Exhibit 99.5
EXECUTION COPY
(MULTICURRENCY - CROSS BORDER)
ISDA(R)
International Swaps and Derivatives, Inc.
MASTER AGREEMENT
dated as of February 21, 2006
DEUTSCHE BANK AG, ACTING THROUGH ITS and NELNET STUDENT LOAN TRUST
NEW YORK BRANCH 2006-1
("PARTY A") ("PARTY B")
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows: --
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master
Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the
relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this
"Agreement"), and the parties would not otherwise enter into any
Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions
of this Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement,
in freely transferable funds and in the manner customary for
payments in the required currency. Where settlement is by
delivery (that is, other than by payment), such delivery will be
made for receipt on the due date in the manner customary for the
relevant obligation unless otherwise specified in the relevant
Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or
Potential Event of Default with respect to the other party has
occurred and is continuing, (2) the condition precedent that no
Early Termination Date in respect of the relevant Transaction
has occurred or been effectively designated and (3) each other
applicable condition precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or
delivery to which such change applies unless such other party gives
timely notice of a reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable: --
(i) in the same currency; and
( ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless
such deduction or withholding is required by any applicable law,
as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct
or withhold, then that party ("X") will:
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount required
to be deducted or withheld (including the full amount
required to be deducted or withheld from any additional
amount paid by X to Y under this Section 2(d)) promptly
upon the earlier of determining that such deduction or
withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such
authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled
under this Agreement, such additional amount as is
necessary to ensure that the net amount actually
received by Y (free and clear of Indemnifiable Taxes,
whether assessed against X or Y) will equal the full
amount Y would have received had no such deduction or
withholding been required. However, X will not be
required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d); or
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(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but
for (I) any action taken by a taxing authority,
or brought in a court of competent jurisdiction,
on or after the date on which a Transaction is
entered into (regardless of whether such action
is taken or brought with respect to a party to
this Agreement) or (II) a Change in Tax Law.
(ii) LIABILITY. If: --
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority,
to make any deduction or withholding in respect of which
X would not be required to pay an additional amount to Y
under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the
amount of such liability (including any related liability for
interest, but including any related liability for penalties only
if Y has failed to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment
obligation will, to the extent permitted by law and subject to Section
6(c), be required to pay interest (before as well as after judgment) on
the overdue amount to the other party on demand in the same currency as
such overdue amount, for the period from (and including) the original
due date for payment to (but excluding) the date of actual payment, at
the Default Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. If, prior to the
occurrence or effective designation of an Early Termination Date in
respect of the relevant Transaction, a party defaults in the performance
of any obligation required to be settled by delivery, it will compensate
the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(1), at all times until the
termination of this Agreement) that:
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party,
to deliver this Agreement and any other documentation relating
to this Agreement that it is required by this Agreement to
deliver and to perform its obligations under this Agreement and
any obligations it has under any Credit Support Document to
which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any order
or judgment of any court or other agency of government
applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets;
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(iv) CONSENTS. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or
any Credit Support Document to which it is a party have been
obtained and are in full force and effect and all conditions of
any such consents have been complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and
any Credit Support Document to which it is a party constitute
its legal, valid and binding obligations, enforceable in
accordance with their respective terms (subject to applicable
bankruptcy, reorganisation, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application.
(regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur
as a result of its entering into or performing its obligations under
this Agreement or any Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or
proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely
to affect the legality, validity or enforceability against it of this
Agreement or any Credit Support Document to which it is a party or its
ability to perform its obligations under this Agreement or such Credit
Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as
of the date of the information, true, accurate and complete in every
material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and
true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in
the Schedule as being made by it for the purpose of this Section 3
(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party: -
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or
taxing authority as the other party reasonably directs: -
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order
to allow such other party or its Credit Support Provider to make
a payment under this Agreement or any applicable Credit Support
Document without any deduction or withholding for or on account
of any Tax or with such deduction or withholding at a reduced
rate (so long as the completion, execution or submission of such
form or document would not materially prejudice the legal or
commercial position of the party in receipt of such demand),
with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
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(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party and will
use all reasonable efforts to obtain any that may become necessary in
the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations
under this Agreement or any Credit Support Document to which it is a
party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon
learning of such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance
of this Agreement by a jurisdiction in which it is incorporated,
organised, managed and controlled, or considered to have its seat, or in
which a branch or office through which it is acting for the purpose of
this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify
the other party against any Stamp Tax levied or imposed upon the other
party or in respect of the other party's execution or performance of
this Agreement by any such Stamp Tax Jurisdiction which is not also a
Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any of the following events
constitutes an event of default (an "Event of Default") with respect to
such party:
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section
2(a)(i) or 2(e) required to be made by it if such failure is not
remedied on or before the third Local Business Day after notice
of such failure is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to
make any payment under this Agreement or delivery under Section
2(a)(i) or 2(e) or to give notice of a Termination Event or any
agreement or obligation under Section 4(a)(i), 4(a)(iii) or
4(d)) to be complied with or performed by the party in
accordance with this Agreement if such failure is not remedied
on or before the thirtieth day after notice of such failure is
given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such
failure is continuing after any applicable grace period
has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit
Support Document to be in full force and effect for the
purpose of this Agreement (in either case other than in
accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to
which such Credit Support Document relates without the
written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part,
or challenges the validity of, such Credit Support
Document;
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(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have
been made or repeated by the party or any Credit Support
Provider of such party in this Agreement or any Credit Support
Document proves to have been incorrect or misleading in any
material respect when made or repeated or deemed to have been
made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit
Support Provider of such party or any applicable Specified
Entity of such party (I) defaults under a Specified Transaction
and, after giving effect to any applicable notice requirement or
grace period, there occurs a liquidation of, an acceleration of
obligations under, or an early termination of, that Specified
Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of,
or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business
Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in
whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate
it or act on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule
as applying to the party, the occurrence or existence of (1) a
default, event of default or other similar condition or event
(however described) in respect of such party, any Credit Support
Provider of such party or any applicable Specified Entity of
such party under one or more agreements or instruments relating
to Specified Indebtedness of any of them (individually or
collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which
has resulted in such Specified Indebtedness becoming, or
becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise
have been due and payable or (2) a default by such party, such
Credit Support Provider or such Specified Entity (individually
or collectively) in making one or more payments on the due date
thereof in an aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace
period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party: -
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is
unable to pay its debts or fails or admits in writing
its inability generally to pay its debts as they become
due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding
seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or
other similar law affecting creditors' rights, or a
petition is presented for its winding-up or liquidation,
and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or
petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation or
(B) is not dismissed, discharged, stayed or restrained
in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for
its winding-up, official management or liquidation
(other than pursuant to a consolidation, amalgamation or
merger); (6) seeks or becomes subject to the appointment
of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all
its assets; (7) has a secured party take possession of
all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party
maintains possession, or any such process is not
dismissed, discharged, stayed or restrained, in each
case within 30 days thereafter; (8) causes or is subject
to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to
(7) (inclusive); or (9) takes any action in furtherance
of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or
merges with or into, or transfers all or substantially all its
assets to, another entity and, at the time of such
consolidation, amalgamation, merger or transfer: -
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(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit
Support Document to which it or its predecessor was a
party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee
entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any event specified below constitutes
an Illegality if the event is specified in (i) below, a Tax Event if the
event is specified in (ii) below or a Tax Event Upon Merger if the event
is specified in (iii) below, and, if specified to be applicable, a
Credit Event
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered
into, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority
with competent jurisdiction of any applicable law after such
date, it becomes unlawful (other than as a result of a breach by
the party of Section 4(b)) for such party (which will be the
Affected Party): -
(1) to perform any absolute or contingent obligation to make
a payment or delivery or to receive a payment or
delivery in respect of such Transaction or to comply
with any other material provision of this Agreement
relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation
which the party (or such Credit Support Provider) has
under any Credit Support Document relating to such
Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the
date on which a Transaction is entered into (regardless of
whether such action is taken or brought with respect to a party
to this Agreement) or (y) a Change in Tax Law, the party (which
will be the Affected Party) will, or there is a substantial
likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an
amount is required to be deducted or withheld for or on account
of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be
paid in respect of such Tax under Section 2(d)(i)(4) (other than
by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be
required to pay an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount has been deducted or withheld for
or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other
than by reason of Section 2(d)(i)(4)(A) or (B)), in either case
as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all
its assets to, another entity (which will be the Affected Party)
where such action does not constitute an event described in
Section 5(a)(viii);
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(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party
("X"), any Credit Support Provider of X or any applicable
Specified Entity of X consolidates or amalgamates with, or
merges with or into, or transfers all or substantially all its
assets to, another entity and such action does not constitute an
event described in Section 5(a)(viii) but the creditworthiness
of the resulting, surviving or transferee entity is materially
weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such
action (and, in such event, X or its successor or transferee, as
appropriate, will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as
applying, the occurrence of such event (and, in such event, the
Affected Party or Affected Parties shall be as specified for
such Additional Termination Event in the Schedule or such
Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will
not constitute an Event of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred
and is then continuing, the other party (the "Non-defaulting Party")
may, by not more than 20 days notice to the Defaulting Party specifying
the relevant Event of Default, designate a day not earlier than the day
such notice is effective as an Early Termination Date in respect of all
outstanding Transactions. If, however, "Automatic Early Termination" is
specified in the Schedule as applying to a party, then an Early
Termination Date in respect of all outstanding Transactions will occur
immediately upon the occurrence with respect to such party of an Event
of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding
the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(4) or, to the extent
analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party,
specifying the nature of that Termination Event and each
Affected Transaction and will also give such other information
about that Termination Event as the other party may reasonably
require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only
one Affected Party, or if a Tax Event Upon Merger occurs and the
Burdened Party is the Affected Party, the Affected Party will,
as a condition to its right to designate an Early Termination
Date under Section 6(b)(iv), use all reasonable efforts (which
will not require such party to incur a loss, excluding
immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that
such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it
will give notice to the other party to that effect within such
20 day period, whereupon the other party may effect such a
transfer within 30 days after the notice is given under Section
6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the
other party, which consent will not be withheld if such other
party's policies in effect at such time would permit it to enter
into transactions with the transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each
party will use all reasonable efforts to reach agreement within
30 days after notice thereof is given under Section 6(b)(i) on
action to avoid that Termination Event.
