documents to which each Borrower is a party have been
duly executed and delivered by each Borrower and constitute the legal, valid,
and binding obligations of such Borrower enforceable against it in accordance
with their respective terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
transfer or other similar laws affecting the enforcement of creditors' rights
generally. The Loan Documents to which each Obligated Party is a party have been
duly executed and delivered by each Obligated Party and constitute the legal,
valid, and binding obligations of the applicable Obligated Party enforceable
against such party in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer or other similar laws affecting
the enforcement of creditors' rights generally.
4. To our knowledge, there are no legal or arbitral proceedings,
and no proceedings by or before any Governmental Authority, pending or
threatened against or affecting either Borrower or any of the Subsidiaries or
any properties or rights of either Borrower or any of the Subsidiaries which, if
adversely determined, would have a Material Adverse Effect.
5. No authorization, consent, or approval of, or filing or
registration with, any Governmental Authority or any third party under any
Securitization Documents is required for the execution, delivery, and
performance by Borrowers or any Obligated Party of the Loan Documents to which
the it is a party except for ____________.
6. Neither Borrower nor any Subsidiary is an "INVESTMENT COMPANY"
within the meaning of the Investment Company Act of 1940, as amended. Neither
Borrower nor any Subsidiary is a "HOLDING COMPANY" or a "SUBSIDIARY COMPANY" of
a "HOLDING COMPANY" or an "AFFILIATE" of a "HOLDING COMPANY" or a "PUBLIC
UTILITY" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Exhibit "B" - Page 1 of 2
7. The choice of Texas law to govern all the Loan Documents is a
valid and effective choice of law under the laws of State of Nebraska and
adherence to existing judicial precedents should require a court of competent
jurisdiction in the State of Nebraska to enforce such choice of law.
8. The Bank is not required to pay any tax or qualify to do
business or file any designation for service of process or file any reports in
the State of Nebraska or comply with any statutory or regulatory rule or
requirement applicable only to financial institutions chartered or qualified to
do business in the State of Nebraska solely by reason of its execution and
delivery or acceptance of the Loan Documents, the possession and ownership of
any of the Loan Documents, the indebtedness evidenced or secured by the Loan
Documents or participation in any transaction contemplated by the Loan
Documents, including, without limitation, the making of any Loan, the making and
receipt of payments pursuant thereto and the exercise of any right or remedy
under or with respect to the Loan Documents, and the validity and enforceability
of the Loan Documents will not be affected by any failure to so qualify or file.
9. The Security Agreement is sufficient to create a valid and
enforceable security interest in the property described therein which secures
payment and performance of the Obligations (as defined therein), including,
without limitation, all future advances pursuant to the Credit Agreement and all
extensions and renewals thereof.
10. The financing statements are sufficient in form to perfect a
security interest in the items and types of property described therein, to the
extent that a security interest in such property may be perfected by the filing
of a financing statement under the Uniform Commercial Code ("UCC").
11. The filing of the financing statements executed by Borrowers
and the Obligated Parties in the offices designated in SCHEDULE 1 hereto are the
only filings, recordings and registrations necessary to perfect the lien of and
security interest in the property created by the Security Agreement in which a
security interest may be perfected by the filing of a financing statement under
the UCC. No further or subsequent filing, re-filing, recording or re-recording,
registration or re-registration of such financing statement or any additional
financing statements or any other documentation will be necessary or advisable
to continue such perfected security interest except for filing of continuation
statement in accordance with the UCC.
12. Except for filing or recording fees which are not material, no
taxes or other charges, including, without limitation, intangible or documentary
stamp taxes, mortgage or recording taxes, transfer taxes or similar charges, are
payable to the State of Nebraska or to any jurisdiction therein on account of
the execution and delivery or acceptance of any Loan Document, or the filing,
recording or registration of the financing statements.
Exhibit "B" - Page 2 of 2
EXHIBIT "C"
To
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Borrowing Request Form
Exhibit "C", Cover Page
Borrowing Request
TO: Bank of America, N. A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ladies and Gentlemen:
The undersigned is an officer of NELNET LOAN SERVICES, INC. and NELNET,
INC. and is authorized to make and deliver this certificate pursuant to that
certain Credit Agreement (the "CREDIT AGREEMENT") dated as of January 11,2002
among Nelnet Loan Services, Inc., NELnet, Inc ("BORROWERS"), and Bank of
America, N.A. (the "BANK"). All terms defined in the Credit Agreement shall
have the same meaning herein. In accordance with the Credit Agreement, Borrowers
hereby (check which ever is applicable):
______ (a). Request that the Bank make an advance which shall be
a Base Rate Loan in the amount of $ ___________.
______ (b). Request that the Bank make an advance which shall be
Libor Loans with the amount of each Libor Loan and duration of the Interest
Periods with respect thereto to be as follows:
Amount Interest Period
----------------------------------------------
1.
----------------------------------------------
2.
----------------------------------------------
3.
----------------------------------------------
In connection with the foregoing and pursuant to the terms and
provisions of the Credit Agreement, the undersigned hereby certifies to the Bank
(in the undersigned's capacity as an officer of Borrowers and not as an
individual capacity) that the following statements are true and correct:
(i) The representations and warranties contained in the
Credit Agreement and in each of the other Loan Documents are true,
correct and complete in all material respects on and as of the date
hereof with the same force and effect as if made on and as of such date
except for any representation or warranty limited by its terms to a
specific date.
(ii) No Default exists or would result from the extension
of credit requested hereunder.
(iii) Since September 30, 2001, no event has occurred which
has a Material Adverse Effect.
(iv) The Pro Forma Fixed Charge Coverage Ratio, calculated
after giving effect to the Loan requested hereby and the acquisition of
the Target or its assets to be financed with the proceeds thereof, is
no less than 1.50 to 1.00. Calculations demonstrating compliance with
this ratio are set forth on EXHIBIT "A " hereto.
(v) All other conditions precedent set forth in ARTICLE V
of the Credit Agreement have been satisfied.
Borrowing Request - Page 1 of 2
(vi) All information supplied below is true, correct, and
complete as of the date hereof.
Advance Request Information
(a) Commitment: $_________
(b) Loans made to date: $_________
(c) Available Commitment: $_________
(d) Amount of requested borrowing: $_________
(e) Amount of remaining Commitment: $_________
BORROWERS:
NELNET LOAN SERVICES, INC.
NELNET, INC.
By: ____________________________________________
Name: ______________________________________
Authorized Officer for both Borrowers
Dated as of: _________________________________________
(dated the date of the requested advance)
Borrowing Request - Page 2 of 2
EXHIBIT "A"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
BORROWING REQUEST FORM
Pro Forma Fixed Charge Coverage Ratio Calculation
1. Pro Forma Cash Flow (for the period ended_______________).
(a) Borrowers' Consolidated Net Income (as detailed on Exhibit B) $__________
(b) Amortization and Depreciation $__________
(c) Restricted cash flow in Asset Securitizations (net of effective taxes) $__________
(d) Permitted Principal Payments $__________
(e) Amounts paid under student loan participation agreements $__________
(f) Other adjustments approved by Bank
(g) Sum of (a) plus (b) minus (c) minus (d) minus (e) plus or minus (f) $__________
(h) Target and Prior Target Consolidated Net Income approved by the
Bank (as detailed on Schedules attached) $__________
(i) Amortization and Depreciation $__________
(j) Sum of (h) Plus (i) $__________
(k) Prior Company/Asset Consolidated Net Income (as detailed on
Schedules attached) $__________
(1) Prior Company/Asset Amortization and Depreciation $__________
(m) Sum of (k) Plus (l) $__________
(n) Sum of (g) plus (j) minus (m) $__________
2. Fixed Charges.
(a) Pro Forma Interest Expense on Permitted Debt $__________
(b) Current long term Debt (other than Permitted Debt) $__________
(c) Principal amount of outstanding Permitted Debt $__________
(d) Principal amount of Loan requested $__________
(e) Principal amount of Debt assumed
(f) Sum of (c) plus (d) and (e) $__________
(g) .25 x (f) = $__________
(h) Sum of (a) plus (b) plus (g) $__________
3. Pro Forma Fixed Charge Coverage.
(a) Line l(h)/2(h) ____:1.00
(b) Minimum Fixed Charge Coverage 1.50:1.00
(c) Test Satisfied? Yes No
Exhibit "A" to Borrowing Request - Solo Page
EXHIBIT "B"
$___________ to
NELNET LOAN SERVICES, INC.
NELNET, INC.
BORROWING REQUEST FORM
Consolidated Net Income
(a) GAAP consolidated net income $_________
(b) Income of others not received $_________
(c) Investments to fund deficits or loss $_________
(d) Income of a Target for periods prior to acquisition
if included in (a) above $_________
(e) Gains realized upon the sale or refinancing of assets $_________
(f) Increases in book value of assets acquired if
included in (a) above $_________
(g) Other extraordinary, non-operating or non-cash gains $_________
(h) Sum of (b) through (g) $_________
(i) Consolidated Net Income: Line (a) minus line (h) $_________
Exhibit "B" to Borrowing Request - Solo Page
EXHIBIT "D"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Compliance Certificate
Exhibit "D", Cover Page
COMPLIANCE CERTIFICATE
for the
quarter ending________ __,____
To: Bank of America, N. A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ladies and Gentlemen:
This Compliance Certificate (the "CERTIFICATE") is being delivered
pursuant to SECTION 7.1(c) of that certain Credit Agreement (as amended, the
"AGREEMENT') dated as of January 11,2002, among Nelnet Loan Services, Inc.,
NELnet, INC. (together, the "BORROWERS"), and Bank of America, N. A. (the
"BANK"). All capitalized terms, unless otherwise defined herein, shall have the
same meanings as in the Credit Agreement. All the calculations set forth below
shall be made pursuant to the terms of the Credit Agreement.
The undersigned, an financial officer of Borrowers authorized under
certified resolutions delivered to the Bank, in his capacity as such financial
officer and not in his individual capacity, does hereby certify to the Bank
that:
1. DEFAULT.
No Default exists or, if a Default exists, I have described on the
attached EXHIBIT "A " the nature thereof and the steps taken or
proposed to remedy such Default.
Compliance
2. SECTION 7.1 - REPORTING REQUIREMENTS.
(a) Annual audited financial statements of Borrowers on
a consolidated basis within 90 days after the end
of each fiscal year end (together with Compliance
Certificate). Yes No N/A
(b) Quarterly unaudited financial statements of
Borrowers and their respective Subsidiaries on a
consolidated and consolidating basis within 45 days
after each fiscal quarter end (together with
Compliance Certificate). Yes No N/A
(c) Student loan and DOE audit reports within 45 days
after each fiscal quarter end. Yes No N/A
(d) Annual audit report and SAS 70 report for services. Yes No N/A
3. SECTION 7.12 - SERVICING PERFORMANCE.
Has the guarantee applicable to any Student Loans owned
or by either Borrower or any Subsidiary been reduced
below 98%? Yes No
Compliance Certificate - Page 1 of 5
4. SECTION 8.5 - INVESTMENTS.
(a) Basket of loans to officers, directors, agents and employees $ 100,000
(b) Actual outstanding principal amount of loans to officers etc. $____________
(c) Total Acquisitions during period [Describe]
(d) Adjustments for purchase/acquisition of
- InTuition Services Inc. related assets
- Idaho Financial Associates, Inc. $____________
(e) Other investments pursuant to Section 8.5(k) made in previous
periods $____________
(f) Other Investments in Subject Period [specify] $____________
(g) Sum of (c) minus (d) plus (e) plus (f) $____________
(h) 5% of Borrowers' consolidated net assets at book value $____________
(i) Is (h) greater than (g) Yes No
5. SECTION 9.1 - CONSOLIDATED TANGIBLE NET WORTH.
(a) Beginning Consolidated Tangible Net Worth. $ 40,000,000
(b) 75% of Borrowers' positive GAAP consolidated net income
(for each completed fiscal quarter since September 30, 2001) $____________
(c) Required Consolidated Net Worth (the sum of (a) plus (b)) $____________
(d) Actual Consolidated Net Worth as of Quarter End:
(i) Stockholders equity $____________
(ii) Intangibles ($____________)
(iii) Deferred income tax assets ($____________)
(iv) Securities not marketable ($____________)
(v) Cash held in sinking fund or other similar fund ($____________)
(vi) Sum of (ii) through (v) ($____________)
(vii) Sum of (i) minus (vi) $____________ Yes No
6. SECTION 9.2 - MAXIMUM LEVERAGE RATIO.
(a) Funded Debt $___________
(i) Debt for borrowed money $___________
(ii) Debt evidenced by bonds, participation certificates, etc. $___________
(iii) Debt for deferred purchase price
(excluding trade payables) $___________
(iv) Capital lease obligations $___________
(v) Guaranties $___________
(vi) Reimbursement obligations $___________
(vii) Debt of other secured by liens $___________
(viii) Obligations subject to mandatory dividend or
redemptions $___________
(ix) Unfunded vested benefits $___________
(x) Non-compete and similar obligation. $___________
Compliance Certificate - Page 2 of 5
(xi) Synthetic lease obligations $___________
(xii) Other long term debt obligation liabilities $___________
(xiii) Debt secured by Student Loans ($___________)
(xiv) sum of (a)(i) through (xii) minus (xiii) $___________
(b) Borrowers' Rolling 12-month EBITDA (as described on
SCHEDULE 1) $___________
(c) Pro Forma EBITDA of Prior Target or attributable to Prior
Target Assets (as detailed on SCHEDULE 2) $___________
(d) Prior Company or Prior Asset EBITDA (as detailed on
SCHEDULE 3) ($___________)
(e) Permitted Principal Payments during the period ($___________)
(f) Principal amounts paid under student loan participation
agreements for residuals ($___________)
(g) Other adjustments approved by Bank
(h) Adjusted EBITDA Sum of (b) plus (c) minus (d) minus (e)
minus (f) plus or minus (g) $___________
(i) Line (a)(xiv) / line (h) = _____: 1.00
(j) Funded Debt to Adjusted EBITDA not to exceed 3:00:1.00 Yes No
7. SECTION 9.3 - INTEREST COVERAGE RATIO
(a) Adjusted EBITDA (from line 6(h) above) $___________
(b) Interest expense for debt secured by Student Loans $___________
(c) The sum of line (a) plus line (b) $___________
(d) Consolidated interest expense, including interest expense for
debt secured by Student Loans $___________
(e) Line (c) / line (d)