(iv) RIGHT TO TERMINATE. If: --
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(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions
within 30 days after an Affected Party gives notice
under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event
Upon Merger or an Additional Termination Event occurs,
or a Tax Event Upon Merger occurs and the Burdened Party
is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on
the date so designated, whether or not the relevant Event of
Default or Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under
Section 2(a)(i) or 2(e) in respect of the Terminated
Transactions will be required to be made, but without prejudice
to the other provisions of this Agreement. The amount, if any,
payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make
the calculations on its part, if any, contemplated by Section
6(e) and will provide to the other party a statement (1)
showing, in reasonable detail, such calculations (including all
relevant quotations and specifying any amount payable under
Section 6(e)) and (2) giving details of the relevant account to
which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of
any Early Termination Date under Section 6(e) will be payable on
the day that notice of the amount payable is effective (in the
case of an Early Termination Date which is designated or occurs
as a result of an Event of Default) and on the day which is two
Local Business Days after the day on which notice of the amount
payable is effective (in the case of an Early Termination Date
which is designated as a result of a Termination Event). Such
amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after
judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual
number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and
a payment method, either the "First Method" or the "Second Method". If
the parties fail to designate a payment measure or payment method in the
Schedule, it will be deemed that "Market Quotation" or the "Second
Method", as the case may be, shall apply. The amount, if any, payable in
respect of an Early Termination Date and determined pursuant to this
Section will be subject to any Set-off.
9
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default: -
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method
and Market Quotation apply, the Defaulting Party will
pay to the Non-defaulting Party the excess, if a
positive number, of (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of
the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting
Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss
apply, the Defaulting Party will pay to the
Non-defaulting Party, if a positive number, the
Non-defaulting Party's Loss in respect of this
Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method
and Market Quotation apply, an amount will be payable
equal to (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of
the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the
Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss
apply, an amount will be payable equal to the
Non-defaulting Party's Loss in respect of this
Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the
Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event: -
(1) ONE AFFECTED PARTY. If there is one Affected Party, the
amount payable will be determined in accordance with
Section 6(e)(i)(3), if Market Quotation applies, or
Section 6(e)(i)(4), if Loss applies, except that, in
either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references
to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and
fewer than all the Transactions are being terminated,
Loss shall be calculated in respect of all Terminated
Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:
-
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of
the party with the higher Settlement Amount
("X") and the Settlement Amount of the party
with the lower Settlement Amount ("Y") and (b)
the Termination Currency Equivalent of the
Unpaid Amounts owing to X less (11) the
Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its
Loss in respect of this Agreement (or, if fewer
than all the Transactions are being terminated,
in respect of all Terminated Transactions) and
an amount will be payable equal to one-half of
the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the
party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of that
amount to Y.
10
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination"
applies in respect of a party, the amount determined under this
Section 6(e) will be subject to such adjustments as are
appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement
(and retained by such other party) during the period from the
relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable
for the loss of bargain and the loss of protection against
future risks and except as otherwise provided in this Agreement
neither party will be entitled to recover any additional damages
as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer
of all or substantially all its assets to, another entity (but without
prejudice to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in
the Contractual Currency will not be discharged or satisfied by any
tender in any currency other than the Contractual Currency, except to
the extent such tender results in the actual receipt by the party to
which payment is owed, acting in a reasonable manner and in good faith
in converting the currency so tendered into the Contractual Currency, of
the full amount in the Contractual Currency of all amounts payable in
respect of this Agreement. If for any reason the amount in the
Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party
required to make the payment will, to the extent permitted by applicable
law, immediately pay such additional amount in the Contractual Currency
as may be necessary to compensate for the shortfall. If for any reason
the amount in the Contractual Currency so received exceeds the amount in
the Contractual Currency payable in respect of this Agreement, the party
receiving the payment will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is
rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early
termination in respect of this Agreement or (iii) in respect of a
judgment or order of another court for the payment of any amount
described in (i) or (ii) above, the party seeking recovery, after
recovery in full of the aggregate amount to which such party is entitled
pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums
paid in such other currency and will refund promptly to the other party
any excess of the Contractual Currency received by such party as a
consequence of sums paid in such other currency if such shortfall or
such excess arises or results from any variation between the rate of
exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with
the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation,
any premiums and costs of exchange payable in connection with the
purchase of or conversion into the Contractual Currency.
11
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the
other obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not be
affected by judgment being obtained or claim or proof being made for any
other sums payable in respect of this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss
had an actual exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect
thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the
parties or confirmed by an exchange of telexes or electronic messages on
an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will
survive the termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and
privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be
deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms
(whether orally or otherwise). A Confirmation shall he entered
into as soon as practicable and may he executed and delivered in
counterparts (including by facsimile transmission) or be created
by an exchange of telexes or by an exchange of electronic
messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein
or through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to
operate as a waiver, and a single or partial exercise of any right,
power or privilege will not be presumed to preclude any subsequent or
further exercise, of that right, power or privilege or the exercise of
any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
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(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or
home office represents to the other party that, notwithstanding the
place of booking office or jurisdiction of incorporation or organisation
of such party, the obligations of such party are the same as if it had
entered into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each date
on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the
prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect
to a Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a
notice or other communication under Section 5 or 6 may not be given by
facsimile transmission or electronic messaging system) to the address or
number or in accordance with the electronic messaging system details
provided (see the Schedule) and will be deemed effective as indicated:
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in
legible form (it being agreed that the burden of proving receipt
will be on the sender and will not be met by a transmission
report generated by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that
mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system
details at which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably: --
13
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New
York and the United States District Court located in the Borough
of Manhattan in New York City, if this Agreement is expressed to
be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives
any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have any
jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Xxx 0000 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it
and on its behalf, service of process in any Proceedings. If for any
reason any party's Process Agent is unable to act as such, such party
will promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other party. The parties
irrevocably consent to service of process given in the manner provided
for notices in Section 12. Nothing in this Agreement will affect the
right of either party to serve process in any other manner permitted by
law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all
immunity on the grounds of sovereignty or other similar grounds from (i)
suit, (ii) jurisdiction of any court, (iii) relief by way of injunction,
order for specific performance or for recovery of property, (iv)
attachment of its assets (whether before or after judgment) and (v)
execution or enforcement of any judgment to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the courts of
any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any
Proceedings.
14. DEFINITIONS
As used in this Agreement:
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means: --
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with
Section 6(d)(ii)) on which that amount is payable, the Default Rate;
14
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party,
the Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1 % per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
15
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
16
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of: -
(e) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation is determined; and
(f) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation cannot be
determined or would not (in the reasonable belief of the party making
the determination) produce a commercially reasonable result.
"SPECIFIED ENTITY" has the meanings specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
17
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
18
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
DEUTSCHE BANK AG, ACTING THROUGH ITS NELNET STUDENT LOAN TRUST 2006-1
NEW YORK BRANCH
By: XXXXX FARGO DELAWARE TRUST COMPANY,
not in its individual capacity but
solely in its capacity as Delaware
Trustee
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxx Xxxxxxx Xxxxxx
--------------------------------- -------------------------------------
Name: Xxxxxx Xxxxxxx Name: Xxx Xxxxxxx Xxxxxx
Title: Director Title: Vice President
Date: February 21, 2006 Date: February 21, 2006
SCHEDULE
to the
1992 ISDA MASTER AGREEMENT
dated as of February 21, 2006
between
DEUTSCHE BANK AG, ACTING THROUGH ITS NEW YORK BRANCH
("PARTY A")
and
NELNET STUDENT LOAN TRUST 2006-1
("PARTY B")
PART 1. TERMINATION PROVISIONS
(a) "Specified Entity" means in relation to Party A for the purpose of:
Section 5(a)(v) (Default under Specified Transaction), Not Applicable.
Section 5(a)(vi) (Cross Default), Not Applicable.
Section 5(a)(vii) (Bankruptcy), Not Applicable.
Section 5(b)(iv) (Credit Event Upon Merger), Not Applicable.
and in relation to Party B for the purpose of:
Section 5(a)(v) (Default under Specified Transaction), Not Applicable.
Section 5(a)(vi) (Cross Default), Not Applicable.
Section 5(a)(vii) (Bankruptcy), Not Applicable.
Section 5(b)(iv) (Credit Event Upon Merger), Not Applicable.
(b) EVENTS OF DEFAULT. Notwithstanding anything in this Agreement to the
contrary, the following Events of Default shall apply to the specified
party:
--------------------------------------------------------------------------------
Party A Party B
------- ------------------------------------------- -------------- -------------
(i) Section 5(a)(i), Failure to Pay or Deliver Applicable Applicable
------- ------------------------------------------- -------------- -------------
(ii) Section 5(a)(ii), Breach of Agreement Applicable Not Applicable
------- ------------------------------------------- -------------- -------------
(iii) Section 5(a)(iii), Credit Support Default Applicable Not Applicable
------- ------------------------------------------- -------------- -------------
(iv) Section 5(a)(iv), Misrepresentation Applicable Not Applicable
------- ------------------------------------------- -------------- -------------
(v) Section 5(a)(v), Default Under Specified Not Applicable Not Applicable
Transaction
------- ------------------------------------------- ------------- --------------
(vi) Section 5(a)(vi), Cross Default Applicable Not Applicable
------- ------------------------------------------- ------------- --------------
(vii) Section 5(a)(vii), Bankruptcy Applicable Applicable
------- ------------------------------------------- -------------- -------------
(viii) Section 5(a)(viii), Merger Without Applicable Not Assumption
Applicable
------- ------------------------------------------- -------------- -------------
provided, however; that with respect to Section 5(a)(i), a comma shall be
inserted after the word "party" in the third line of such Section, and following
such comma, the words "provided, that with respect to Party B, Party B has
available, after all prior obligations of Party B, sufficient funds to make the
payment" at the end of such Section; and provided further that with respect to
Section 5(a)(vii), (i) clauses (2) and (9) shall not be applicable to Party B;
(ii) clause (4) shall not apply to the institution of any proceedings described
therein with respect to Party B, if such proceedings were instituted by Party A
or its Affiliates (but this provision shall not affect Party A's rights under
the proviso in Part 5(f) of this Schedule); (iii) in clause (6), the words
"seeks or" shall not be applicable to Party B; and (iv) for purposes of clauses
(6) and (7), the appointment of the Trustee or other secured party by Party B or
the Noteholders for the purpose of holding all or a substantial portion of the
assets of Party B for the benefit of the Noteholders or Party A does not qualify
as the appointment of a trustee, custodian or similar official under clause (6)
or as a secured party taking possession of the assets of Party B under clause
(7).
For purposes of Section 5(a)(vi), the "Cross Default" provisions shall be
amended by adding at the end thereof the following words:
"provided, however, that, notwithstanding the foregoing, an Event of
Default shall not occur under either (1) or (2) above if (A) (I) the
default, or other similar event or condition referred to in (1) or the
failure to pay referred to in (2) is a failure to pay or deliver caused
by an error or omission of an administrative or operational nature,
and(II) funds or the asset to be delivered were available to such party
to enable it to make the relevant payment or delivery when due and (III)
such payment or delivery is made within three (3) Local Business Days
following receipt of written notice from an interested party of such
failure to pay, or (B) such party was precluded from paying, or was
unable to pay, using reasonable means, through the office of the party
through which it was acting for purposes of the relevant Specified
Indebtedness, by reason of force majeure, act of State, illegality or
impossibility."
2
For purposes of Section 5(a)(vi), the definition of "Specified Indebtedness"
shall be amended in its entirety to read as follows:
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise) in respect of borrowed money (other
than indebtedness in respect of bank deposits received in the ordinary
course of business).
With regard to Party A, "Threshold Amount" means, at any time, 3% of its
shareholders' equity (i.e., the sum of its capital and disclosed reserves).
(c) TERMINATION EVENTS. Notwithstanding anything in this Agreement to the
contrary, the following Termination Events shall apply to the specified
party:
-------------------------------------------------------------------------
Party A Party B
------- ------------------------------------ ------------- --------------
(i) Section 5(b)(i), Illegality Applicable Applicable
------- ------------------------------------ ------------- --------------
(ii) Section 5(b)(ii), Tax Event Applicable Applicable
------- ------------------------------------ ------------- --------------
(iii) Section 5(b)(iii), Tax Event Upon Applicable Not Applicable
Merger
------- ------------------------------------ ------------- --------------
(iv) Section 5(b)(iv), Credit Event Upon
Merger Applicable Not Applicable Not Applicable
------- ------------------------------------ ------------- --------------
(d) The "AUTOMATIC EARLY TERMINATION" provisions of Section 6(a) will not
apply to Party A or to Party B.
(e) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e):
"MARKET QUOTATION" and "SECOND METHOD" will apply for the purpose of
Section 6(e) of this Agreement.
(f) "TERMINATION CURRENCY" means U.S. Dollars.
(g) Each of the following events shall constitute an additional
"EVENT OF DEFAULT" for purposes of Section 5(a), as to which
Party B will be the Defaulting Party:
(i) an acceleration of the principal of the Notes following an Event
of Default (as defined in the Indenture) under Section 6.01(a)
or Section 6.01(b) of the Indenture which acceleration has
become non-rescindable and non-waivable; or
(ii) an acceleration of the principal of the Notes following an Event
of Default (as defined in the Indenture) under Section 6.01(c)
of the Indenture which acceleration has become non-rescindable
and non-waivable, and pursuant to which the Trustee has
liquidated the Trust Estate, including, but not limited to, the
Financed Eligible Loans.
(h) The "ADDITIONAL TERMINATION EVENT" provisions of Section 5(b)(v)
will apply. Each of the following shall constitute an Additional
Termination Event:
(i) a Downgrade Event occurs and is continuing in respect of Party
A, in which case Party A will be the sole Affected Party and all
Transactions will be Affected Transactions. "DOWNGRADE EVENT"
means that an S&P Downgrade, an S&P Replacement Event, a Xxxxx'x
Downgrade, a Xxxxx'x Replacement Event, a Fitch Downgrade or a
Fitch Replacement Event (each, a "Relevant Downgrade") occurs,
and Party A fails to take one of the actions required under Part
1(i) in respect of such Relevant Downgrade within the time
period specified for such action in Part 1(i);
(ii) failure by Party A to comply with or perform any agreement or
undertaking to be complied with or performed by Party A in
accordance with the Disclosure Agreement if such failure is not
remedied on or before the tenth day after notice of such failure
is given to Party A, in which case Party A will be the sole
Affected Party and all Transactions will be Affected
Transactions; and
3
(iii) without the prior written consent of Party A, Party B waives any
provision of, or amends or otherwise modifies the Indenture or
any other Basic Document in any manner that would adversely and
materially affect Party A under this Agreement, in which case
Party B will be the sole Affected Party and all Transactions
will be Affected Transactions.
(i) CERTAIN DOWNGRADES.
(i) In the event that any Notes rated by Standard & Poor's Rating
Services, a division of The XxXxxx-Xxxx Companies, Inc. ("S&P")
remain outstanding, if the short-term rating assigned by S&P to
the unsecured, unsubordinated debt of Party A falls below
"A-1+", or in the absence of a short-term rating, the long-term
debt rating assigned by S&P to the unsecured, unsubordinated
debt of Party A falls below "AA-" (such downgrade, an "S&P
Downgrade"), then, within thirty (30) calendar days of the date
of such S&P Downgrade, Party A shall:
(1) either (i) transfer all of its rights and obligations
under this Agreement to another entity with the Required
Ratings or whose credit support provider has the Required
Ratings, or (ii) cause an entity with the Required Ratings
to guarantee or provide an indemnity in respect of Party
A's obligations under this Agreement, such guarantee or
indemnity to be subject to a Rating Confirmation from S&P;
or
(2) post collateral in an amount equal to the Credit Support
Amount (as defined in the Credit Support Annex) in
accordance with the Credit Support Annex, which shall be
subject to a Rating Confirmation by S&P. If the short-term
rating assigned by S&P to the unsecured, unsubordinated
debt of Party A falls below "A-1+", then Party A shall, in
addition to posting collateral, provide (within thirty
(30) calendar days after such downgrade) a legal opinion
addressed to S&P and Party B regarding the ability of
Party B to have timely access to the collateral following
the bankruptcy or insolvency of Party A. Such legal
opinion shall be subject to Rating Confirmation.
Without limiting the foregoing, if an S&P Downgrade occurs and
such S&P Downgrade is to a level that is more than one S&P rating
gradation (within a rating category) below the relevant S&P
Required Rating, Party A shall be required (without duplication)
to post collateral in an amount equal to Party B's Exposure (as
defined in the Credit Support Annex)(but not the Rating Agency
Amount (as defined in the Credit Support Annex)) in accordance
with the Credit Support Annex within one (1) Business Day after
such S&P Downgrade; provided that any failure by Party A to
provide collateral in accordance with the terms of this sentence
shall not constitute an Additional Termination Event under Part
1(h) unless such failure is not corrected within two (2) Business
Days after notice from Party B.