(f) Minimum interest coverage required 1.10 to 1.00
(g) Line (e) is greater than line (f) Yes No
8. SECTION 9.4 - PRO FORMA FIXED CHARGE COVERAGE RATIO.
1. Pro Forma Cash Flow (for the period ended _________).
(a) Borrowers' Consolidated Net Income (as detailed on
Exhibit B) $___________
(b) Amortization and Depreciation $___________
(c) Restricted cash flow in Asset Securitizations (net of
effective taxes) $___________
(d) Permitted Principal Payments during the period $___________
(e) Principal amounts paid under student loan participation
agreements for residuals $___________
(f) Other adjustments approved by Bank
(g) Sum of (a) plus (b) minus (c) minus (d) minus (e) plus
or minus (f) $___________
(h) Target and Prior Target Consolidated Net Income approved
by the Bank (as detailed on Schedules attached) $___________
(i) Amortization and Depreciation $___________
Compliance Certificate - Page 3 of 5
(j) Sum of (g), Plus (h) plus (i) $___________
(k) Net Income of companies sold or disposed (as detailed
on Schedules attached) $___________
(l) Amortization and Depreciation of companies included in
line (k) $___________
(m) Sum of (j) minus (k) minus (l) $___________
2. Fixed Charges.
(a) Pro Forma Interest Expense on Permitted Debt $___________
(b) Current long term Debt (other than Permitted Debt) $___________
(c) Principal amount of outstanding Permitted Debt $___________
(d) Principal amount of Loan requested $___________
(e) Principal amount of Debt assumed
(f) Sum of (c) plus (d) and (e) $___________
(g) .25 x (f)= $___________
(h) Sum of (a) plus (b) plus (g) $___________
3. Pro Forma Fixed Charge Coverage.
(a) Line1(m) / 2(h) ____:1.00
(b) Minimum Fixed Charge Coverage 1.50:1.00
(c) Test Satisfied? Yes No
9. ATTACHED SCHEDULES
Attached hereto as schedules are the calculations supporting the
computations set forth above in this Certificate. All information
contained herein and on the attached schedules is true and correct.
10. FINANCIAL STATEMENTS.
The financial statements attached hereto were prepared in accordance
with GAAP and fairly present (subject to year end audit adjustments)
the financial conditions and the results of the operations of the
Persons reflected thereon, at the date and for the periods indicated
therein.
11. CONFLICT.
In the event of any conflict between this compliance certificate and
the Credit Agreement, the Credit Agreement shall control.
Compliance Certificate - Page 4 of 5
IN WITNESS WHEREOF, the undersigned has executed this Certificate
effective this ______day of ___________, ____.
BORROWERS:
NELNET LOAN SERVICES, INC.
NELNET, INC.
By: __________________________________________
Name: ____________________________________
Authorized Officer of Both Borrowers
Compliance Certificate - Page 5 of 5
Schedule 1
to
Compliance Certificate
BORROWERS' EBITDA
Consolidated Net Income
(a) GAAP consolidated net income $___________
(b) Income of others not received ($___________)
(c) Investments to fund deficits or loss ($___________)
(d) Income subject to restrictions ($___________)
(e) Income of a Target for periods prior to Acquisition ($___________)
(f) Gains realized upon the sale or refinancing of assets ($___________)
(g) Increases in book value of assets acquired ($___________)
(h) Other extraordinary, non-operating or non-cash gains ($___________)
(i) Sum of (b) through (h) $___________
(j) Line (a) minus line (i) $___________
(k) Plus provisions for tax $___________
(l) Less benefit from tax ($___________)
(m) Plus interest expense (on debt not secured by Student Loans) $___________
(n) Plus amortization $___________
(o) Plus depreciation $___________
(p) Minus other non-cash credits ($___________)
(q) Borrowers' and the Subsidiaries' EBITDA: (j) plus (k),
(m), (n) and (o) less (l) and (p) $___________
Schedule 1 to Compliance Certificate - Solo Page
Schedule 2
to
Compliance Certificate
Prior Target and Asset EBITDA
Schedule 2 to Compliance Certificate - Solo Page
Schedule 3
to
Compliance Certificate
Prior Company EBITDA
Schedule 3 to Compliance Certificate - Solo Page
EXHIBIT "E"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Subsidiary Guaranty
Exhibit "E", Cover Page
GUARANTY AGREEMENT
(Subsidiaries)
WHEREAS, NELNET LOAN SERVICES, INC, and NELNET, INC. (together
"BORROWERS") have entered into that certain Credit Agreement dated January 11,
2002, with BANK OF AMERICA, N.A. (the "BANK") (such Credit Agreement, as it may
hereafter be amended or otherwise modified from time to time, being hereinafter
referred to as the "CREDIT AGREEMENT, and capitalized terms not otherwise
defined herein shall have the same meaning as set forth in the Credit
Agreement);
WHEREAS, the execution of this Guaranty Agreement is a condition to the
Bank's obligations under the Credit Agreement and an inducement to the other
Secured Parties to extend credit to the Borrowers;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, each of the undersigned Subsidiaries and any
Subsidiary hereafter added as a "GUARANTOR" hereto pursuant to a Subsidiary
Joinder Agreement (individually a "GUARANTOR" and collectively the
"GUARANTORS"), hereby irrevocably and unconditionally guarantees to Bank of
America, N.A., as agent for itself and the other Secured Parties (the "AGENT")
the full and prompt payment and performance of the Guaranteed Indebtedness
(hereinafter defined), this Guaranty Agreement being upon the following terms:
1. The term "GUARANTEED INDEBTEDNESS", as used herein means all
of the "OBLIGATIONS", as defined in the Credit Agreement and shall include any
and all post-petition interest and expenses (including reasonable attorneys'
fees) whether or not allowed under any bankruptcy, insolvency, or other similar
law; provided that the Guaranteed Indebtedness shall be limited, with respect to
each Guarantor, to an aggregate amount equal to the largest amount that would
not render such Guarantor's obligations hereunder subject to avoidance under
Section 544 or 548 of the United States Bankruptcy Code or under any applicable
state law relating to fraudulent transfers or conveyances.
2. This instrument shall be an absolute, continuing, irrevocable
and unconditional guaranty of payment and performance, and not a guaranty of
collection, and each Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which either Borrower may have against
Agent, any Secured Party or any other party, or which any Guarantor may have
against either Borrower, Agent, any Secured Party or any other party, shall be
available to, or shall be asserted by, any Guarantor against Agent, any Secured
Party or any subsequent holder of the Guaranteed Indebtedness or any part
thereof or against payment of the Guaranteed Indebtedness or any part thereof.
3. If a Guarantor becomes liable for any indebtedness owing by
either Borrower to Agent or any Secured Party by endorsement or otherwise, other
than under this Guaranty Agreement, such liability shall not be in any manner
impaired or affected hereby, and the rights of Agent and the Secured Parties
hereunder shall be cumulative of any and all other rights that Agent and the
Secured Parties may ever have against such Guarantor. The exercise by Agent and
the Secured Parties of any right or remedy hereunder or under any other
instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy.
4. In the event of default by either Borrower in payment or
performance of the Guaranteed Indebtedness, or any part thereof, when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration, or
otherwise, the Guarantors shall, jointly and severally, promptly pay the amount
due thereon to Agent, without notice or demand, in lawful currency of the United
States of America, and it shall not be necessary for Agent or any Secured Party,
in order to enforce such payment by any Guarantor, first to institute suit or
exhaust its remedies against either Borrower or others liable on such Guaranteed
Guaranty Agreement, Page 1 of 7
Indebtedness, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Indebtedness. In the event such
payment is made by a Guarantor, then such Guarantor shall be subrogated to the
rights then held by Agent and any Secured Party with respect to the Guaranteed
Indebtedness to the extent to which the Guaranteed Indebtedness was discharged
by such Guarantor and, in addition, upon payment by such Guarantor of any sums
to Agent and any Secured Party hereunder, all rights of such Guarantor against
Borrowers, any other guarantor or any Collateral arising as a result therefrom
by way of right of subrogation, reimbursement, or otherwise shall in all
respects be subordinate and junior in right of payment to the prior indefeasible
payment in full of the Guaranteed Indebtedness. Each Guarantor also agrees to be
bound by the contribution and subrogation provisions of SECTION 3.7 of the
Credit Agreement.
5. If acceleration of the time for payment of any amount payable
by either Borrower under the Guaranteed Indebtedness is stayed upon the
insolvency, bankruptcy, or reorganization of either Borrower, all such amounts
otherwise subject to acceleration under the terms of the Guaranteed Indebtedness
shall nonetheless be payable by the Guarantors hereunder forthwith on demand by
Agent or any Secured Party.
6. Each Guarantor hereby agrees that its obligations under this
Guaranty Agreement shall not be released, discharged, diminished, impaired,
reduced, or affected for any reason or by the occurrence of any event,
including, without limitation, one or more of the following events, whether
or not with notice to or the consent of any Guarantor: (a) the taking or
accepting of collateral as security for any or all of the Guaranteed
Indebtedness or the release, surrender, exchange, or subordination of any
collateral now or hereafter securing any or all of the Guaranteed Indebtedness;
(b) any partial release of the liability of any Guarantor hereunder, or the full
or partial release of any other guarantor from liability for any or all of the
Guaranteed Indebtedness; (c) any disability of either Borrower, or the
dissolution, insolvency, or bankruptcy of either Borrower, any Guarantor, or any
other party at any time liable for the payment of any or all of the Guaranteed
Indebtedness; (d) any renewal, extension, modification, waiver, amendment, or
rearrangement of any or all of the Guaranteed Indebtedness or any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (e) any adjustment, indulgence, forbearance,
waiver, or compromise that may be granted or given by Agent or any Secured Party
to either Borrower, any Guarantor, or any other party ever liable for any or all
of the Guaranteed Indebtedness; (f) any neglect, delay, omission, failure, or
refusal of Agent or any Secured Party to take or prosecute any action for the
collection of any of the Guaranteed Indebtedness or to foreclose or take or
prosecute any action in connection with any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (g) the unenforceability or invalidity of any or all of the
Guaranteed Indebtedness or of any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Guaranteed Indebtedness;
(h) any payment by either Borrower or any other party to Agent or any Secured
Party is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason Agent or any Secured Party is required
to refund any payment or pay the amount thereof to someone else; (i)the
settlement or compromise of any of the Guaranteed Indebtedness; (j) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (k) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (1) the failure of Agent or any Secured
Party to sell any collateral securing any or all of the Guaranteed Indebtedness
in a commercially reasonable manner or as otherwise required by law; (m) any
change in the corporate existence, structure, or ownership of either Borrower;
or (n) any other circumstance which might otherwise constitute a defense
available to, or discharge of, either Borrower or any Guarantor (other than
payment of the Guaranteed Indebtedness).
7. Each Guarantor represents and warrants to the Agent and the
Secured Parties as follows:
(a) All representations and warranties in the Credit
Agreement relating to it are true and correct as of the date hereof and on each
date the representations and warranties hereunder are restated
Guaranty Agreement, Page 2 of 7
pursuant to any of the Loan Documents with the same force and effect as if such
representations and warranties had been made on and as of such date except to
the extent that such representations and warranties relate specifically to
another date.
(b) It has, independently and without reliance upon the
Agent or any Secured Party and based upon such documents and information as it
has deemed appropriate, made its own analysis and decision to enter into the
Loan Documents to which it is a party.
(c) It has adequate means to obtain from Borrowers on a
continuing basis information concerning the financial condition and assets of
Borrowers and it is not relying upon the Agent or any Secured Party to provide
(and neither the Agent nor any Secured Party shall have any duty to provide) any
such information to it either now or in the future.
(d) The value of the consideration received and to be
received by each Guarantor as a result of Borrowers' and the Bank's entering
into the Credit Agreement and each Guarantor's executing and delivering the Loan
Documents to which it is a party is reasonably worth at least as much as the
liability and obligation of each Guarantor hereunder, and such liability and
obligation and the Credit Agreement have benefited and may reasonably be
expected to benefit each Guarantor directly or indirectly.
8. Each Guarantor covenants and agrees that, as long as the
Guaranteed Indebtedness or any part thereof is outstanding or the Bank has any
commitment under the Credit Agreement, it will comply with all covenants set
forth in the Credit Agreement specifically applicable to it.
9. When an Event of Default exists, each Secured Party shall have
the right to set-off and apply against this Guaranty Agreement or the Guaranteed
Indebtedness or both, at any time and without notice to any Guarantor, any and
all deposits (general or special, time or demand, provisional or final) or other
sums at any time credited by or owing from any Secured Party to any Guarantor
whether or not the Guaranteed Indebtedness is then due and irrespective of
whether or not the Agent shall have made any demand under this Guaranty
Agreement. Each Secured Party agrees promptly to notify Borrowers after any such
setoff and application, provided that the failure to give such notice shall not
affect the validity of such setoff and application. The rights and remedies of
the Secured Parties hereunder are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Secured
Parties may have.