(ii) In the event that any Notes rated by S&P remain outstanding, if
the long-term debt rating assigned by S&P to the unsecured,
unsubordinated debt of Party A falls below "BBB-" (such
downgrade, an "S&P Replacement Event"), then, within ten (10)
Business Days of the date of such S&P Replacement Event, Party A
shall transfer all of its rights, and obligations under this
Agreement to another entity with the Required Ratings or whose
credit support provider has the Required Ratings.
(iii) In the event that any Notes rated by Xxxxx'x Investors Service,
Inc. ("Moody's") remain outstanding, (x) if Party A has no
short-term rating by Moody's, the long-term debt rating assigned
by Moody's to the unsecured, unsubordinated debt of Party A
falls below "A1", or (y) if Party A has both short-term and
long-term ratings by Moody's, the short-term debt rating
assigned by Moody's to the unsecured, unsubordinated debt of
Party A falls below "P-1" or the long-term debt rating assigned
by Moody's to the unsecured, unsubordinated debt of Party A
falls below "A2" (either downgrade under the foregoing clause
(x) and (y), a "Moody's Downgrade"), then Party A shall:
4
(1) within thirty (30) Business Days of the date of the
Moody's Downgrade, post collateral in an amount equal to
the Credit Support Amount (as defined in the Credit
Support Annex) in accordance with the Credit Support
Annex; or
(2) within thirty (30) Business Days of the date of the
Moody's Downgrade, transfer all of its rights and
obligations under this Agreement to another entity with
the Required Ratings or whose credit support provider
has the Required Ratings; or
(3) within thirty (30) Business Days of the date of the
Moody's Downgrade, cause an entity with the Required
Ratings to guarantee or provide an indemnity in respect
of Party A's obligations under this Agreement in a form
and substance reasonably satisfactory to Moody's.
Without limiting the foregoing, if a Moody's Downgrade occurs
and such Moody's Downgrade is to a level that is more than one
Xxxxx'x rating gradation (within a rating category) below the
relevant Moody's Required Rating, Party A shall be required
(without duplication) to post collateral in an amount equal to
Party B's Exposure (as defined in the Credit Support Annex)(but
not the Rating Agency Amount (as defined in the Credit Support
Annex)) in accordance with the Credit Support Annex within one
(1) Business Day after such Moody's Downgrade; provided that any
failure by Party A to provide collateral in accordance with the
terms of this sentence shall not constitute an Additional
Termination Event under Part 1(h) unless such failure is not
corrected within two (2) Business Days after notice from Party
B.
(iv) In the event that any Notes rated by Moody's remain outstanding,
if the short-term rating assigned by Moody's to the unsecured,
unsubordinated debt of Party A falls below "P2" or the long-term
debt rating assigned by Moody's to the unsecured, unsubordinated
debt of Party A falls below "A3" (such downgrade, a "Moody's
Replacement Event"), then, within 10 Business Days of the date
of such Moody's Replacement Event, Party A shall transfer all of
its rights, and obligations under this Agreement to another
entity with the Required Ratings or whose credit support
provider has the Required Ratings.
(v) In the event that any Notes rated by Fitch, Inc. d/b/a Fitch
Ratings ("Fitch") remain outstanding, if the short-term rating
assigned by Fitch to the unsecured, unsubordinated debt of Party
A falls below "F1" and the long-term debt rating assigned by
Fitch to the unsecured, unsubordinated debt of Party A falls
below "A+" (such downgrade, a "Fitch Downgrade"), then, within
thirty (30) calendar days of the date of such Fitch Downgrade,
Party A shall:
(1) either (i) transfer all of its rights and obligations
under this Agreement to another entity with the Required
Ratings or whose credit support provider has the
Required Ratings, or (ii) cause an entity with the
Required Ratings to guarantee or provide an indemnity in
respect of Party A's obligations under this Agreement in
a form and substance reasonably satisfactory to Fitch;
or
(2) post collateral in an amount equal to the Credit Support
Amount (as defined in the Credit Support Annex) in
accordance with the Credit Support Annex. If the
short-term rating assigned by Fitch to the unsecured,
unsubordinated debt of Party A falls below "F1", Party A
shall, in addition to posting collateral, provide
(within thirty (30) calendar days after such downgrade)
a legal opinion addressed to Fitch and Party B regarding
the ability of Party B to have timely access to the
collateral following the bankruptcy or insolvency of
Party A. Such legal opinion shall be subject to Rating
Confirmation.
Without limiting the foregoing, if a Fitch Downgrade occurs and
such Fitch Downgrade is to a level that is more than one Fitch
rating gradation (within a rating category) below the relevant
Fitch Required Rating, Party A shall be required (without
duplication) to post collateral in an amount equal to Party B's
Exposure (as defined in the Credit Support Annex)(but not the
5
Rating Agency Amount (as defined in the Credit Support Annex)) in
accordance with the Credit Support Annex within one (1) Business
Day after such Fitch Downgrade; provided that any failure by
Party A to provide collateral in accordance with the terms of
this sentence shall not constitute an Additional Termination
Event under Part 1(h) unless such failure is not corrected within
two (2) Business Days after notice from Party B.
(vi) In the event that any Notes rated by Fitch remain outstanding, if
the long-term debt rating assigned by Fitch to the unsecured,
unsubordinated debt of Party A falls below "BBB-" (such
downgrade, a "Fitch Replacement Event"), then, within 10 business
days of the date of such Fitch Replacement Event, Party A shall
transfer all of its rights, and obligations under this Agreement
to another entity with the Required Ratings or whose credit
support provider has the Required Ratings.
For the avoidance of doubt, for purposes of this Part 1(i), Party
A shall be responsible for: (i) locating a party with the
Required Ratings to transfer (at its own cost) all its interest
in and obligations under this Agreement or to guarantee or
provide an indemnity in respect of, its obligations under this
Agreement or to post collateral in accordance with the Credit
Support Annex; and (ii) any cost incurred by it in complying with
its obligations.
For purposes of the foregoing, "REQUIRED RATINGS" shall mean: (i)
with respect to S&P, a short-term unsecured, unsubordinated debt
rating of "A-1+" from S&P or a long term unsecured,
unsubordinated debt rating of "AA-" from S&P (each, an "S&P
Required Rating"); (ii) with respect to Fitch, a short-term
unsecured, unsubordinated debt rating of "F1" from Fitch or a
long term unsecured, unsubordinated debt rating of "A+" from
Fitch (each, a "Fitch Required Rating"); and (iii) with respect
to Moody's, either (x) an unsecured, unsubordinated short debt
rating of "P-1" from Moody's and unsecured, unsubordinated
long-term debt rating of "A2" from Moody's or (y) if such Person
only has a long-term rating by Moody's, then, a long term
unsecured, unsubordinated debt rating of "A1" from Moody's (each,
a "Moody's Required Rating").
(j) CERTAIN NOTICES. Party B will provide at least ten (10) Local Business
Days' prior written notice to Party A of any proposed waiver, amendment
or modification to the Indenture and the other Basic Documents, and if
Party A does not object within nine (9) Local Business Days after its
receipt of such notice, Party B shall be deemed to have agreed that such
waiver, amendment or other modification is not a material adverse
change.
PART 2. TAX REPRESENTATIONS.
(a) PAYER TAX REPRESENTATIONS. For purposes of Section 3(e), Party A and
Party B each made the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e)) to be made by it to the other party under this
Agreement. In making this representation, it may rely on (i) the
accuracy of any representations made by the other party pursuant to
Section 3(f), (ii) the satisfaction of the agreement of the other party
contained in Section 4(a)(i) or 4(a)(iii) and the accuracy and
effectiveness of any document provided by the other party pursuant to
Section 4(a)(i) or 4(a)(iii), and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d); provided that it
shall not be a breach of this representation where reliance is placed on
clause (ii) and the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f) of this
Agreement, Party A makes the following representations:
6
It is a "foreign person" within the meaning of the applicable U.S.
Treasury Regulations concerning information reporting and backup
withholding tax (as in effect on January 1, 2001), unless Party A
provides written notice to Party B that it is no longer a foreign
person. In respect of each Transaction it enters into through an
office or discretionary agent in the United States or which otherwise
is allocated for United States federal income tax purposes to such
United States trade or business, each payment received or to be
received by it under such Transaction will be effectively connected
with its conduct of a trade or business in the United States.
For the purpose of Section 3(f), Party B makes the following
representations:
It is a statutory business trust formed under the laws of the State
of Delaware, and, for United States federal income tax purposes, it
is either treated as a partnership or, if it has a single owner for
United States federal income tax purposes, is disregarded as an
entity separate from such sole owner.
PART 3. AGREEMENT TO DELIVER DOCUMENTS.
For the purpose of Section 4(a), each party agrees to deliver the following
documents, as applicable:
(a) Tax forms, documents, or certificates to be delivered for purposes of
Section 4(a)(i) are:
---------------------- ------------------------------------ ------------------------------
PARTY REQUIRED TO FORMS/DOCUMENTS/CERTIFICATES DATE BY WHICH TO BE DELIVERED
DELIVER DOCUMENT
---------------------- ------------------------------------ ------------------------------
Party A United States Internal Revenue (i) Before the first
Service Form W-8ECI (with all payment is made under this
parts fully completed), or any Agreement, and every three
successor form. years thereafter, (ii)
promptly upon
reasonable demand by
Party A; and (iii)
promptly upon
learning that any
such form previously
provided by Party B
has become obsolete,
incorrect, or
ineffective.
---------------------- ------------------------------------ ------------------------------
Party B United States Internal Revenue (i) Before the first
Service Form W-9, or any successor payment is made under this
form (but if Party B is Agreement, and, if such form
disregarded as an entity separate is not IRS Form W-9, every
from its sole owner for United three years thereafter, (ii)
States federal income tax purpose, promptly upon reasonable
United States Internal Revenue demand by Party B; and (iii)
Service X-0, X-0XXX, X-0XXX or promptly upon learning that
W-8IMY, as applicable, in respect any such form previously
of such sole owner, or any provided by Party A has
applicable successor form) become obsolete, incorrect,
or ineffective.
---------------------- ------------------------------------ ------------------------------
Party A and Party B Each party shall, as soon as As soon as it can reasonably
practicable after demand, deliver be delivered, following
to the other party any form or request.
document reasonably requested by
the other party which is required
to enable such other party to make
payments hereunder without
withholding for or on account of
Taxes or with such withholding at
a reduced rate.
---------------------- ------------------------------------ ------------------------------
7
(b) Other documents to be delivered are:
------------------------- ------------------------- ---------------------- ----------------------
PARTY REQUIRED TO FORM/DOCUMENT/CERTIFICATE DATE BY WHICH TO BE COVERED BY SECTION
DELIVER DOCUMENT DELIVERED 3(D) REPRESENTATION
------------------------- ------------------------- ---------------------- ----------------------
Party A Certificates or other Upon execution of Yes
documents evidencing this Agreement
the authority of Party
A, to execute, deliver
and perform its
obligations under this
Agreement, any
Confirmation and any
Credit Support
Document, as applicable
including a certificate
of an authorized
officer of Party A as
to the incumbency and
authority of the
respective officers of
such party to execute
and deliver this
Agreement, any
Confirmation and any
Credit Support
Document, as applicable.
------------------------- ------------------------- ---------------------- ----------------------
Party B Each of (i) a copy of Upon execution of Yes
the Indenture and the this Agreement
other material
operative documents
relating thereto and
referred to therein,
executed and delivered
by the parties thereto
and the offering
circular howsoever
denominated and (ii)
certificates or other
documents evidencing
the authority of Party
B in relation to this
Agreement and the
related Confirmation
and the persons acting
on behalf of Party B in
relation thereto.
------------------------- ------------------------- ---------------------- ----------------------
Party A An opinion of counsel Upon execution of No
to such party this Agreement
reasonably satisfactory
in form and substance
to Party B addressed to
Party B.
------------------------- ------------------------- ---------------------- ----------------------
Party B An opinion of counsel Upon execution of No
to such party this Agreement
reasonably satisfactory
in form and substance
to Party A addressed to
Party A.
------------------------- ------------------------- ---------------------- ----------------------
Party A and Party B Disclosure Agreement Upon execution of Yes
among Party A, Party B this Agreement
and certain other
parties (the
"DISCLOSURE AGREEMENT")
substantially in the
form attached hereto as
Exhibit A.
------------------------- ------------------------- ---------------------- ----------------------
Party A and Party B Credit Support Annex Upon execution of Yes
between Party A and this Agreement
Party B
------------------------- ------------------------- ---------------------- ----------------------
8
PART 4. MISCELLANEOUS PROVISIONS.
(a) All notices to Party A shall be sent to:
All notices to Party A under Sections 5 or 6 of the Agreement
(other than notices under Section 5(a)(i)) shall be sent to:
Deutsche Bank AG, Head Office
Xxxxxxxxxxxx 00
00000 Xxxxxxxxx
XXXXXXX
Attention: Legal Department
Fax No. 0000000 36097
Telex No: 411836 or 416731 or 41233
Answerback: DBF-D
All other notices to Party A shall be sent directly to the office
through which Party A is acting for the relevant Transaction,
using the address and contact particulars specified in the
Confirmation of that Transaction or otherwise notified.
Address for notices or communications to Party B:
Xxxxx Fargo Delaware Trust Company Corporate Trust Services 000
Xxxxx Xxxxxx Xxxxxx, Xxxxx 000 Xxxxxxxxxx, XX 00000 Phone:
000-000-0000 Facsimile: 000-000-0000
with a copy to:
Nelnet Student Loan Trust 2006-1
000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Assistant Vice President
Phone: 000-000-0000
Facsimile: 000-000-0000
(b) PROCESS AGENT. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not Applicable
Party B appoints as its Process Agent: Not Applicable
(c) OFFICES; MULTIBRANCH PARTIES.
(1) The provisions of Section 10(a) will be applicable to
this Agreement.
(2) For the purpose of Section 10(c) of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(d) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction or
unless an Event of Default applicable to Party A has occurred and is
continuing, in which case Party B shall have the right to designate a
third party to act as the Calculation Agent by giving notice to Party A.
All determinations and calculations by the Calculation Agent shall be
(i) made in good faith and in a commercially reasonable manner and (ii)
determined, where applicable, on the basis of then prevailing market
rates or prices.
9
(e) GOVERNING LAW. THIS AGREEMENT AND EACH CONFIRMATION, AND ANY CONTROVERSY
OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION, WILL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(f) WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ITS RIGHT TO HAVE A JURY TRIAL IN RESPECT TO ANY
PROCEEDINGS RELATED TO THIS AGREEMENT.
(g) JURISDICTION. Section 13(b) is hereby amended by: (i) deleting in the
second line of Subparagraph (i) thereof the word "non-"; and (ii)
deleting the final paragraph thereof; provided, however that this
provision shall not have any effect on any action to enforce a judgment,
which action may be brought in any suitable jurisdiction.
(h) "AFFILIATE" will have the meaning specified in Section 14., except that
it shall not apply to Party B.
(i) "NETTING OF PAYMENT." Subparagraph (ii) of Section 2(c) of this
Agreement will apply to all Transactions under this Agreement.
(j) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:
(1) Party A: Credit Support Annex; and
(2) Party B: Not applicable.
(k) CREDIT SUPPORT PROVIDER. Credit Support Provider means:
(1) in relation to Party A: Not Applicable; and
(2) in relation to Party B: Not applicable.
PART 5. OTHER PROVISIONS.
(a) DEFINITIONS. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivative
Association, Inc., in effect on the date of this Agreement, without
regard to any revision or subsequent edition thereof (the "ISDA
Definitions"), shall be incorporated into this Agreement. In the event
of any inconsistency between the ISDA Definitions and the Agreement or
any Confirmation, the Agreement or, as the case may be, the Confirmation
shall prevail. "INDENTURE" means that certain Indenture dated as of
February 1, 2006 (including, but not limited to, any and all appendices
and exhibits thereto)(collectively, the "Indenture"), by and among the
Trust, Zions First National Bank, as the eligible lender trustee, and
Zions First National Bank, as the indenture trustee, as the same may be
amended, modified, supplemented, restated or replaced from time to time.
Capitalized terms used in this Schedule but not defined in the
Definitions, Section 14 of the Agreement or elsewhere herein shall have
the meanings assigned to them in the Indenture.
(b) SEVERABILITY. If any term, provision, covenant, or condition of this
Agreement, or the application thereof to any party or circumstance,
shall be held to be invalid or unenforceable (in whole or in part) for
any reason, the remaining terms, provisions, covenants, and conditions
hereof shall continue in full force and effect as if this Agreement had
been executed with the invalid or unenforceable portion eliminated, so
long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter of this Agreement and the deletion of such portion of
this Agreement will not substantially impair the respective benefits or
expectations of the parties to this Agreement; provided, --------
however, that this severability provision shall not be applicable if any
provision of ------- Section 1, 2, 5, 6, or 13 (or any definition or
provision in Section 14 to the extent it relates to, or is used in or in
connection with any such Section) shall be so held to be invalid or
unenforceable.
10
(c) ADDITIONAL REPRESENTATIONS. Section 3 is hereby amended by adding the
following additional Subsections:
(i) NO AGENCY. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other
capacity, fiduciary or otherwise).
(ii) ELIGIBLE CONTRACT PARTICIPANT. It is an "eligible contract
participant" as such term is defined in Section 1a(12) of the
Commodity Exchange Act, as amended.
(iii) LINE OF BUSINESS. It has entered into this Agreement (including
each Transaction evidenced hereby) in conjunction with its line
of business (including financial intermediation services) or the
financing of its business.
(iv) NO RELIANCE. It is acting for its own account, and it has made
its own independent decisions to enter into that Transaction and
as to whether that Transaction is appropriate or proper for it
based upon its own judgment and upon advice from such advisers
as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment
advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to
the terms and conditions of a Transaction shall not be
considered investment advice or a recommendation to enter into
that Transaction. No communication (written or oral) received
from the other party shall be deemed to be an assurance or
guarantee as to the expected results of that Transaction.
(v) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the
merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts
the terms, conditions and risks of that Transaction. It is also
capable of assuming, and assumes, the risks of that Transaction.
(vi) STATUS OF PARTIES. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction.