10. (a) Each Guarantor hereby agrees that the Subordinated
Indebtedness (as defined below) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness as herein
provided. The Subordinated Indebtedness shall not be payable, and no payment of
principal, interest or other amounts on account thereof, and no property or
guarantee of any nature to secure or pay the Subordinated Indebtedness shall be
made or given, directly or indirectly by or on behalf of any Debtor (hereafter
defined) or received, accepted, retained or applied by any Guarantor unless and
until the Guaranteed Indebtedness shall have been paid in full in cash; except
that prior to the occurrence and continuance of a Default, a Guarantor shall
have the right to receive payments on the Subordinated Indebtedness made in the
ordinary course of business. When a Default exists, no payments of principal or
interest may be made or given, directly or indirectly, by or on behalf of any
Debtor or received, accepted, retained or applied by any Guarantor unless and
until the Guaranteed Indebtedness shall have been paid in full in cash. If any
sums shall be paid to a Guarantor by any Debtor or any other Person on account
of the Subordinated Indebtedness when such payment is not permitted hereunder,
such sums shall be held in trust by such Guarantor for the benefit of the Agent
and shall forthwith be paid to Agent without affecting the liability of any
Guarantor under this Guaranty Agreement and may be applied by Agent against the
Guaranteed Indebtedness in accordance with the Credit Agreement. Upon the
request of Agent, a Guarantor shall execute, deliver, and endorse to Agent such
documentation as Agent may request to perfect, preserve, and enforce its rights
hereunder. For purposes of this Guaranty Agreement and with respect to a
Guarantor,
Guaranty Agreement, Page 3 of 7
the term "SUBORDINATED INDEBTEDNESS" means all indebtedness, liabilities, and
obligations of either Borrower or any Obligated Party other than such Guarantor
(Borrowers and such Obligated Parties herein the "DEBTORS") to such Guarantor,
whether such indebtedness, liabilities, and obligations now exist or are
hereafter incurred or arise, or are direct, indirect, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of whether
such indebtedness, liabilities, or obligations are evidenced by a note,
contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such indebtedness, obligations, or liabilities may, at their
inception, have been, or may hereafter be created, or the manner in which they
have been or may hereafter be acquired by such Guarantor.
(b) Each Guarantor agrees that any and all Liens
(including any judgment liens), upon any Debtor's assets securing payment of any
Subordinated Indebtedness shall be and remain inferior and subordinate to any
and all Liens upon any Debtor's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such Liens in favor of a
Guarantor, Agent or any Secured Party presently exist or are hereafter created
or attached. Without the prior written consent of Agent, no Guarantor shall (i)
file suit against any Debtor or exercise or enforce any other creditor's right
it may have against any Debtor, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings (judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any obligations of any Debtor to such Guarantor or any
Liens held by such Guarantor on assets of any Debtor.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency proceeding
involving any Debtor as debtor, Agent shall have the right to prove any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments made
in respect of the Subordinated Indebtedness until the Guaranteed Indebtedness
has been paid in full in cash. Agent may apply any such dividends,
distributions, and payments against the Guaranteed Indebtedness in accordance
with the Credit Agreement.
(d) Each Guarantor agrees that all promissory notes,
accounts receivable, ledgers, records, or any other evidence of Subordinated
Indebtedness shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this Guaranty
Agreement.
11. Except for modifications made pursuant to the execution and
delivery of a Subsidiary Joinder Agreement (which needs to be signed only by the
Subsidiary party thereto), no amendment or waiver of any provision of this
Guaranty Agreement or consent to any departure by any Guarantor therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Agent. No failure on the part of the Agent or any Secured Party to exercise, and
no delay in exercising, any right, power, or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power, or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power, or privilege. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
12. To the extent permitted by law, any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
either Borrower or others (including any Guarantor), with respect to any of the
Guaranteed Indebtedness shall, if the statute of limitations in favor of a
Guarantor against the Agent or any Secured Party shall have commenced to run,
toll the running of such statute of limitations and, if the period of such
statute of limitations shall have expired, prevent the operation of such statute
of limitations.
13. This Guaranty Agreement is for the benefit of the Agent and
the Secured Parties and their successors and assigns, and in the event of an
assignment of the Guaranteed Indebtedness, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the indebtedness so assigned,
may be transferred with such indebtedness. This Guaranty Agreement is binding
not only on each Guarantor, but on
Guaranty Agreement, Page 4 of 7
each Guarantor's successors and assigns; provided that no Guarantor may assign
its rights or obligations hereunder without the prior written consent of the
Bank.
14. Each Guarantor recognizes that the Bank is relying upon this
Guaranty Agreement and the undertakings of each Guarantor hereunder and under
the other Loan Documents to which each is a party in making extensions of credit
to Borrowers under the Credit Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement and the other Loan Documents
to which each Guarantor is a party is a material inducement to the Bank in
entering into the Credit Agreement and continuing to extend credit thereunder.
Each Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty Agreement or any other Loan Document to which it
is a party.
15. Any notice or demand to any Guarantor under or in connection
with this Guaranty Agreement or any other Loan Document to which it is a party
shall be deemed effective if given to the Guarantor, care of Borrowers in
accordance with the notice provisions in the Credit Agreement.
16. The Guarantors shall, jointly and severally, pay on demand all
reasonable attorneys' fees and all other reasonable costs and expenses incurred
by the Agent in connection with the enforcement or collection of this Guaranty
Agreement.
17. Each Guarantor hereby waives promptness, diligence, notice of
any default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty Agreement, presentment, notice of protest, notice of
dishonor, notice of the incurring by either Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement.
18. The Credit Agreement, and all of the terms thereof, are
incorporated herein by reference, the same as if stated verbatim herein, and
each Guarantor agrees that the Agent may exercise any and all rights granted to
it under the Credit Agreement and the other Loan Documents without affecting the
validity or enforceability of this Guaranty Agreement.
19. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT
OF EACH GUARANTOR, THE AGENT AND THE SECURED PARTIES WITH RESPECT TO EACH
GUARANTOR'S GUARANTY OF THE GUARANTEED INDEBTEDNESS AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT
IS INTENDED BY EACH GUARANTOR, THE AGENT AND THE SECURED PARTIES AS A FINAL AND
COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY AGREEMENT, AND NO COURSE OF
DEALING AMONG ANY GUARANTOR, THE AGENT AND THE SECURED PARTIES, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS AMONG ANY GUARANTOR, THE AGENT
AND THE SECURED PARTIES.
20. This Guaranty Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas and applicable laws of the
United States of America.
21. Each Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest, notice
Guaranty Agreement, Page 5 of 7
of intent to accelerate, notice of acceleration, notice of dishonor, diligence
in enforcement, and indulgences of every kind, and (b) the taking of any other
action by the Agent, including without limitation, giving any notice of default
or any other notice to, or making any demand on, Borrowers, any other guarantor
of all or any part of the Guaranteed Indebtedness or any other party. To the
maximum extent lawful, each Guarantor waives all rights by which it might be
entitled to require suit on an accrued right of action in respect of any
Guaranteed Indebtedness or require suit against either Borrower or others,
whether arising under Section 34.02 of the Texas Business and Commerce Code, as
amended (regarding its right to require Agent or Secured Parties to ▇▇▇ either
Borrower on accrued right of action following its written notice to Agent or
Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as
amended (allowing suit against it without suit against either Borrower, but
precluding entry of judgment against it before entry of judgment against
Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring
Agent or Secured Parties to join either Borrower in any suit against it unless
judgment has been previously entered against such Borrower), or otherwise.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
Guaranty Agreement, Page 6 of 7
EXECUTED as of the date first written above.
GUARANTORS:
NELNET LOAN SERVICES, INC.
By: _____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
NELNET, INC.
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
NELNET GUARANTEE SERVICES, INC.
GUARANTEC, LLP
By: _____________________________________
▇▇▇▇▇ Hoesa, President
NELNET MARKETING SOLUTIONS, INC.
CLASSCREDIT, INC.
By: ____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
INTUITION, INC.
By: ____________________________________
▇▇▇▇▇ ▇▇▇ ▇▇▇▇, President
NATIONAL HIGHER EDUCATION
LOAN PROGRAM, INC.
By: ____________________________________
▇▇▇▇ ▇▇▇▇, President
EFS, INC.
EFS SERVICES, INC.
EFS FINANCE CO.
By: ___________________________________
▇▇▇▇ ▇▇▇▇▇▇, President
Guaranty Agreement, Signature Page
EXHIBIT"F"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Subsidiary Joinder Agreement
Exhibit "F", Cover Page
SUBSIDIARY JOINDER AGREEMENT
This SUBSIDIARY JOINDER AGREEMENT (the "AGREEMENT") dated as of
______________, _____ is executed by the undersigned (the "OBLIGATED PARTY") for
the benefit of BANK OF AMERICA, N.A., as agent for itself and the other Secured
Parties in connection with that certain Credit Agreement dated January 11,2002,
among NELNET LOAN SERVICES, INC., NELNET, INC. (together the "BORROWERS") and
BANK OF AMERICA, N.A. (the "BANK") (as modified, the "CREDIT AGREEMENT", and
capitalized terms not otherwise defined herein being used herein as defined in
the Credit Agreement).
The Obligated Party is a newly formed or newly acquired Subsidiary (but
not a Special Purpose Vehicle) and is required to execute this Agreement
pursuant to the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Obligated Party hereby agrees as follows:
1. The Obligated Party hereby assumes all the obligations of a
"GUARANTOR" under the Guaranty and agrees that it is a "GUARANTOR" and bound as
a "GUARANTOR" under the terms of the Guaranty as if it had been an original
signatory thereto. In accordance with the forgoing and for valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Obligated Party irrevocably and unconditionally guarantees to the Agent and the
Secured Parties the full and prompt payment and performance of the Guaranteed
Indebtedness (as defined in the Guaranty) upon the terms and conditions set
forth in the Guaranty.
2. This Agreement shall be deemed to be part of, and a
modification to, the Guaranty and the Security Agreement and shall be governed
by all the terms and provisions of the Guaranty and Security Agreement, which
terms are incorporated herein by reference, are ratified and confirmed and shall
continue in full force and effect as valid and binding agreements of Obligated
Party enforceable against Obligated Party. The Obligated Party hereby waives
notice of the Agent's or any Secured Party's acceptance of this Agreement.
IN WITNESS WHEREOF, the Obligated Party has executed this Agreement as
of the day and year first written above.
Obligated Party:
__________________________________
By: ______________________________
Name: ________________________
Title: _______________________
Subsidiary Joinder Agreement Page 1 of 1
EXHIBIT "G"
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Security Agreement
Exhibit "G", Cover Page
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "AGREEMENT) dated as of January 11,2002,
is by and among NELNET LOAN SERVICES, INC. "DEBTOR" and BANK OF AMERICA, N.A.,
as agent for itself and the other Secured Parties, as that term is defined in
the Credit Agreement described below (the "AGENT").
RECITALS:
The Debtor and NELnet, Inc., as borrowers (collectively, "BORROWERS"),
are entering into that certain Credit Agreement dated of even date herewith with
Bank of America, N. A. (the "BANK') (such agreement, as it may be amended or
otherwise modified from time to time, herein the "CREDIT AGREEMENT"). The
execution and delivery of this Agreement is a condition to the Bank's entering
into the Credit Agreement and making the extensions of credit thereunder.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the adequacy, receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Bank to make the Loans under the
Credit Agreement and the other Secured Parties to extend credit to Borrowers,
the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"COLLATERAL" has the meaning specified in SECTION 2.1 of this
Agreement.
"GENERAL INTANGIBLES" means any "GENERAL INTANGIBLES," as such
term is defined in Article or Chapter 9 of the UCC, now owned or
hereafter acquired by the Debtor and, in any event, shall include,
without limitation, each of the following, whether now owned or
hereafter acquired by the Debtor: (a) books, records, data, plans,
manuals, computer software, computer tapes, computer disks, computer
programs, source codes, object codes and rights of the Debtor to
retrieve data and other information from third parties; (b) contract
rights including, without limitation, all right, title and interest in
and to the Servicing Contracts and any documentation pursuant to which
any of the other Collateral was acquired which include, without
limitation, the following: (i) all rights of the Debtor to receive
moneys due and to become due under or pursuant to such agreements, (ii)
all rights of the Debtor to receive proceeds of any insurance,
indemnity, warranty, or guaranty with respect to such agreements, (iii)
all claims of the Debtor for damages arising out of or for breach of or
default under such agreements, (iv) all rights of the Debtor to
terminate such agreements, to perform thereunder and to compel
performance and otherwise exercise all rights and remedies thereunder,
and (v) any rights to Liens arising under or as a result of any such
agreement; (c) all rights of the Debtor to payment under letters of
credit and similar agreements, including without limitation, all letter
of credit rights and other supporting obligations; (d) choses in action
and causes of action of the Debtor (whether arising in contract, tort
or otherwise and whether or not currently in litigation) and all
judgments in favor of the Debtor, including without limitation, all
commercial tort claims; (e) rights and claims of the Debtor under
warranties and indemnities; (f) rights of the Debtor under any
insurance, surety or similar contract or arrangement; and (g) all
payment intangibles.
"OBLIGATIONS" means all "OBLIGATIONS" (as such term is defined
in the Credit Agreement); provided that the obligations secured hereby
shall be limited to an aggregate amount equal to the largest amount
that would not render the Debtor's obligations hereunder subject to
avoidance under Section 544 or 548 of the United States Bankruptcy Code
or under any applicable state law relating to fraudulent transfers or
conveyances.
"PROCEEDS" means any "PROCEEDS," as such term is defined in
Article or Chapter 9 of the UCC and, in any event, shall include, but
not be limited to: (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Debtor from time to time
with respect to any of the Collateral; (b) any and all payments (in any
form whatsoever) made or due and payable to the Debtor from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting, or purporting to act, for
or on behalf of any Governmental Authority); (c) all instruments,
documents, chattel paper and general intangibles received or arising in
connection with a disposition of Collateral; (d) all dividends or other
distributions relating to any of the Collateral; and (e) any and all
other amounts or property from time to time paid, payable, distributed
or distributable under, in connection with or in exchange for any of
the Collateral and all other payment intangibles relating thereto.