(vii) ERISA REPRESENTATION. It continuously represents that it is not
(i) an employee benefit plan (hereinafter an "ERISA Plan"), as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), subject to Title I
of ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended, (ii) a person acting on behalf of an ERISA Plan or
(iii) a person the assets of whom constitute assets of an ERISA
Plan. It will provide notice to the other party in the event
that it is aware that it is in breach of any aspect of this
representation or is aware that with the passing of time, giving
of notice or expiry of any applicable grace period it will
breach this representation.
(d) NON-RECOURSE. Notwithstanding any other provision of this Agreement or
any Confirmation or Transaction, the obligations of Party B under this
Agreement are non-recourse obligations of Party B, payable solely from
the Trust Estate as applied in accordance with the priority of payments
set forth in Article V of the Indenture. Following realization, and
distribution of all proceeds of the Trust Estate as applied in
accordance with the priority of payments in Article V of the Indenture,
any and all claims of Party A arising from this Agreement, and
distribution of all proceeds, or any transactions contemplated hereby or
thereby shall be extinguished against Party B and shall not thereafter
be revived. No recourse shall be had for the payment of any amount owing
under this Agreement against any officer, member, director, employee,
securityholder or incorporator of Party B or their respective successors
or assigns for any amounts payable under this Agreement. This provision
shall survive termination of this Agreement for any reason whatsoever.
11
(e) DELAWARE TRUSTEE. It is expressly understood and agreed by the parties
hereto that (a) this Agreement is executed and delivered by Xxxxx Fargo
Delaware Trust Company, not individually or personally but solely as
Delaware Trustee of Party B, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of Party B is made
and intended not as personal representations, undertakings and
agreements by Xxxxx Fargo Delaware Trust Company but is made and
intended for the purpose of binding only Party B, (c) nothing herein
contained shall be construed as creating any liability on Xxxxx Fargo
Delaware Trust Company, individually or personally, to perform any
covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by
any person claiming by, through or under the parties hereto and (d)
under no circumstances shall Xxxxx Fargo Delaware Trust Company be
personally liable for the payment of any indebtedness or expenses of
Party B or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Party B under
this Agreement or any other related documents.
(f) NON-PETITION. Party A agrees that it will not, prior to at least one
year and one day (or if longer, the applicable preference period then in
effect) following the payment in full of all the Notes issued pursuant
to the Indenture and the expiration of all applicable preference periods
under the laws of any jurisdiction, if longer, relating to any such
payment, acquiesce, petition or otherwise invoke or cause Party B to
invoke the process of any governmental authority for the purpose of
commencing or sustaining a case (whether voluntary or involuntary)
against Party B under any bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of Party B or any substantial
part of its property or ordering the winding-up or liquidation of the
affairs of Party B; provided, that this provision shall not restrict or
prohibit -------- Party A from joining any other person, including,
without limitation the Trustee or the Administrator, in any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation
proceedings already commenced or other analogous proceedings already
commenced under applicable laws.
(g) WAIVER OF SET-OFF. Notwithstanding any provision of this Agreement or
any other existing or future agreement between Party A and Party B, each
of Party A and Party B irrevocably waives as to itself any and all
rights to counterclaim, set-off, recoupment, whether arising by
contract, operation of law or otherwise, provided that nothing herein
shall be construed as limiting the provisions contained in Section 2(c)
of this Agreement with respect to the netting of the parties respective
obligations under this Agreement. Specifically, the provision for
set-off in the last sentence of the preamble to Section 6(e) of this
Agreement shall not apply for purposes of any Transaction hereunder.
(h) AGREEMENT AMENDMENTS. Party B will deliver notice in writing to S&P,
Xxxxx'x and Fitch of any modification, amendment or waiver under Section
9(b). Party B will obtain, or cause to be obtained, prior written
confirmation from each Rating Agency to the effect that any proposed
amendment shall not result in a withdrawal, suspension or downgrade of
its rating assigned to any Class of Notes. Party B will provide to Party
A a copy of such Rating Confirmation promptly after receipt thereof from
each Rating Agency.
(i) TRANSFER. Section 7 is hereby deleted in its entirety and replaced by
the following:
"Except as stated under Section 6(b)(ii) of this Agreement and as
expressly provided herein, neither Party A nor Party B is
permitted to assign, novate or transfer (whether by way of
security or otherwise) as a whole or in part, any of its rights,
obligations or interests under this Agreement without the prior
written consent of the other party and the prior issuance of a
Rating Confirmation; provided that Party A may transfer this
Agreement to any person, including, without limitation, another
of Party A's offices, branches or affiliates (each, a
"Transferee") on five Business Days' prior written notice to
Party B and the prior issuance of a Rating Confirmation; provided
that, (i) as of the date of such transfer, neither the Transferee
nor Party B will be required to withhold or deduct any increased
12
amount on account of any Taxes under this Agreement as a result
of such transfer, unless, as of the date of such transfer, (x)
Party B is entitled to additional amounts under Section
2(d)(i)(4) on account of any such Taxes required to be deducted
or withheld by the Transferee and (y) Party B is not required to
pay Transferee additional amounts under Section 2(d)(i)(4) on
account of any such Taxes required to be deducted or withheld by
Party B, and (ii) a Termination Event or Event of Default does
not occur under this Agreement as a result of such transfer. Upon
any transfer pursuant to this Section 7 of this Agreement, the
transferring party agrees to provide the non-transferring party
with the name and address of the transferee so that the
non-transferring party may fulfill its requirements to record the
transfer on it books and records, and, notwithstanding anything
to the contrary herein, any failure by the transferring party to
do so will render the purported transfer void."
(j) RECORDED CONVERSATIONS. Each party to this Agreement acknowledges and
agrees that the other may electronically record all telephonic
conversations between them in connection with this Agreement or any
Transaction or any other transaction between the parties and any such
recordings may be submitted in evidence in Proceedings provided that
such recording would be admissible in accordance with the applicable law
of such Proceedings.
(k) ACKNOWLEDGMENT OF SECURITY INTEREST. Party A hereby acknowledges and
consents to Party B's grant and pledge of all right, title and interest
in, to and under, in each case, whether now owned or existing, or
hereafter acquired or arising, this Agreement (including, without
limitation, its right to payments due it hereunder or with respect
hereto) pursuant to the terms of the Indenture, to the Trustee, for the
benefit of the persons identified therein.
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
13
IN WITNESS WHEREOF, the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
DEUTSCHE BANK AG, acting through its
New York Branch
By: /s/ Xxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Director
Date: February 21, 2006
NELNET STUDENT LOAN TRUST 2006-1
By: Xxxxx Fargo Delaware Trust Company,
not in its individual capacity but solely
in its capacity as Delaware Trustee of
the Nelnet Student Loan Trust 2006-1
By: /s/ Xxx Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxx Xxxxxxx Xxxxxx
Title: Vice President
Date: February 21, 2006
14
EXHIBIT A
FORM OF DISCLOSURE AGREEMENT
DISCLOSURE AGREEMENT
THIS DISCLOSURE AGREEMENT dated February __, 2006 (the "Disclosure
Agreement") is among Nelnet Student Loan Funding, LLC (the "Depositor"),
Nelnet Student Loan Trust 0000-0 (xxx "Xxxxxxx Xxxxxx"), Nelnet, Inc. (the
"Sponsor"), Banc of America Securities LLC, Credit Suisse Securities (USA) LLC
and Deutsche Bank Securities Inc. (each an "Underwriter" and collectively with
the other underwriters listed on Schedule A to the Underwriting Agreement
referred to below, the "Underwriters"), and Deutsche Bank AG, New York Branch
(the "Swap Counterparty").
W I T N E S S E T H:
WHEREAS, on the Closing Date, the Issuing Entity is issuing its Series
2006-1 Student Loan Asset-Backed Notes (the "Notes") pursuant to an Indenture
of Trust dated as of February 1, 2006 (the "Indenture") between the Issuing
Entity and Zions First National Bank, as Trustee and Eligible Lender Trustee;
and
WHEREAS, the Underwriters are acquiring the Notes from the Issuing
Entity pursuant to the Underwriting Agreement, dated February 14, 2006 (the
"Underwriting Agreement"), among the Depositor and the Underwriters; and
WHEREAS, pursuant to the Prospectus dated February 2, 2006, the
Prospectus Supplement dated February 7, 2006, the Free-Writing Prospectus
dated February 7, 2006, the Term Sheet dated February 13, 2006 (the "Term
Sheet") and the Prospectus and Prospectus Supplement dated February 17, 2006
(the "Prospectus Supplement" and together with each of the foregoing, the
"Offering Materials") the Underwriters are offering for sale the Notes; and
WHEREAS, the Issuing Entity and the Swap Counterparty are entering into
a 1992 ISDA Master Agreement (Multicurrency - Cross Border), dated as of
February __, 2006, and a related confirmation, schedule and credit support
annex (collectively, the "Currency Swap Agreement"); and
WHEREAS, the Offering Materials are required to contain certain
disclosure concerning the Swap Counterparty in accordance with the Securities
and Exchange Commission's Regulation AB ("Reg AB");
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. Definitions. Capitalized terms used and not defined in this
Disclosure Agreement shall have the meanings ascribed to such terms in the
Indenture.