"SERVICING CONTRACT" means an arrangement, whether or not in
writing, pursuant to which the Debtor has the right to service Student
Loans for other Persons.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas from time to time. For purposes of all provisions of
this agreement, if, by applicable law, the perfection or effect of
perfection or non-perfection of the security interest created hereunder
in any Collateral is governed by the Uniform Commercial Code as in
effect on or after the date hereof in any other jurisdiction, "UCC"
means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or the effect of perfection or non-perfection.
Section 1.2 Other Definitional Provisions. Terms used herein that
are defined in the Credit Agreement and are not otherwise defined herein shall
have the meanings therefor specified in the Credit Agreement. References to
"SECTIONS," "SUBSECTIONS," "EXHIBITS" and "SCHEDULES" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. All definitions contained in this Agreement are
equally applicable to the singular and plural forms of the terms defined. All
references to statutes and regulations shall include any amendments of the same
and any successor statutes and regulations. References to particular sections of
the UCC should be read to refer also to parallel sections of the Uniform
Commercial Code as enacted in each state or other jurisdiction where any portion
of the Collateral is or may be located. Terms used herein, which are defined in
the UCC, unless otherwise defined herein or in the Credit Agreement, shall have
the meanings determined in accordance with the UCC.
Security Agreement
2
ARTICLE II.
SECURITY INTEREST
Section 2.1 Security Interest. As collateral security for the
prompt payment and performance in full when due of the Obligations (whether at
stated maturity, by acceleration or otherwise), the Debtor hereby pledges and
assigns to the Agent, and grants to the Agent a continuing lien on and security
interest in, all of the Debtor's right, title and interest in and to the
following, whether now owned or hereafter arising or acquired and wherever
located (collectively, the "COLLATERAL'"):
(a) all rights of the Debtor under all Servicing
Contracts now owned or hereafter acquired by the Debtor;
(b) all rights of the Debtor to receive payments under or
by virtue of the Servicing Contracts described in clause (b) preceding,
whether as servicing fees, servicing income, damages, amounts payable
upon the cancellation of termination of any such Servicing Contract, or
otherwise;
(c) all General Intangibles of the Debtor relating to or
arising out of the Collateral described in clauses (a) and (b)
preceding;
(d) all rights of the Debtor under any Hedging Agreement
now or hereafter entered into by the Debtor to protect the Debtor
against changes in the value of any of the Collateral described in
clauses (a), (b) and (c) preceding; and
(e) all products and Proceeds, in cash or otherwise, of
any of the Collateral described in clauses (a), (b), (c) and (d)
preceding.
Section 2.2 Debtor Remains Liable. Notwithstanding anything to
the contrary contained herein, (a) the Debtor shall remain liable under the
documentation included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Agent of any of
its rights or remedies hereunder shall not release the Debtor from any of its
duties or obligations under such documentation, (c) the Agent shall not have any
obligation under any of such documentation included in the Collateral by reason
of this Agreement, and (d) the Agent shall not be obligated to perform any of
the obligations of the Debtor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into the Credit Agreement and the other
Secured Parties to extend credit to the Borrowers, the Debtor represents and
warrants to the Bank and the other Secured Parties that:
Section 3.1 Current Servicing Contracts. Attached hereto as
SCHEDULE 3.1 is a true and complete list of all of its Servicing Contracts in
effect on the date hereof. Each of the Servicing Contracts listed in SCHEDULE
3.1 contain provisions that are consistent with those set forth in the form of
Agreement attached hereto as SCHEDULE 3.1A, except that the life of loan
servicing provision found in SECTION 1.2 of SCHEDULE 3.1A appears only in the
Servicing Contracts so noted. The termination, indemnification, and liability
Security Agreement
3
provision of each Servicing Contract listed in SCHEDULE 3.1 are substantially
similar to those provisions contained in SCHEDULE 3.1 A,
Section 3.2 Office Locations; Fictitious Names; Tax I.D. Number.
Its principal place of business, chief executive office and jurisdiction of
organization are located at the place or places identified for it on SCHEDULE
3.2. Within the last four months it has not had any other chief place of
business, chief executive office, or jurisdiction of organization except as
disclosed on SCHEDULE 3.2. SCHEDULE 3.2 also sets forth all other places where
it keeps its books and records relating to the Collateral. It does not do
business and has not done business during the past five years under any
trade-name or fictitious business name except as disclosed on SCHEDULE 3.2. Its
United States Federal Income Tax I.D. Number and organizational number is
identified on SCHEDULE 3.2.
Section 3.3 Ownership of Collateral. It is the legal and
equitable owner of the Collateral owned by it, free and clear of all Liens,
except the Lien created hereby.
Section 3.4 Validity of Service Contracts. Each Servicing
Contract is in full force and effect, each Servicing Contract is legal, valid,
and enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency and similar laws of general application affecting the rights of
creditors and general principles of equity, and, to the best of its knowledge,
no default or event of default exists under any Servicing Contract that could
have a Material Adverse Effect.
Section 3.5 Consents; Status. No consent or approval of any
Person, including any Governmental Authority, is required for it to execute,
deliver and perform this Agreement, or for the validity and enforceability of
the Lien and security interest in the Collateral created hereby, that in each
case has not been obtained and is not in full force and effect. It is approved
by, and qualified and in good standing with, all Governmental Authorities
necessary for it to service the Student Loans under the Servicing Contracts.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees with the Agent that until the
Obligations are paid and performed in full and all commitments under the Credit
Agreement have expired or have been terminated:
Section 4.1 Payment Obligations. It shall, in accordance with its
customary business practices, endeavor to collect or cause to be collected from
each obligor on the Collateral, as and when due, any and all amounts owing under
the Collateral. Without the prior written consent of the Agent, it shall not,
except in the ordinary course of business, (a) grant any extension of time for
any payment with respect to any of the Collateral, (b) compromise, compound, or
settle any of the Collateral for less than the full amount thereof, (c) release,
in whole or in part, any Person liable for payment of any of the Collateral, (d)
allow any credit or discount for payment with respect to any of the Collateral,
or (e) release any Lien or guaranty securing any payment obligation under the
Collateral.
Section 4.2 Further Assurances. At any time and from time to
time, upon the request of the Agent, and at its sole expense, it shall, promptly
execute and deliver all such further agreements, documents and instruments and
take such further action as the Agent may reasonably deem necessary or
appropriate to preserve and perfect its security interest in the Collateral and
carry out the provisions and purposes of this Agreement or to enable the Agent
to exercise and enforce its rights and remedies hereunder with respect to any of
the Collateral. Without limiting the generality of the foregoing, it shall upon
reasonable request by the Agent: (a) authorize the Agent to file such financing
statements as the Agent may from time to time require; (b) take such action as
the Agent may request to permit the Agent to have control over any investment
Security Agreement
4
property, (c) deliver to the Agent all Collateral the possession of which is
necessary to perfect its security interest therein, duly endorsed and/or
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Agent; and (d) execute and deliver to the
Agent such other agreements, documents and instruments as the Agent may
reasonably require to perfect and maintain the validity, effectiveness and
priority of the Liens intended to be created by the Loan Documents.
Section 4.3 Corporate Changes. It shall not change its name,
identity, jurisdiction of organization, or corporate structure in any manner
that might make any financing statement filed in connection with this Agreement
seriously misleading or its United States Federal Tax I.D. Number unless such
action is permitted or not restricted by the Credit Agreement and it shall have
given the Agent thirty (30) days prior written notice thereof and shall have
taken all action reasonably deemed necessary or desirable by the Agent to
protect its security interest in the Collateral with the perfection and priority
thereof required by the Loan Documents. It shall not change its principal place
of business, chief executive office or the place where it keeps its books and
records unless it shall have given the Agent thirty (30) days prior written
notice thereof and shall have taken all action deemed necessary or desirable by
the Agent to cause its security interest in the Collateral to be perfected with
the priority required by the Loan Documents.
Section 4.4 Performance of Servicing Contracts. It will, at its
expense: (a) perform and observe all of the material terms and provisions of the
Servicing Contracts to be performed or observed by it in accordance with their
terms and with applicable laws and regulations of Governmental Authorities,
maintain the Servicing Contracts in fall force and effect, enforce the Servicing
Contracts in accordance with their respective terms, and take all action to such
end as may be from time to time reasonably requested by the Agent and (b) from
time to time (1) furnish to the Agent such information and requests regarding
the Servicing Contracts as the Agent may reasonably request and (2) upon
reasonable request of the Agent make to any other party to any Servicing
Contract such demands and requests for information and reports or for action as
it is entitled to make thereunder.
Section 4.5 Modification to Servicing Contracts. It will not
amend or otherwise modify the terms and conditions of any Servicing Contract if
such amendment or modification could have a Material Adverse Effect.
ARTICLE V.
RIGHTS OF THE AGENT
Section 5.1 POWER OF ATTORNEY. THE DEBTOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE AGENT AND ANY OFFICER OR AGENT THEREOF, WITH FULL
POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH FULL
IRREVOCABLE POWER AND AUTHORITY IN THE NAME OF THE DEBTOR OR IN ITS OWN NAME, TO
TAKE, WHEN AN EVENT OF DEFAULT EXISTS, ANY AND ALL ACTIONS AND TO EXECUTE ANY
AND ALL DOCUMENTS AND INSTRUMENTS WHICH THE AGENT AT ANY TIME AND FROM TIME TO
TIME DEEMS NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT
AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT HEREBY GIVES THE AGENT
THE POWER AND RIGHT ON ITS BEHALF AND IN ITS OWN NAME TO DO ANY OF THE FOLLOWING
WHEN AN EVENT OF DEFAULT EXISTS, WITH NOTICE TO THE DEBTOR BUT WITHOUT THE
CONSENT OF THE DEBTOR:
(a) to demand, ▇▇▇ for, collect or receive, in the name
of it or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders,
Security Agreement
5
documents of title or any other instruments for the payment of money
under the Collateral or any policy of insurance;
(b) to pay or discharge taxes, Liens or other
encumbrances levied or placed on or threatened against the Collateral;
(c) to notify post office authorities to change the
address for delivery of mail of the Debtor to an address designated by
the Agent and to receive, open, and dispose of mail addressed to the
Debtor;
(d) (A) to direct account debtors and any other parties
liable for any payment under any of the Collateral to make payment of
any and all monies due and to become due thereunder directly to the
Agent or as the Agent shall direct (the Debtor agrees that if any
Proceeds of any Collateral shall be received by it after such a
direction from the Agent, it shall promptly deliver such Proceeds to
the Agent with any necessary endorsements, and until such Proceeds are
delivered to the Agent, such Proceeds shall be held in trust by it for
the benefit of the Agent and shall not be commingled with any other of
its funds or property); (B) to receive payment of and receipt for any
and all monies, claims and other amounts due and to become due at any
time in respect of or arising out of any Collateral; (C) to sign and
endorse any assignments, proxies, stock powers, verifications and
notices in connection with accounts or payment obligations and other
documents relating to the Collateral; (D) to commence and prosecute any
suit, action or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against it with respect
to any Collateral; (F) to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to give
such discharges or releases as the Agent may deem appropriate; (G) to
add or release any guarantor, endorser, surety or other party to any of
the Collateral; (H) to renew, extend or otherwise change the terms and
conditions of any of the Collateral; (I) to make, settle, compromise or
adjust any claims under or pertaining to any of the Collateral
(including claims under any policy of insurance); and (J) to sell,
transfer, pledge, convey, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Agent were the absolute owner thereof for all purposes, and
to do, at the Agent's option and the Debtor's expense, at any time, or
from time to time, all acts and things which the Agent deems necessary
to protect, preserve, maintain, or realize upon the Collateral and the
Agent's security interest therein.
THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH SECTION 7.11.
The Agent shall be under no duty to exercise or withhold the exercise of any of
the rights, powers, privileges and options expressly or implicitly granted to
the Agent in this Agreement, and shall not be liable for any failure to do so or
any delay in doing so. Neither the Agent nor any Person designated by the Agent
shall be liable for any act or omission or for any error of judgment or any
mistake of fact or law, except any of the same resulting from its or their gross
negligence or willful misconduct. This power of attorney is conferred on the
Agent solely to protect, preserve, maintain and realize upon its security
interest in the Collateral. The Agent shall not be responsible for any decline
in the value of the Collateral and shall not be required to take any steps to
preserve rights against prior parties or to protect, preserve or maintain any
Lien given to secure the Collateral.
Section 5.2 Assignment by the Agent. The Agent may at any time
assign or otherwise transfer all or any portion of their rights and obligations
under this Agreement and the other Loan Documents (including, without
limitation, the Obligations) to any other Person, to the extent permitted by,
and upon the conditions contained in, the Credit Agreement, and such Person
shall thereupon become vested with all the benefits thereof granted to the
Agent, herein or otherwise.
Security Agreement
6
ARTICLE VI.