2. Swap Counterparty Information. The parties hereto acknowledge and
agree that the statements set forth under the heading "Currency Swap Agreement -
Currency Swap Agreement Counterparty" in the Term Sheet and the Prospectus
Supplement (including any information described or incorporated therein by
reference to the reports filed by the Swap Counterparty with the Securities and
Exchange Commission (the "SEC")) constitute the only information furnished to
the Depositor, the Issuing Entity, the Sponsor or the Underwriters by or on
behalf of the Swap Counterparty for inclusion in the Offering Materials as of
their respective dates (the "Swap Counterparty Information") and the Swap
Counterparty hereby represents and warrants, as of the dates of the Term Sheet
and the Prospectus Supplement, that the Swap Counterparty Information is true
and correct in all material respects.
15
3. Authorization to Incorporate by Reference Additional Swap
Counterparty Information. The Swap Counterparty is a foreign private issuer
currently subject to the periodic reporting requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Pursuant to
such requirements, it files an Annual Report on Form 20-F with the SEC. The Swap
Counterparty publishes Interim Reports for each of the first three quarters of
its fiscal year, each containing unaudited interim financial statements for such
quarter. Pursuant to the Exchange Act, it submits such Interim Reports to the
SEC on Reports on Form 6-K. The Swap Counterparty transmits its Annual Reports
on Form 20-F and Reports on Form 6-K to the SEC via the SEC's XXXXX System, and
such reports are available on the SEC's XXXXX internet site under File Number
001-15242. So long as the Issuing Entity is required to file reports with the
SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act, if the "aggregate
significance percentage" (within the meaning of Item 1115 or Regulation AB) of
all derivative instruments provided by the Swap Counterparty and any of its
affiliates to the Issuing Entity is: (a) 10% or more, but less than 20%, the
Issuing Entity is authorized to incorporate by reference into such reports Item
3.A. of the Swap Counterparty's most recent Annual Report on Form 20-F filed
with the SEC, or (b) 20% or more, the Issuing Entity is authorized to
incorporate by reference into such reports the audited financial statements
contained in the Swap Counterparty's most recent Annual Report on Form 20-F and
the unaudited financial statements contained in each Interim Report on Form 6-K
furnished to the SEC by the Swap Counterparty subsequent to the filing of its
most recent Annual Report on Form 20-F. To the extent necessary to comply with
Regulation AB, the Swap Counterparty agrees to use its reasonable efforts to
obtain any necessary auditor's consents related to the financial statements so
incorporated by reference and promptly to forward to the Sponsor any such
auditor consents obtained. The information authorized to be incorporated by
reference pursuant to this Section 3 is referred to as the "Additional
Information." In connection with each filing or submission to the SEC of
Additional Information incorporated by reference pursuant to this Section 3, the
Swap Counterparty will be deemed to have represented and warranted that all such
Additional Information is true and correct in all material respects as of its
respective date.
4. Exchange Act Reporting. If as of January 1, 2007, the Notes are held
of record by less than 300 persons, and if permitted by law, the Sponsor shall
cause the Issuing Entity to file with the Securities and Exchange Commission, by
no later than January 30, 2007, a Form 15 suspending the Issuing Entity's
requirement to file reports with the Securities and Exchange Commission pursuant
to the Exchange Act. The Issuing Entity shall notify the Swap Counterparty upon
the filing of any Form 15.
5. Indemnification. The Swap Counterparty hereby agrees to indemnify and
hold harmless the Depositor, the Issuing Entity, the Sponsor and each
Underwriter, the respective present and former directors, officers, employees
and agents of each of the foregoing and each person, if any, who controls the
Depositor, the Sponsor or any Underwriter within the meaning of Section 15 of
the Securities Act of 1933, as amended, or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arising out of or are based upon the Swap
Counterparty Information and the Additional Information not being true and
correct in all material respects as of their respective dates.
6. Procedures. Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability that
such indemnifying party may have to any indemnified party under this Agreement
except to the extent that such indemnifying party has been materially prejudiced
by such failure. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and, to the extent
that such indemnifying party may wish, to assume (at its own expense) the
16
defense thereof, with counsel satisfactory to such indemnified party (which
counsel may be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party hereunder, such indemnifying party
shall not be liable for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnifying party shall have agreed in writing to the continuing participation
of such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would, in the opinion of
such counsel, be inappropriate due to the actual or potential differing
interests between them. If the indemnifying party assumes the defense of any
proceeding, it shall be entitled to settle such proceeding with the consent of
the indemnified party, which will not be unreasonably withheld or delayed or, if
such settlement provides for release of the indemnified party in connection with
all matters relating to the proceeding which have been asserted against the
indemnified party in such proceeding by the other parties to such settlement,
without the consent of the indemnified party.
7. Survival of Terms. The agreements, indemnities and representations of
the parties thereto contained herein or made pursuant to this Disclosure
Agreement will remain in full force and effect, regardless of any investigation,
or statement as to the results thereof, made by or on behalf of any parties
hereto or any of the controlling persons referred to herein, and will survive
the sale of the Notes.
8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
9. Benefit of Agreement. This Disclosure Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
assigns and the controlling persons referred to herein, and no other person
shall have any right or obligation hereunder. Neither this Disclosure Agreement
nor any term hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought.
10. Counterparts. This Disclosure Agreement may be executed in
counterparts, each of which when so executed and delivered shall be considered
an original, and all such counterparts shall constitute one and the same
instrument.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
17
Executed as of the day and year first above written.
DEUTSCHE BANK AG, acting through its
New York Branch, as Swap Counterparty
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
NELNET STUDENT LOAN FUNDING, LLC,
as Depositor
By: ___________________________
Name:
Title:
NELNET, INC.,
as Sponsor
By: ___________________________
Name:
Title:
NELNET STUDENT LOAN TRUST 2006-1,
as Issuing Entity
By: XXXXX FARGO DELAWARE TRUST COMPANY, not
in its individual capacity but solely in
its capacity as Delaware Trustee
By: ___________________________
Name:
Title:
BANC OF AMERICA SECURITIES LLC,
acting on behalf of itself and as
Representative of the Underwriters
By: ___________________________
Name:
Title:
CREDIT SUISSE SECURITIES (USA) LLC,
acting on behalf of itself and as
Representative of the Underwriters
By: ___________________________
Name:
Title:
DEUTSCHE BANK SECURITIES INC.,
acting on behalf of itself and as
Representative of the Underwriters
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
BANC OF AMERICA SECURITIES LIMITED
By: ___________________________
Name:
Title:
CREDIT SUISSE SECURITIES (EUROPE) LIMITED
By: ___________________________
Name:
Title:
DEUTSCHE BANK AG, LONDON BRANCH
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
BARCLAYS BANK PLC
By: ___________________________
Name:
Title:
SOCIETE GENERALE, LONDON BRANCH
By: ___________________________
Name:
Title:
EXECUTION COPY
CONFIRMATION
February 21, 2006
Nelnet Student Loan Trust 2006-1
c/o Wells Fargo Delaware Trust Company
Corporate Trust Services
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Our Reference: 1401582N
Subject: Euro/USD Cross Currency Swap Transaction in respect of Class A-6 Notes
Dear Sir/Madam:
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the above referenced cross-currency swap transaction
entered into on the Trade Date specified below (the "Swap Transaction") between
Deutsche Bank AG, acting through its New York Branch ("DBAG") and Nelnet Student
Loan Trust 2006-1 (the "Trust"). This Confirmation constitutes a "Confirmation"
as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 2000 ISDA Definitions, as
published by the International Swaps and Derivative Association, Inc., in effect
on the date of this Confirmation, without regard to any revision or subsequent
edition thereof (the "ISDA Definitions"), shall be incorporated into this
Confirmation. In the event of any inconsistency between the ISDA Definitions and
the Agreement or this Confirmation, the Agreement or, as the case may be, this
Confirmation shall prevail.
Unless otherwise defined in this Confirmation, terms used in this Confirmation
but not defined herein shall have the meanings ascribed to such terms in that
certain Indenture dated as of February 1, 2006 (including, but not limited to,
any and all appendices and exhibits thereto)(collectively, the "Indenture"), by
and among the Trust, Zions First National Bank, as the eligible lender trustee,
and Zions First National Bank, as the indenture trustee, as the same may be
amended, modified, supplemented, restated or replaced from time to time. In the
event of any inconsistency between the ISDA Definitions, the Master Agreement,
this Confirmation and the Indenture, the Indenture shall prevail.
This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA
Master Agreement (Multicurrency - Cross Border), dated as of February 21, 2006
(the "Master Agreement"), between you and us, as the same may be amended,
modified and supplemented from time to time. All provisions contained in, or
incorporated by reference to, the Master Agreement shall govern this
Confirmation except as expressly modified below. In the event of any
inconsistency between this Confirmation, the ISDA Definitions or the Master
Agreement, as the case may be, this Confirmation will prevail for purposes of
the Swap Transaction to which this Confirmation relates.