DEFAULT, RIGHTS AND REMEDIES
If an Event of Default exists, the Agent shall have the following
rights and remedies:
(a) In addition to all other rights and remedies granted
to the Agent in this Agreement or in any other Loan Document or by
applicable law, the Agent shall have all of the rights and remedies of
a secured party under the UCC (whether or not the UCC applies to the
affected Collateral). Without limiting the generality of the foregoing,
the Agent may (A) without demand or notice to it, collect, receive or
take possession of the Collateral or any part thereof and for that
purpose the Agent may enter upon any premises on which the Collateral
is located and remove the Collateral therefrom or render it inoperable,
and/or (B) sell, lease or otherwise dispose of the Collateral, or any
part thereof, in one or more parcels at public or private sale or
sales, at the Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Agent may deem
commercially reasonable or otherwise as may be permitted by law. The
Agent shall have the right at any public sale or sales, and, to the
extent permitted by applicable law, at any private sale or sales, to
bid (which bid may be, in whole or in part, in the form of cancellation
of indebtedness) and become a purchaser of the Collateral or any part
thereof free of any right or equity of redemption on the part of the
Debtor, which right or equity of redemption is hereby expressly waived
and released by the Debtor. Upon the request of the Agent, the Debtor
shall assemble the Collateral and make it available to the Agent at any
place designated by the Agent that is reasonably convenient to it and
the Agent. The Debtor agrees that the Agent shall not be obligated to
give more than ten (10) days prior written notice of the time and place
of any public sale or of the time after which any private sale may take
place and that such notice shall constitute reasonable notice of such
matters. The Agent shall not be obligated to make any sale of
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of Collateral may have been given. The Agent may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so
adjourned. The Debtor shall be liable for all reasonable expenses of
retaking, holding, preparing for sale or the like, and all reasonable
attorneys' fees, legal expenses and other costs and expenses incurred
by the Agent in connection with the collection of the Obligations and
the enforcement of the Agent's rights under this Agreement. The Debtor
shall remain liable for any deficiency if the Proceeds of any sale or
other disposition of the Collateral applied to the Obligations are
insufficient to pay the Obligations in full to the extent provided in
the Loan Documents. The Agent may apply the Collateral against the
Obligations as provided in the Credit Agreement. The Debtor waives all
rights of marshalling, valuation and appraisal in respect of the
Collateral. Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection
from or other realization upon all or any part of the Collateral may,
in the discretion of the Agent, be held by the Agent as collateral for,
and then or at any time thereafter applied in whole or in part by the
Agent against, the Obligations in the order permitted by the Credit
Agreement. Any surplus of such cash or cash proceeds and interest
accrued thereon, if any, held by the Agent and remaining after payment
in full of all the Obligations shall be promptly paid over to the
Debtor or to whomsoever may be lawfully entitled to receive such
surplus; provided that the Agent shall have no obligation to invest or
otherwise pay interest on any amounts held by it in connection with or
pursuant to this Agreement.
(b) The Agent may cause any or all of the Collateral held
by it to be transferred into the name of the Agent or the name or names
of the Agent's nominee or nominees.
Security Agreement
7
(c) The Agent may exercise any and all of the rights and
remedies of the Debtor under or in respect of the Collateral,
including, without limitation, any and all rights of it to demand or
otherwise require payment of any amount under, or performance of any
provision of, any of the Collateral.
(d) The Agent may collect or receive all money or
property at any time payable or receivable on account of or in exchange
for any of the Collateral, but shall be under no obligation to do so.
(e) On any sale of the Collateral, the Agent is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of the Agent's counsel, in order
to avoid any violation of applicable law or in order to obtain any
required approval of the purchaser or purchasers by any applicable
Governmental Authority.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 No Waiver; Cumulative Remedies. No failure on the
part of the Agent to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 7.2 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Debtor and the Agent and respective
successors and assigns, except that Debtor may not assign any of its rights or
obligations under this Agreement without the prior written consent of the Agent.
Section 7.3 AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this
Agreement may be amended or waived only by an instrument in writing signed by
the Debtor and the Agent.
Section 7.4 Notices. All notices and other communications
provided for in this Agreement shall be given or made in accordance with the
Credit Agreement.
Section 7.5 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas and applicable
laws of the United States of America.
Section 7.6 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Security Agreement
8
Section 7.7 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Agent shall affect the representations
and warranties or the right of the Agent or the Bank to rely upon them.
Section 7.8 Counterparts. This Agreement may be executed in any
number of counterparts and on telecopy counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.
Section 7.9 Waiver of Bond. In the event the Agent seeks to take
possession of any or all of the Collateral by judicial process, the Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.
Section 7.10 Severability. Any provision of this Agreement which
is determined by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.11 Termination. If all of the Obligations shall have
been paid and performed in full, all commitments of the Bank shall have expired
or terminated, the Agent shall, upon the written request of the Debtor, execute
and deliver to the Debtor a proper instrument or instruments acknowledging the
release and termination of the security interests created by this Agreement, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Agent and has not previously been sold or otherwise applied pursuant to
this Agreement.
Section 7.12 Obligations Absolute. All rights and remedies of the
Agent hereunder, and all obligations of the Debtor hereunder, shall be absolute
and unconditional irrespective of: (a) any lack of validity or enforceability of
any of the Loan Documents; or (b) any change in the time, manner, or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from any of the Loan
Documents; any exchange, release, or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Obligations; or any other circumstance that
might otherwise constitute a defense available to, or a discharge of, a third
party ▇▇▇▇▇▇▇.
Section 7.13 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE DEBTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE AGENT
OR ANY SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
Security Agreement
9
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
DEBTOR:
NELNET LOAN SERVICES, INC.
By: __________________________________
Name: ____________________________
Title: ___________________________
Security Agreement
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
AGENT:
BANK OF AMERICA, N.A.,
as Agent for the Secured Parties
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Principal
Security Agreement
SCHEDULE 3.1
TO
SECURITY AGREEMENT
CURRENT FFELP LOAN SERVICING CLIENTS
JANUARY 8,2002
1) AmSouth Bank of Alabama (Remote)
2) Arkansas Student Loan Authority (LIFE OF LOAN)
3) Bank of America NT&SA (LIFE OF LOAN)
4) Bank One Corporation (LIFE OF LOAN)
5) Brazos Higher Education Service Corporation
6) California Higher Education Loan Authority (2) (LIFE OF LOAN)
7) Citibank, New York State (LIFE OF LOAN)
8) Class Credit/Hibemia (LIFE OF LOAN)
9) Comerica Bank (LIFE OF LOAN)
10) Credit Union of Denver
11) College Loan Corporation (LIFE OF LOAN)
12) Colorado Student Obligation Bond Authority
13) Central Texas Higher Education ▇▇▇▇▇▇▇▇▇
▇▇) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Bank, N. A.
15) Education Finance Group
16) First National Bank of Ft. ▇▇▇▇▇▇▇ (LIFE OF LOAN)
17) Florida Educational Loan Marketing Corporation (LIFE OF LOAN)
18) Greater Texas Student Loan Corporation
19) Illinois Designated Account Purchase Program (FFELP Full Service and
Remote) (LIFE OF LOAN)
20) Key Bank (LIFE OF LOAN)
21) Louisiana Public Facilities Authority
22) Manufacturers and Traders Bank (LIFE OF LOAN)
23) Maine Education Loan Marketing Corporation (LIFE OF LOAN)
24) Mesa County Teachers Federal Credit Union (LIFE OF LOAN)
25) Michigan Higher Education Student Loan Authority
26) Michigan National Bank/MN Finance/Standard Federal (LIFE OF LOAN)
27) Minnesota Higher Education Services Office
28) Mountain States Bank (LIFE OF LOAN)
29) Navy Federal Credit Union (LIFE OF LOAN)
30) NHELP (LIFE OF LOAN)
31) NSA, Bank of Oklahoma (LIFE OF LOAN)
32) NES, Bank of Oklahoma (LIFE OF LOAN)
33) Norlarco Credit Union (LIFE OF LOAN)
34) Northwestern Area Credit Union (LIFE OF LOAN)
35) ▇▇▇▇▇ Fargo Bank, N.A. (LIFE OF LOAN)
36) North Texas Higher Education Authority
37) Orange County Teachers Federal Credit Union (LIFE OF LOAN)
38) Pinnacle Bank of Papillion (LIFE OF LOAN)
39) North Fork Bank (LIFE OF LOAN)
Security Agreement
40) Rhode Island Student Loan Authority (FFELP Full Service and Remote)
41) San Antonio Federal Credit Union (LIFE OF LOAN)
42) Student Loan Acquisition Authority (LIFE OF LOAN)
43) Student Loan Finance Association
44) Student Loan Funding Corporation (LIFE OF LOAN)
45) Space Age Federal Credit Union (LIFE OF LOAN)
46) Sun Trust Bank (LIFE OF LOAN)
47) Union Bank & Trust Company
48) University Federal Credit Union (LIFE OF LOAN)
49) University of Missouri Kansas City (LIFE OF LOAN)
50) NELnet (LIFE OF LOAN)
51) U.S. Bank N.A.
52) USA Education (LIFE OF LOAN)
53) Utah Higher Education Assistance Authority (LIFE OF LOAN IN EVENT OF
SALE)
54) Alabama Higher Education Loan (Remote)
55) Colorado Student Loan Program (Remote)
56) Regions Financial Corporation (Remote)
57) National Higher Education Loan Program (Remote)
58) Oklahoma Student Loan Authority (Remote)
Security Agreement
SCHEDULE 3.1A
TO
SECURITY AGREEMENT
[NELNET LOGO]
LOAN APPLICATION PROCESSING,
DISBURSEMENT AND SERVICING AGREEMENT
--FEDERAL FAMILY EDUCATION LOAN PROGRAM--
THIS LOAN APPLICATION PROCESSING, DISBURSEMENT AND SERVICING AGREEMENT (the
"Agreement") is entered into as of the______________day of____________, 2001,
(the "Effective Date") by and between Nelnet Loan Services, Inc. ("Servicer"),
and ____________________________________________, ("Lender").
WHEREAS, Servicer is in the loan application processing, disbursement and
servicing business in the States of Colorado, Nebraska and Florida, and in the
ordinary course of such business processes applications, disburses and services
loans to student/parent borrowers (the "Education Loans") which are made and
guaranteed in accordance with the provisions of the Higher Education Act of
1965, as amended, and rules and regulations promulgated thereunder as in effect
from time to time (collectively, the "Education Act"); and,
WHEREAS, Servicer has developed and/or has available to it the systems and
services to enable it to process applications, disburse and service Education
Loans in accordance with the Education Act and with rules and regulations
previously promulgated by__________________________, which constitute all of
the Guarantors for all Education Loans which are to be serviced hereunder
("Guarantor(s)") as in effect from time to time(collectively, "Regulations");
and
WHEREAS, Lender in the ordinary course of its business makes or acquires
Education Loans; and
WHEREAS, Lender desires to retain Servicer to process applications,
disburse and service its Education Loans.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
AGREEMENT
1. TERM; LIFE OF LOAN SERVICING; REMOVAL; SERIAL LOANS.
1.1 TERM. With respect to application processing and disbursements only,
the initial term of this Agreement shall be from the Effective Date for a period
of five (5) years ("Initial Term") subject to earlier termination pursuant to
the terms herein. The Initial Term of this Agreement may be renewed for an
additional period of time upon mutual agreement of the parties ("Additional
Term"). Upon expiration of the Initial or Additional Terms, all terms and
conditions of this Agreement with respect to application processing and
disbursements, except Section 12, shall continue on a month to month basis until
either party terminates this Agreement, with or without cause, upon sixty (60)
days written notice to the other party. If this Agreement continues on a month
to month
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 1
basis after expiration, the "Servicing Fees" (as set forth in this Agreement and
Schedule "A") will increase by two percent (2%). Servicer also reserves the
right, at any other time after expiration of the Initial Term or any Additional
Term, to increase, decrease, modify and/or change the Servicing Fees as provided
for in Section 13 and Schedule "A", in such manner as Servicer may determine,
upon sixty (60) days prior written notice to Lender.
1.2 LIFE OF LOAN SERVICING. The parties acknowledge that in order to avoid
disruption and maintain continuity of service to the maker(s) of a note securing
an Education Loan ("Borrowers"), it has become customary in the industry to have
Education Loans serviced for the life of the Education Loan by a single
servicer. Accordingly, with respect to all post-disbursement servicing, Lender
hereby agrees that it will ensure that all Education Loans originated, acquired,
held, or sold by the Lender under the Education Act and subject to this
Agreement will remain with Servicer for the life of the loan, which means until
the Education Loan is paid in full by the Borrower or Guarantor.
In the event the Lender desires to sell any of its Education Loans, the Lender
will sell the Education Loans to a purchaser maintaining a servicing agreement
with Servicer which provides for servicing of such Education Loans on a life of
loan basis.
If the Lender desires to sell its Education Loans to a purchaser that does not
have such an agreement with Servicer, Lender shall require such purchaser to
execute a servicing agreement with Servicer in order to have the Education Loans
serviced on a life of loan basis by Servicer.
The intent of this section is to assure that every Education Loan will remain
with Servicer for servicing for the life of the loan.
Notwithstanding the foregoing, this section will not apply in the event:Servicer
is in material breach of this Agreement and fails to cure such breach under the
provisions set forth in Section 23(a) hereof.
1.3 APPROVED REMOVAL OF EDUCATION LOANS. If Lender sells or removes any
Education Loan from the Servicer system with Servicer's prior written approval
(i.e., for reasons such as serialization, but subject to Servicer's sole
discretion), Lender agrees to pay to Servicer a removal fee of Twenty-One
dollars ($21.00) per "Account Group" (as defined below) transferred off the
Servicer's servicing system plus any other expenses related to additional,
special or unique requests of the Lender.
1.4 SERIAL LOANS. Notwithstanding any other provision to the contrary in
this Agreement, Servicer shall have the right to originate and service all
Education Loans that are "serial" (as that term is commonly understood with
respect to Education Loans) to Education Loans originated and/or serviced
hereunder. This provision shall survive the termination of this Agreement for so
long as Lender is directly or indirectly engaged in the business of making
Education Loans under the FFEL Program; provided, however, that if an "eligible
institution" as defined in the Education Act ("Eligible Institution") or a
Borrower requests in writing that Servicer not provide either origination or
servicing for a serial loan, then Lender shall not be required to use Servicer
for origination or servicing for such serial loan as requested by the Eligible
Institution or borrower; Lender shall not request an Eligible Institution or
Borrower to give such request to Sender.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 2
APPLICATION PROCESSING AND DISBURSEMENT SERVICES
2.1. APPLICATION PROCESSING. Servicer shall maintain a special post office
drawer or box for purposes of receiving applications directly from Eligible
Institutions, Borrowers or Lender. Servicer shall process applications received
at the drawer or box or otherwise received at Servicer's office, as follows:
(a) Servicer shall verify that all Education Loan applications and
supporting documents are complete, provided, however, Servicer shall
not be required to verify any information included in an Education
Loan application (except to the extent required by the Education Act
or applicable Regulations of the Guarantor);
(b) Servicer shall perform acts necessary to secure disbursement
approval and insurance coverage of the principal and interest on the
Education Loan from the applicable Guarantor and shall be responsible
for all communication and contact with such Guarantor necessary or
appropriate to accomplish such approval and coverage;
(c) Servicer shall prepare and mail directly to Borrower all notices,
statements and disclosures required under the Education Act;
(d) Servicer shall, if necessary, prepare and mail directly to
Borrower a replacement or other necessary promissory note, together
with appropriate instructions for execution and delivery of the
promissory note and any related documentation;
Lender shall be solely responsible for payment to the U.S. Government of
origination or other fees required by the Education Act, and for all fees
required by any central disbursement agent, unless the parties agree otherwise
in writing.
If Lender is utilizing a third party disbursement agent to disburse its
Education Loans prior to delivery of the Education Loans to Servicer, Servicer
will have no liability or responsibility for the tasks set forth in subsections
(a) - (d) above nor for reconciliation issues arising from such process.
2.2. DISBURSEMENT SERVICES. Servicer shall prepare the disbursement checks
made payable to the appropriate Borrowers, or shall make other allowable
arrangements for the disbursement of Education Loan proceeds, and shall mail the
checks or deliver the funds, to the appropriate location. Servicer will print
Lender's logo on checks if requested.
2.3. PLUS LOAN SERVICES. If applicable, Servicer shall perform credit
review services (as required under the Education Act) on Borrowers to whom
Lender agrees to make Education Loans which are PLUS loans authorized under
Section 428B of the Education Act ("PLUS Loans"). Servicer agrees to act as
Lender's agent for the receipt, evaluation, handling and maintenance of certain
PLUS Loan credit information, in order to assist Lender in making decisions with
respect to the approval or denial of PLUS Loans, consistent with the terms of
the Education Act and Regulations. Lender will make the final lending decision,
according to the procedures stated in this Agreement and such reasonable appeal
processes as Lender determines and directs. Servicer will, with respect to PLUS
Loans:
(a) Accept PLUS Loan applications or pre-approval requests for
purposes of
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 3
performing credit evaluation;
(b) Receive and evaluate (based on Education Act requirements and
Lender's reasonable guidelines) a credit report from the
credit-reporting agency for each applicant, and report the results of
such evaluation to the appropriate Eligible Institution within
twenty-four hours of receipt. Servicer may rely upon all information
contained in such report or otherwise provided by the credit reporting
agency and shall have no liability for inaccurate or erroneous
information contained therein.
(c) Identify each applicant for a PLUS Loan who does not have an
adverse credit history by generating and providing to Lender a
disbursement report related to Education Loan origination.
(d) According to Education Act requirements, generate and provide to
the PLUS Loan applicant an "adverse action" letter in compliance with
the Equal Credit Opportunity Act on behalf of Lender with respect to
each applicant identified as having an adverse credit history, within
thirty (30) days after Servicer receives both the completed Education
Loan application and the credit history, and provide a copy of such
letter or otherwise identify such applicants to Lender.
(e) Lender agrees that with respect to all PLUS Loans processed under
this Agreement, it will ensure that all information in Loan
applications and other information provided to Servicer in connection
with its performance of the services hereunder is accurate and
complete.
(f) Lender will be responsible for handling and evaluating all appeals
of denied credit, including, if appropriate following appeal,
communicating in writing its approval of a PLUS Loan application
previously denied, and requesting guarantee of the PLUS Loan due to
error or other reasons relating to the original credit history and
properly documenting the same.
Nothing in this Agreement shall make Servicer a loan production office or holder
or originator of PLUS Loans processed under this Agreement. Lender acknowledges
its sole liability for the decision to approve or deny PLUS Loan applications,
and will hold Servicer harmless against claims arising out of such decisions.
2.4. FUNDING OF LOANS.
(a) Servicer shall maintain an account for purposes of disbursing
proceeds of Education Loans pursuant to this Agreement. Servicer shall
notify Lender each "Business Day" (Monday - Friday, except Federally
recognized holidays) of the disbursement amount required to fund the
Education Loans processed in accordance with this Agreement. Promptly
upon such notification, Lender shall cause such account to be credited
with "same day" funds in such amount. If Servicer fails to notify
Lender, Lender shall promptly credit such account with the required
funds on the next Business Day and shall not be liable to Servicer,
the Eligible Institutions or Borrowers for failure to credit the
account on such day; provided, however, Lender shall use its best
efforts to credit the account with "same day" funds regardless of when
notification is received from Servicer. Lender shall cause all
Education Loans originated in accordance with this Agreement to be
promptly funded as set forth above.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 4
(b) Failure to Fund. If Lender fails to fund the Servicer's account at
the instructed level, Lender shall pay Servicer a fee of Two Hundred
dollars ($200.00) per day the account is not funded. Should this
failure persist for three (3) consecutive days, Servicer reserves
the right to terminate its obligation to furnish the funding
services. Servicer shall be entitled to earnings, if any, on the
funding account.
(c) Return of Deposits. Amounts deposited with Servicer but not
disbursed by reason of an Education Loan being canceled, shall be
returned to Lender promptly, and in no event later than one (1) week
after Servicer's receipt of the written notice of cancellation or
return of the check with respect to such cancelled Education Loan.
3. REPORTS.
(a) Standard Reports. Standard reports will be furnished to Lender via
U.S. Mail, first class, postage prepaid, or as otherwise mutually
agreed.
(b) Special Reports. At Lender's request, Servicer will furnish such
special reports as can be reasonably provided by Servicer, provided,
however, that Lender will compensate Servicer for such reports as a
"Special Service" as indicated in Schedule "A".
4. REVIEW OF OUTPUT AND REPORTS. Servicer shall make commercially
reasonable efforts to verify that all output, including reports, are correct and
complete in all material respects. Lender shall, however, review each output,
especially reports, thoroughly upon receipt to verify completeness and accuracy.
Problems identified with output and/or the underlying Education Loan data shall
be reported by Lender to Servicer within forty-five (45) days of the date the
output was generated. Erroneous data and/or output programs so reported will be
corrected, and affected reports will be rerun at no additional charge. Problems
reported to Servicer after forty-five (45) days may be subject to a time and
materials charge at Servicer's option to correct output retroactively. Servicer
shall have no liability for errors that could reasonably be expected to be
identified by Lender personnel familiar with the Education Loan program and
Lender's Education Loan portfolio, or for errors that are not reported within
forty-five (45) days.
POST-DISBURSEMENT SERVICING
5. DELIVERY AND CONVERSION OF EDUCATION LOANS FOR SERVICING AND COLLECTION.
Subject to Servicer's scheduling requirements, Lender may from time to time
deliver or cause to be delivered Education Loans to Servicer with respect to
which processing has been completed and proceeds have been disbursed to the
Borrowers prior to the date of delivery ("Converted Education Loans") to be
serviced pursuant to the terms of this Agreement. Lender shall transmit to
Servicer all documentation required by Servicer to enable it to service the
Converted Education Loans (the "Loan Documentation"). Upon receipt of the Loan
Documentation, Servicer shall verify only the presence of the promissory note,
the original Borrower application, and proof of disbursement. Servicer is
willing to use reasonable efforts to identify previous servicing errors or
omissions in this process, if requested by Lender, for a fee to be mutually
agreed upon following Servicer's review of the portfolio. However, Servicer
shall not be liable or responsible for the consequences of any errors it does or
does not detect in such file review, nor for missing or incorrect documentation
at conversion.
6. PORTFOLIOS SUBJECT TO REJECTION BY SERVICER. Lender acknowledges that
servicing certain types of Education Loan portfolios poses a risk of financial
hardship for Servicer.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 5
Therefore, Servicer may in its discretion reject certain Education Loans or
Education Loan portfolios ("Rejected Loans") prior to placing such loans on the
Servicer system. Servicer shall provide Lender with reasonable notice prior to
transfer to Servicer's system as to Servicer's determination that Education
Loans are deemed to be Rejected Loans. Servicer shall have no right to reject or
decline Education Loans after the loans are transferred to the Servicer system.
7. CONVERSION OF DELINQUENT LOANS. Servicer is agreeable to the conversion
of delinquent Education Loans to its system for servicing. If a loan is one
hundred eighty (180) days or more past due, however, Servicer will not be
responsible for any Guarantor claim rejects or interest denials due to untimely
guarantee claim filing.
8. SERVICING OF EDUCATION LOANS. Upon acceptance of any Education Loan into
Servicer's computer system and after the sale date (if applicable) of the
Education Loan to Lender, or following application processing and disbursement
of Education Loans originated under this Agreement, Servicer shall service the
Education Loan in accordance with the Education Act, and this Agreement,
including the following:
(a) Servicer will service the Education Loans in such a manner as to
maintain the guarantee thereon in full force at all times, subject to
Section 16, below.
(b) Servicer shall prepare and mail all required statements, notices,
disclosures and demands directly to the Borrower.
(c) Servicer shall retain records of contacts, follow-ups, collection
efforts and correspondence regarding each Education Loan.
(d) Servicer shall provide accounting for all transactions related to
individual Education Loans, including, but not limited to, accounting
for all payments of principal and interest upon such Education Loans
(for Converted Education Loans, from the conversion date to the
Servicer system).
(e) Servicer shall process all deferments and forbearances.
(f) Servicer shall process all address changes and update address
changes accordingly.
(g) Servicer shall retain all documents it receives pertaining to each
Education Loan, in accordance with the filing requirements set forth in
the most current "Common Manual - Unified Student Loan Policy". Such
retention may be on magnetic tape, microfilm, laser disk or other
related medium.
(h) When necessary and allowable by the Education Act, Servicer shall
take all steps necessary to file a claim for loss with Guarantor.
(i) Servicer shall provide data as required to Guarantor. Any
requirements beyond those found in the Common Manual shall be billed to
the Lender at a price to be mutually agreed upon. Servicer shall have
no liability for late filing of claims if the information required for
such filing has been requested from Lender but not received within
seven days of such request.
(j) Servicer shall process and add repurchase Education Loans from the
Guarantor to the Servicer Servicing System as required by the Education
Act or upon the request of Lender. The fee for such repurchase is
provided in Schedule A.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 6
(k) Servicer shall provide such other services as Servicer customarily
provides and deems appropriate.
9. SYSTEM UPDATES. Lender agrees that in the course of its Education Loan
servicing activities, Servicer may rely on, without independently verifying, all
data entries, manipulations and representations provided to Servicer by Lender,
Eligible Institutions, and Borrowers with respect to the Education Loans,
including but not limited to, Eligible Institutions/Borrower certification,
eligibility, enrollment, and Eligible Institution or Borrower demographics,
including data entries provided to Servicer electronically, via the Internet or
otherwise, and that Servicer shall have no liability for incorrect information
or the consequences thereof, which is provided by Lender, Eligible Institutions,
or Borrowers.
10. CURE SERVICING. At Lender's request Servicer agrees to perform
additional servicing activities not required under the terms of this Agreement
for Converted Education Loans transferred to Servicer, which have previously not
been serviced in accordance with the Education Act and Regulations, and which
require additional servicing activity to attempt to maintain or reinstate the
Loans' principal and interest guarantee from the Guarantor ("Cure Procedures").
Utilizing Cure Procedures approved by the Guarantor, Servicer will use its best
efforts to cure all defects caused by Lender or unreasonable acts of the
Guarantor(s) (as defined in Section 17 below). Servicer makes no representation
or warranty that the guarantee on any Education Loan will be reinstated
regardless of whether Servicer follows the Cure Procedures approved by the
Guarantor.
11. WRITE OFF GUIDELINES. The Servicer shall use the following guidelines
in determining whether to write off and terminate efforts to collect or service
a Borrower's Account:
Account Balance* Process Requirements
---------------- --------------------
$0 - $100.00 Writeoff thirty (30) days after the last payment was
made, and if applicable, forward notes to Borrower.
$100.01 + Recover such amount by filing a supplemental
claim, if applicable, or service as normal.
*Account Balance includes both principal and interest
If the Borrower's final payment results in an overpayment equal to or greater
than ten dollars ($10.00), the Servicer shall notify the Lender no later than
forty-five (45) days after receipt to refund the entire overpayment to the
Borrower. If the overpayment is less than ten dollars ($10.00), the Servicer
shall write off the amount, but in each case shall notify the Lender by listing
the dollar amount and Borrower Account within thirty (30) days. To the extent a
law requires refunds of less than $10.00, Servicer shall refund such overpayment
upon notification by Lender of such law and the specific requirements thereof.
12. REPORTS TO LENDER. On or before the 15th day of each month, (or by the
15th day following quarter end, as applicable) unless some other time is
provided herein, Servicer shall prepare and deliver the following reports to
Lender, or to such other person as Lender may designate, with respect to
activity during the preceding month:
(a) Total Principal Report (Daily);
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 7
(b) Interest Reconcile Report (Daily)
(c) Refund Reconcile Report (Daily);
(d) Daily Monetary Transaction Summary (Daily, Monthly);
(e) Portfolio Report (Monthly);
(f) Claims Delinquency Detail (Monthly);
(g) Computation of Interest and Special Allowance Payments (currently
reported on E.D. Form 799). Data will be computed commencing with the date
Education Loans appear on the records of Servicer (Quarterly).
Lender shall receive one copy of each of the above reports at no cost.
Servicer will provide extra copies at the request of Lender, and Lender will pay
the cost of the copies. Any customized reports shall be provided at an
additional cost to be mutually agreed upon by Servicer and Lender.
13. SERVICING FEES.
13.1. Lender shall pay to Servicer, on or before the 15th day of each month
(or within fifteen (15) days of billing statement) the fees provided in Schedule
A ("Servicing Fees") for and in consideration of the services performed by
Servicer hereunder for the preceding month. After the first twelve (12) months
of this Agreement, the Servicing Fees shall be subject to change by Servicer at
any time, upon sixty (60) days written notice, but changes will not occur more
frequently than once every twelve (12) months. No change will result in an
increase that exceeds two percent (2%) for any twelve (12) month period.
In the event Servicing Fees are not paid within thirty (30) days of the
billing statement, Lender agrees to pay a late fee of one and one-half percent
(1 1/2%) per month against the entire outstanding balance of the account
including any prior late fees outstanding. Servicer also reserves the rights to
(a) withhold transfer of borrower payments; (b) withhold reports otherwise due;
and (c) terminate this Agreement without notice if nonpayment persists for sixty
(60) days or more from billing.
13.2. POSTAGE EXPENSES. In addition to the foregoing, Lender also agrees
that Servicer may pass on to Lender the cost of actual increases in postage
rates by the United States Postal Service.
13.3. MATERIAL CHANGES. The parties agree that should Servicer be required
to make material changes to its current lender servicing practices or servicing
system due to changes to the Education Act, Regulations of the Guarantor, and/or
business environment, or to other costs beyond Servicer's control, Servicer may
increase the Servicing Fees with Lender to reasonably reflect those increased
costs at any time during this Agreement.
13.4. RIGHT TO OFFSET. In the event that the Servicer does not receive
payment from Lender with respect to any Education Loan or services provided
under this Agreement, or in the event that the Servicer is notified that funds
are owed to the Secretary of Education, the Servicer shall notify Lender of such
nonpayment or monies owed. In such event, the Servicer may, at its discretion,
use funds received on Lender's behalf to offset or pay any monies due the
Secretary of Education or any invoice due the Servicer plus interest provided
that the invoice has not been paid, the amount is undisputed as of the date of
payment, and ninety (90) days have elapsed since the mailing of the invoice to
Lender.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 8
14. LOAN PAYMENTS. Borrowers will be directed to make all Education Loan
payments to a lockbox established by Servicer. All cash receipts will be
remitted once a week to Lender or as Lender may otherwise reasonably request.
15. INQUIRIES. Servicer shall answer all inquiries regarding Education
Loans, Eligible Institution status or refunds, and Lender shall cooperate to the
extent necessary to gather the information needed to answer such inquiries. Such
inquiries may be referred to the Eligible Institution which the student Borrower
attended or is attending, if necessary. Servicer shall have no responsibility
for any disputes between Borrowers and Eligible Institutions regarding tuition,
registration, attendance, or quality of education/training.
16. AGENT AUTHORIZATION. Lender authorizes Servicer to act as Lender's
agent in the processing and servicing of Lender's Education Loans. This
authorization includes but is not limited to all correspondence and liaison
necessary with Guarantor regarding Lender's Education Loans, assignment of
claims to Guarantor and any/or all other communications, correspondence,
signatures or other acts appropriate to service Lender's Education Loans in
accordance with the Education Act and/or Regulations of the Guarantor.
17. LIABILITY OF SERVICER. Servicer assumes no responsibility or liability
for any claims, liabilities, losses, guarantee rejects, or interest denials that
are related to servicing of the Education Loans prior to (a) Servicer processing
the application of the Education Loan, (b) placing of the Education Loan on
Servicer's system, or (c) prior to the date Lender holds ownership of the
Education Loan. Servicer assumes no liability for the failure of any Borrower to
repay their Education Loan, nor for the failure of the United States government
to pay any principal, interest, subsidy or special allowance, nor for the
failure of Guarantor to make a required payment of any principal and/or interest
on any of Lender's Education Loans. Servicer shall not be responsible for
consequences of unreasonable acts of any Guarantor. For purposes of this
Agreement, unreasonable acts of the Guarantor shall include but not be limited
to: Guarantor actions that are outside the scope of industry custom; oral
commitments accepted in practice discontinued without sufficient advance notice;
retroactive implementation of a regulation without sufficient prior notification
or clarification; Guarantor servicing deficiencies that preclude Servicer from
performing requirements correctly or timely; Guarantor submission of data to the
incorrect entity; Guarantor submission of data in a format that is not usable,
legible or readable; refusal of the Guarantor to acknowledge data or
documentation; unscheduled changes in normal business hours; enforcement of an
unwritten policy or standard; interpretation of a policy, standard or regulation
in a manner inconsistent with the Common Manual, Guarantor's manual or
Department of Education clarification; or any other acts of the Guarantor of a
similar nature.
If Servicer takes or fails to take any action in connection with servicing
responsibilities under this Agreement (whether or not such action or inaction
amounts to negligence) which causes any Education Loan subject to this Agreement
to be denied the benefit of any applicable guarantee, Servicer shall have a
reasonable time to cause such benefits of the guarantee to be reinstated. If
such benefits are not reinstated within twelve (12) months of denial by
Guarantor or the Department of Education, Lender agrees to sign a Loan Sale
Agreement to sell the Education Loan to another Eligible Lender (as defined in
the Act) of Servicer's choice ("Buyer"). Subject to the terms of the Loan Sale
Agreement, Buyer will purchase the Education Loan from Lender for an amount
equal to the amount the Guarantor would have paid if the Education Loan had been
accepted and paid by the Guarantor as a claim (which may include but is not
limited to lost principal, interest including interest penalties for due
diligence violations, and special allowance payments), and title to the
Education Loan will thereby be transferred to Buyer. Lender
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 9
shall repurchase any Education Loan on which the guarantee is fully reinstated,
from Buyer at an amount equal to the then outstanding principal balance plus all
accrued interest due thereon, less the amount subject to Lender Risk Sharing
under the Education Act. Notwithstanding any other provision in this Agreement
to the contrary, if Servicer performs its duties under this paragraph, then
Servicer shall not be deemed to be in breach of this Agreement for failure to
service properly.
Lender's remedies for breach of this Agreement by Servicer shall be limited to
this Section. In no event will Servicer be liable under any theory of tort,
contract, strict liability or other legal or equitable theory for any lost
profits or exemplary, punitive, special, incidental, indirect or consequential
damages, each of which is hereby excluded by agreement of the parties regardless
of whether or not Servicer has been advised of the possibility of such damages.
Any action for the breach of any provisions of this Agreement shall be commenced
within one (1) year after the Education Loan leaves the Servicer's servicing
system.
18. INDEMNIFICATION. Lender shall indemnify and hold Servicer harmless from
and against all claims, liabilities, losses, damages, costs and expenses
(including reasonable attorney's fees) asserted against or incurred by Servicer
as a result of Servicer complying with any instruction or directive by Lender.
Lender shall further indemnify and hold Servicer harmless from and against all
claims, liabilities, losses, damages, costs and expenses (including reasonable
attorney's fees) asserted against or incurred by Servicer as a result of actions
not the fault of or not caused solely by a negligent act of Servicer, its agents
or employees, including all claims, liabilities, losses, damages and costs
caused in part or in whole by or the fault of the Lender, a prior holder, owner
or lender, a prior servicer or any other party connected in any manner to the
Education Loan or Education Loans resulting in the claim, liability, loss,
damage, cost, or expense.
19. DISCLOSURE OF INFORMATION. (a) All data, information, records,
correspondence, reports or other documentation received by Servicer pursuant to
this Agreement from Lender, the Eligible Institution which the student attended,
or the Borrower, or prepared and maintained by Servicer in the course of its
activities under this Agreement shall be released or divulged only to Lender,
Eligible Institutions, guarantee agencies, regulatory bodies, other parties
necessary to accommodate enforceability of the Education Loan, Servicer's
affiliates or as otherwise required by law. With respect to information or
documents relating to a particular Borrower, Servicer may release or divulge
that information or those documents to that Borrower, Eligible Institutions, or
such other parties as Servicer may be directed in writing by Lender or such
Borrower, or as otherwise required by law.
(b) Servicer shall establish and maintain policies and procedures designed to
ensure the confidentiality of the Lender information (non-public personal
information). Among other things, Servicer acknowledges that it is against
Federal law to disclose non-public personal information received from a
financial institution under certain circumstances. Servicer and Lender agree to
comply with the provisions of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and all implementing
rules and regulations (collectively "GLB") regarding consumer financial privacy,
to the extent each of their actions and responsibilities hereunder are impacted.
(c) Lender acknowledges that it holds the "Customer Relationship" (as defined in
GLB) with Education Loan borrowers and thereby has the responsibility to provide
required privacy policies and notices to such borrowers. Upon request, Servicer
will assist Lender with such services at an additional fee to be negotiated
separately from this Agreement.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 10
20. CONFIDENTIALITY.
20.1. Lender agrees not to disclose any provisions or portions of this
Agreement, "Trade Secrets" (as defined below) or financial information
(collectively, "Confidential Information") concerning or belonging to Servicer
to any third party or use the same in competition with Servicer. For purposes of
this Agreement, Confidential Information does not include "Nonpublic Personal
Information" as defined in GLB. "Trade Secret" shall mean the whole or any
portion or phase of any technical information, design, process, procedure,
formula, improvement, algorithm, method, technique, confidential business or
financial information, or other information relating to any business of Servicer
that is not generally known by the public. Servicer and Lender specifically
agree that the format used to transfer Lender's data contains confidential and
proprietary trade secret information that is the exclusive property of Servicer.
Servicer makes no claim to the specific data contained in any printout given to
Lender and recognizes that said data is the exclusive property of Lender.
Servicer and Lender agree, however, that all aspects of the underlying computer
program, algorithms, methods of processing, specific design and layout, report
format, and the unique processing techniques and interactions of the various
aspects of Servicer's computer program are trade secrets of, proprietary to, and
owned exclusively by Servicer.
20.2. In accordance with applicable law, the Lender agrees that in the
event Servicer grants access to any Confidential Information, to forever
thereafter keep the same confidential. Lender also agrees to keep Confidential
Information and material (both written and verbal) relating to any Lender,
vendor, or other party transacting business with Servicer. Lender, its agents
and employees, further agrees not to release, share, use, or disclose the same
without the prior written permission of Servicer except to only those of
Lender's employees, agents, or advisors having a need to know the same for
purposes related to this Agreement.
20.3. Lender, its agents, employees, and advisors, recognize the disclosure
of Confidential Information by Lender, or Lender's agents or advisors may give
rise to irreparable injury to Servicer inadequately compensable in damages and
that accordingly, Servicer may seek and obtain injunctive relief or damages
against the disclosure or threatened disclosure, in addition to any other legal
remedies, including attorney's fees, which may be available. The parties agree,
however, that the duty to protect Confidential Information shall not include
data, information, or materials which the Lender can demonstrate is publicly
available by other than unauthorized disclosures by other parties. All
confidentiality requirements shall survive the termination or cancellation of
this Agreement.
21. INTELLECTUAL PROPERTY PROTECTION. The parties agree that all right,
title and interest of whatever nature in Servicer's user manuals, training
materials, computer programs (including both source and object code), routines,
structures, layout, report formats, together with all subsequent versions,
enhancements and supplements to said programs, all copyright rights, and all
oral or written information relating to Servicer's intellectual property
conveyed in confidence by Servicer to Lender pursuant to this Agreement which is
not generally known to the public and which gives Servicer an advantage over its
competitors who do not know or use such information are also Confidential
Information. All forms of Servicer's intellectual property of whatever nature is
and shall remain the sole and exclusive property of Servicer. Lender may only
use aforementioned materials and tools in form and manner approved by Servicer
in writing.
22. MODIFICATION OF EQUIPMENT, COMPUTER PROGRAMS AND PROCEDURES. The
Servicer reserves the right to change any part or all of its equipment and
computer
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 11
programs, and its procedures, reports and services, relating to the manner of,
or the methodology used in, servicing Education Loans as set forth in this
Agreement without the prior consent of the Lender; provided, however, that in no
event shall such change abrogate or in any way modify the obligations of the
Servicer to comply with the Education Act and Regulations as set forth above. It
is specifically understood that the intent of this paragraph is to allow the
Servicer flexibility in the methods and techniques of servicing subject to full
compliance with this Agreement.
23. TERMINATION.
a. If at any time during this Agreement either party refuses or fails to
perform in a material fashion any portion of this Agreement, the
other party will provide written notice describing the nonperformance.
If the nonperforming party fails or refuses to correct the
nonperformance within thirty (30) days after receipt of written
notice, the other party may terminate this Agreement.
b. If the delinquency rate of the Lender's portfolio of Education Loans
being serviced hereunder (as calculated during month-end processing in
accordance with the formula described below) exceeds twenty percent
(20%) for any three consecutive months during the term of this
Agreement, the Servicer may terminate the Agreement by providing sixty
(60) days prior written notice to the Lender. The Servicer may, at its
option, propose modified servicing fees in lieu of exercising the
termination provisions of this section. Delinquency rate is defined as
the number of Accounts 31- 270 days delinquent divided by the total
number of Accounts in repayment status.
24. PROCEDURES IN EVENT OF SERVICER BREACH. If this Agreement is terminated
by Lender due to a breach by Servicer, a deconversion fee of Three dollars
($3.00) per Account plus any other reasonable expenses incurred in connection
with the transfer of Lender's files and other required information and reports
off of the Servicer system, shall be paid by Lender. In such case, Servicer
shall turn over to Lender all Education Loan files in accordance with acceptable
standards as described in the Common Manual to support claims filing function.
Servicer shall make available to Lender the original promissory note, along with
an electronic record of Servicer servicing documenting information related to
deferments, forbearances, disbursements, and guarantees (the "Electronic
History"). Electronic History shall be provided in Servicer's standard format.
25. NOTICES. All notices or communications between the parties shall be
addressed as follows: If to Servicer: President, Nelnet Loan Services, Inc.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇, with a copy to General
Counsel, Nelnet Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, and if to Lender: ____________________ or to such other address as may be
indicated by the parties. Any notice shall be deemed given upon mailing if by
registered or certified mail, and upon receipt in every other case.
26. GOVERNING LAW. This Agreement is executed and delivered within the
State of Colorado. The parties agree this Agreement shall be construed,
interpreted and applied in accordance with the laws of the State of Colorado,
and that the state and Federal courts and authorities within Colorado shall have
sole jurisdiction and venue over all controversies which may arise with respect
to the execution, interpretation and compliance with this Agreement.
27. CHANGES IN WRITING. This Agreement, including this provision, shall not
be modified or changed except by a writing signed by all parties hereto.
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 12
28. SEVERABILITY. If a court of competent jurisdiction finds any of the
provisions of this Agreement to be so overly broad as to be unenforceable or
invalid for any other reason, the invalid provisions will be reduced in scope or
eliminated by the court to the extent deemed necessary by the court to render
the remaining provisions of this Agreement reasonable and enforceable.
29. PERSONS BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their legal representatives, successors and
assigns.
30. ASSIGNMENT. This Agreement shall not be assigned by either party
without the prior written consent of the other party which consent shall not be
unreasonably withheld. However, notwithstanding the previous sentence, Servicer
may in its sole discretion, without Lender's consent, assign or delegate any of
its duties or obligations hereunder to an entity affiliated with Servicer. In
such case, the assignee or delegate shall be bound by all terms and conditions
of this Agreement related to such assignment or delegation.
31. TITLES. The titles used in this Agreement are intended for convenience
and reference only. They are not intended and shall not be construed to be a
substantive part of this Agreement or in any other way to affect the validity,
construction or effect of any of the provisions of this Agreement.
32. WAIVER. The waiver or failure of either party to exercise in any
respect any right provided for herein shall not be deemed a waiver of any
further right hereunder.
33. FORCE MAJEURE. The foregoing provisions of this Agreement are subject
to the following limitation: If by reason of a force majeure Servicer is unable
in whole or in part to carry out any agreement on its part herein contained,
Servicer shall not be deemed in default during the continuance of such
inability. The term "force majeure" as used herein shall mean, without
limitation, the following: acts of God, strikes, lockouts, or other industrial
disturbances; acts of public enemies; order or restraint of any kind of the
government of the United States of America or of the States of Colorado,
Nebraska or Florida or Cities of Aurora, Colorado, Lincoln, Nebraska or
Jacksonville, Florida, or any of their departments, agencies or officials, or
any civil or military authority; insurrections; riots; landslides; earthquakes;
fires; storms; droughts; floods; explosions; breakage or accident to machinery,
equipment, transmission pipes or canals; or any other cause or event not
reasonably within the control of Servicer.
34. HIRING. Lender agrees that during the term of this Agreement and any
extensions or renewals thereof, and for one year thereafter, Lender shall not
solicit for hire, or knowingly allow its employees to solicit for hire, any
employees of Servicer without the prior written consent of Servicer.
35. AUDITS. Lender, at its own expense, with prior notice to Servicer and
during Servicer's normal business hours, may perform or arrange to have audits
performed of Servicer's servicing activities on Lender's Education Loans.
Servicer shall provide up to forty (40) hours of audit assistance per year.
Lender will reimburse Servicer for its staff time and expense beyond said forty
(40) hours.
36. CORPORATE OBLIGATION. This Agreement is solely a corporate obligation
of Servicer and Lender and no personal liability against any parent, subsidiary,
affiliate, incorporator, member, officer, employee, or trustee, past present, or
future of the parties shall attach to any of the foregoing as a result of this
Agreement, the provision of the
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 13
Services pursuant to this Agreement, or any breach of this Agreement; the
parties hereto agreeing that the sole recourse is against the Servicer (or its
successors) or the Lender (or its successors). Notwithstanding the foregoing,
any incorporator, member, officer, employee, or trustee shall have
responsibility to the extent such individual receives a fraudulent conveyance
from Servicer or Lender.
37. ENTIRE AGREEMENT. This is the entire and exclusive statement of the
Agreement between the parties, which supersedes and merges all prior proposals,
understandings and all other agreements oral and written, between the parties
relating to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
NELNET LOAN SERVICES, INC.
By: _____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Sr. Vice President/General Counsel
LENDER
By: _____________________________________
Name: ___________________________________
(PLEASE PRINT)
Title: __________________________________
NELNET LOAN SERVICES, INC. SERVICING AGREEMENT
11/13/2001
PAGE 14
SCHEDULE 3.2
TO
SECURITY AGREEMENT
Office Locations; Fictitious Names; Tax I.D. Number; Organizational Number
OFFICE LOCATIONS:
Headquarters Office: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Other Locations: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
First Trust Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
NAMES:
Current Name: NELNET Loan Services, Inc.
Prior Name: UNIPAC Service Corporation
Fictitious Names: None
TAX PAYER I.D. NO.:
Security Agreement
SCHEDULE 6.14
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
List of Subsidiaries
Directly Owned Subsidiaries of NLSI
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
1. NELnet, Inc. Nevada Corporation Lincoln, NE 1,000 sh. 100 sh. 100
Directly Owned Subsidiaries of NELnet, Inc.
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
1. NHELP-I, Inc. Nevada Corporation Lincoln, NE 1,000 sh. 100 sh. 100
2. NHELP-II Inc. Nevada Corporation Lincoln, NE 1,000 sh. 1,000 sh. 100
3. NHELP-III, Inc. Nevada Corporation Lincoln, NE 1,000 sh. 100 sh. 100
4. NELNET Student Loan
Corporation-1, Inc. Nevada Corporation Lincoln, NE 1,000 sh. 1,000 sh. 100
5. NELNET Student Loan
Corporation-2, Inc. Nevada Corporation Lincoln, NE 1,000 sh. 1,000 sh. 100
6. Nelnet Corporation Nevada Corporation Lincoln, NE 1,000 sh. 1,000 sh. 100
7. NELnet Private
Student Loan
Corporation-1 Nevada Corporation Lincoln, NE 1,000 sh. 1,000 sh. 100
8. National Higher
Educational Loan Program,
Inc. Nebraska Corporation Lincoln, NE 1,000 sh. 1,000 sh. 100
9. MELMAC, Inc. Nevada Corporation Portland, ME 200 sh. 1 share 100
10. NELnet Marketing
Solutions, Inc. Florida Corporation Jacksonville, FL 10,000 sh. 1,100 sh. 100
11. NELnet Guarantee
Services, Inc. Florida Corporation Jacksonville, FL 1,000 sh. 1,000 sh. 100
Schedule 6.14 to Credit Agreement
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
12. EFS, Inc. Indiana Corporation Indianapolis, IN 1,000,000 sh. 361,577.515 sh. 100
13. NEBHELP, INC. Nebraska Corporation Lincoln, NE 2,010 sh. 111 sh. 100
Directly Owned Subsidiaries of NHELP-II Inc.
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
1. NHELP-II, LLC Nevada Limited Liability N/A (single N/A (single 100
Company Lincoln, NE member) member)
Directly Owned Subsidiaries of MELMAC, Inc.
Principal
Place of Authorized Outstanding
Name and Type Jurisdiction Type of Entity Business Equity Equity % Interest
MELMAC Enterprises,
1. Inc. Nevada Corporation Portland, ME 100 sh. 1 sh. 100
2. MELMAC, LLC Delaware Limited 99% (MELMAC, Inc.)
Liability 1% (Melmac
Company Portland, ME N/A N/A Enterprises, Inc.)
Directly Owned Subsidiaries of NELnet Marketing Solutions, Inc.
Principal
Place of Authorized Outstanding
Name and Type Jurisdiction Type of Entity Business Equity Equity % Interest
1. ClassCredit, Inc. Florida Corporation Jacksonville, FL 100 sh. 100 sh. 100
2. InTuition, Inc. Florida Corporation Jacksonville, FL 1,000,000 1,000,000 100
Schedule 6.14 to Credit Agreement
Directly Owned Subsidiaries of NELnet Guarantee Services, Inc.
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
1. GuaranTec, LLP Florida Limited Liability
Partnership Jacksonville, FL N/A N/A 100
Directly Owned Subsidiaries of EFS, Inc.
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
1. EFS Finance Co. Indiana Corporation Indianapolis, IN 1,000 1,000 100
2. EFS Services, Inc. Indiana Corporation Indianapolis 1,000 1,000 100
Directly Owned Subsidiaries of EFS Finance Co.
Principal
Place of Authorized Outstanding %
Name and Type Jurisdiction Type of Entity Business Equity Equity Interest
1. EMT Corp. Indiana Corporation Indianapolis, IN 1,000 1,000 100
Schedule 6.14 to Credit Agreement
SCHEDULE 8.1
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
Existing Debt
Original/Maximum Current Amount
Issue Issuer Issue Amount Outstanding
--------------------------------------------------------- ------------- ---------------- --------------
WAREHOUSING LINES:
NHELP-I NHELP-I, Inc. 445,000,000 126,244,545
(CP Conduit with Concord Minutement Capital)
NHELP-II NHELP-II, Inc. 60,000,000 13,574,458
(CP Conduit with Galleon Capital Corporation)
NHELP-III NHELP-III, Inc. 400,000,000 93,237,080
(CP Conduit with Delaware Funding/Three Rivers Funding)
1997 Commercial Paper Program NEBHELP, INC. 350,000,000 204,483,000
---------------- --------------
Total Warehousing 1,255, 000,000 437,539,083
---------------- --------------
LONG TERM TAX-EXEMPT/TAXABLE:
1985 Student Loan Revenue Bonds Series A,B,C,D,E NEBHELP, INC. 143,035,000 143,035,000
1986 Student Loan Revenue Bonds Series A,B,C,D NEBHELP, INC. 103,500,000 103,500,000
1988 Student Loan Revenue Bonds Series C NEBHELP, INC. 40,000,000 40,000,000
1993 Student Loan Revenue Bonds NEBHELP, INC. 550,400,000 375,300,000
Series ▇-▇,▇-▇,▇-▇,▇-▇,▇-▇,▇-▇
▇▇▇▇ ▇▇▇▇▇▇▇ Loan Revenue Bonds Series B NEBHELP, INC. 50,000,000 46,520,000
MELMAC Student Loan Revenue Bonds Series 1991 MELMAC 100,000,000 7,025,000
MELMAC Student Loan Revenue Bonds Series ▇▇▇▇ ▇▇▇▇▇▇ 49,490,000 8,680,000
Schedule 8.1 to Credit Agreement
MELMAC Student Loan Revenue Bonds Master Trust Series 1994, 1996A, 1997A, 1999A
Series 1994, 1996A, 1997A, ▇▇▇▇▇ ▇▇▇▇▇▇ 470,000,000 438,160,000
------------- -------------
Total Long Term Tax-Exempt/Taxable 1,506,425,000 1,162.220,000
------------- -------------
ABS ISSUES:
NELnet-1 Student Loan Corp. Inc.
Series 1996 A1,A2,A3,A4,A5,A6,B1,B2,B3; 1997 B4; NELnet-1 Student 1,595,200,000 1,398,400,000
1998 A7,A8,A9,A10,A11,A12,B5; 1999 A13,A14,A15,A16 Loan Corp. Inc.
NELnet-2 Student Loan Corp. Inc. NELnet-2 Student 2,500,000,000 2,030,000,000
Series 2000 A1,A2,A3,A4,A5,A6,A7,A8,A9,A10,A11, Loan Corp. Inc.
A12,A13,A14,B1
NELnet Private Student Loan Corp. - 1 NELnet Private 125,000,000 125,000,000
2001A-1, 2001A-2 Student Loan Corp
------------- -------------
Total ABS Issues 4,220,200,000 3,553,400,000
------------- -------------
INTEREST MARGIN SECURITIES:
The NEBHELP Trust (SLIMS) NEBHELP, INC. 45,000,000 29,811,000
The NELnet Group Trust I (SLIMS 2) NELnet, Inc. 57,500,000 54,106,000
The NELnet Group Trust II (SLIMS 3) NELnet, Inc. 60,000,000 60,000,000
------------- -------------
Total Interest Margin Securities 162,500,000 143,917,000
------------- -------------
GENERAL OBLIGATION*
Line of Credit with Farmers & Merchants 30,000,000 29,200,000
------------- -------------
30,000,000 29,200,000
------------- -------------
------------- -------------
GRAND TOTAL 7,174,125,000 5,326,276,083
============= =============
* The following participation agreements do not constitute debt and are not
included above:
Participation agreement with FEF 35,000,000
Various participation agreements directly in loans 75,000,000
Schedule 8.1 to Credit Agreement
SCHEDULE 8.2
to
NELNET LOAN SERVICES, INC.
NELNET, INC.
CREDIT AGREEMENT
A. EXISTING LIENS
DEBTOR SECURED PARTY COLLATERAL JURISDICTION
------ ------------- ---------- ------------
1. UNDIAC Service ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; 1-5430 Colorado
Corporation assigned to MetLife 7-5030-9S3
Capital Corporation 1-MEM1280
2-DP-SCD2
2. UNIPAC Service ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; 1-5500-9S42 Colorado
Corporation assigned to General 3-SCD-2
Electric Corporation 2-SYMMGR-BAS
2-SYMMGR-WLA
3. UNIPAC Service Pitney ▇▇▇▇▇ Credit All Pitney ▇▇▇▇▇ Colorado
Corporation Corporation and Dictaphone
equipment subject to
lease dated
08/28/1997
4. UNIPAC Service Xerox Corporation One Xerox 4635 Colorado
Corporation Copier
5. UNIPAC Service ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; 1-5430 Colorado
Corporation assigned to General 1-MEM2048
Electric Corporation 14-5030-9S3
1-5030-1 8S3
2-DP-SCD2
B. RESTRICTIONS ON SUBSIDIARIES
None.
Schedule 8.2 to Credit Agreement, Solo Page