The terms of the particular Swap Transaction to which this Confirmation relates
are as follows:
Trade Date: February 14, 2006
Effective Date: February 21, 2006
Scheduled Termination Date: August 25, 2036
Termination Date: The earliest to occur of:
(i) the date on which the
Class A-6 Notes are remarketed
or purchased, as applicable,
from the Class A-6 Noteholders
following a successful
Remarketing or exercise of the
Call Option;
(ii) the Quarterly
Distribution Date on which the
outstanding principal balance
of the Class A-6 Notes is
reduced to zero (including as
the result of the redemption
of the Class A-6 Notes); and
(iii) the Scheduled Termination Date.
Value Before Value: Notwithstanding any other provision of this
Confirmation, the following provisions shall
be applicable to this Swap Transaction:
2
(i) if, on any date, the Trust owes a Trust
Initial Exchange Amount, LIBOR Floating
Amount, Trust Interim Exchange Amount,
Trust Final Exchange Amount or Trust
Additional Interest Amount (each, a
"Trust Payment") to DBAG, then DBAG
shall not be required to pay the related
DBAG Initial Exchange Amount, EURIBOR
Floating Amount, DBAG Interim Exchange
Amount, DBAG Final Exchange Amount or
DBAG Additional Interest Amount (each, a
"Related DBAG Payment"), as applicable,
to the Trust unless DBAG has first
received the relevant Trust Payment that
the Trust owes to DBAG;
(ii) if DBAG receives a Trust Payment in USD
from the Trust at or before 10:00 a.m.
(New York time) on any Business Day,
DBAG shall be required to make the
Related DBAG Payment in EUR to the Trust
at or before 3:30 p.m. (London time) on
the same Business Day;
(iii) if DBAG receives a Trust Payment in USD
from the Trust after 10:00 a.m. (New
York time) on any Business Day, DBAG
shall be required to make the Related
DBAG Payment in EUR to the Trust at or
before 3:30 p.m. (London time) on the
following Business Day; and
3
(iv) if, on any date, DBAG receives any Trust
Payment from the Trust in an amount that
is less than the amount of the payment
that the Trust was required to make on
such date under the terms of this Swap
Transaction, then a proportionate
reduction, based upon the Constant
Exchange Rate, shall be made by the
Calculation Agent in the amount of the
Related DBAG Payment, and DBAG shall
only be required to pay the so reduced
amount of such Related DBAG Payment to
the Trust.
Constant Exchange Rate: EUR 1.00 to USD 1.18900126271
Indenture Reset Date(s): February 23, 2016 (the "Initial
Indenture Reset Date") and, if a Failed
Remarketing occurs in respect of the
Initial Indenture Reset Date, each
subsequent Reset Date (as defined in the
Indenture) in respect of the Class A-6
Notes that occurs prior to the Final
Exchange Date.
Initial Exchange:
Initial Exchange Date: Effective Date
DBAG Initial Exchange Amount: USD 500,000,000.00
Trust Initial Exchange Amount: EUR 420,521,000.00
EURIBOR Floating Amounts:
EURIBOR Floating Rate Payer: DBAG
EURIBOR Floating Rate Payer As of any date, with respect to a
Calculation
Currency Amount: Period, an amount equal to EUR
420,521,000.00 minus the aggregate
amount of all DBAG Interim Exchange
Amounts paid prior to such date.
4
EURIBOR Floating Rate: Except for the initial Calculation
Period, EUR-EURIBOR-Telerate; provided,
however, that the term "TARGET
Settlement Days" shall mean any day on
which the Trans-European Automated
Real-time Gross Settlement Express
Transfer System is open for business and
which is also a day on which banks in
New York, New York are open for business
and if for any EURIBOR Reset Date,
EUR-EURIBOR-Telerate for the relevant
Designated Maturity does not appear on
Telerate Page 248 on the day that is two
TARGET Settlement Days prior to that
EURIBOR Reset Date and the Reference
Banks selected by the Administrator are
not providing quotations as provided in
the definition of "EUR-EURIBOR-Reference
Banks", the Floating Rate for the
relevant Calculation Period will be the
Floating Rate in effect for the previous
Calculation Period.
For the initial Calculation Period, the
EURIBOR Floating Rate will be determined
by the following formula:
x + (1/30 * (y-x)
where:
x = EUR-EURIBOR-Telerate for a
Designated Maturity of
three-months, and y =
EUR-EURIBOR-Telerate for a
Designated Maturity of
four-months.
EURIBOR Designated Maturity: Three (3) months.
EURIBOR Spread: 0.11% per annum, in respect of each
Calculation Period ending on
or before the Initial
Indenture Reset Date and
thereafter, 0.55% per annum.
EURIBOR Floating Rate Payer
Period End Dates: The 23rd of each February, May, August
and November during the term hereof,
commencing on 23 May 2006 to and
including the Termination Date, subject
to adjustment in accordance with the
Following Business Day Convention.
5
EURIBOR Floating Rate Payer Early Payment applies - three (3)
Payment Dates: Business Days prior to the applicable
Floating Rate Payer Period End Date.
EURIBOR Floating Rate Day Actual/360.
Count Fraction:
EURIBOR Reset Dates: First day of each Calculation Period.
EURIBOR Floating Amount Value For the avoidance of doubt, the
Before Value: obligation of DBAG to pay any EURIBOR
Floating Amount is subject to the terms
of the Value Before Value section of
this Confirmation.
LIBOR Floating Amounts:
LIBOR Floating Rate Payer: The Trust
LIBOR Floating Rate Payer As at any date, with respect to a
Calculation
Currency Amount: Period, an amount equal to
USD 500,000,000.00 minus the aggregate
of all Trust Interim Exchange Amounts
paid prior to such date.
LIBOR Floating Rate: Except for the initial Calculation
Period, USD- LIBOR-BBA; provided,
however, that the term "London Banking
Days" shall mean a Business Day in New
York and London and if for any LIBOR
Reset Date, USD-LIBOR-BBA for the
relevant Designated Maturity does not
appear on Telerate Page 3750 on the day
that is two London Banking Days prior to
that LIBOR Reset Date and the Reference
Banks selected by the Administrator are
not providing quotations as provided in
the definition of "USD-LIBOR-Reference
Banks", the Floating Rate for the
relevant Calculation Period will be the
Floating Rate in effect for the previous
Calculation Period.
6
For the initial Calculation Period, the
LIBOR Floating Rate will be determined
by the following formula:
x + (1/30 * (y-x))
where:
x = USD-LIBOR-BBA, in respect
of a Designated Maturity for
two months and y =
USD-LIBOR-BBA in respect of
Designated Maturity for three
months.
LIBOR Designated Maturity: Three (3) months.
LIBOR Spread: 0.0955% per annum, in respect of each
Calculation Period ending on
or before the Initial
Indenture Reset Date and
thereafter, 0.75% per annum.
LIBOR Floating Rate Payer The 23rd of each February, May, August
and Period End Dates: November
commencing on 23 May 2006 to and
including the Termination Date, subject
to adjustment in accordance with the
Following Business Day Convention.
LIBOR Floating Rate Payer Early Payment applies - three (3)
Payment Dates: Business Days prior to each Floating
Rate Payer Period End Date.
LIBOR Floating Rate Day Count Actual/360.
Fraction:
LIBOR Reset Dates: First day of each Calculation Period.
Interim Exchanges:
Interim Exchange Date: If a Failed Remarketing occurs in
respect of the Initial Indenture Reset
Date or any subsequent Indenture Reset
Date, such Initial Indenture Reset Date
and each such subsequent Indenture Reset
Date, as applicable, subject to
adjustment in accordance with the
Following Business Day Convention.
7
Trust Interim Exchange Amount: In respect of any Interim Exchange Date
the USD amount allocable to the Class
A-6 Notes in respect of principal for
that Interim Exchange Date and available
for payment to the Class A-6 Noteholders
pursuant to the Indenture.
DBAG Interim Exchange Amount: In respect of any Interim Exchange Date,
an amount equal to the Trust Interim
Exchange Amount converted to EUR using
the Constant Exchange Rate.
Payment of Interim Exchange
Amounts: On the Interim Exchange Date, the Trust
shall pay the Trust Interim Exchange
Amount to DBAG, and, subject to the
terms of the Value Before Value section
of this Confirmation, DBAG shall pay the
DBAG Interim Exchange Amount to the
Trust.
Final Exchange:
Final Exchange Date: The earliest to occur of (i) the
Indenture Reset Date on which the Class
A-6 Notes are reset following a
successful Remarketing, (ii) the
Indenture Reset Date in respect of which
the Call Option for the Class A-6 Notes
is exercised and fully funded, (iii) the
third (3rd) Business Day prior to the
Quarterly Distribution Date on which the
outstanding principal balance of the
Class A-6 Notes will be reduced to zero
(including as the result of the
redemption of the Class A-6 Notes) or
(iv) the third (3rd) Business Day prior
to the Scheduled Termination Date.
8
Trust Final Exchange Amount: In respect of the Final Exchange Date,
the Trust Final Exchange Amount shall
equal the sum of (i) the USD amount
allocable to the Class A-6 Notes in
respect of principal for that Final
Exchange Date and available for payment
to the Class A-6 Noteholders pursuant to
the Indenture plus (ii) the USD amount
(if any) received by the Trust and
allocable to the Class A-6 Notes in
respect of principal as a result of the
successful Remarketing, the exercise of
the Option Call or the redemption of the
Class A-6 Notes, as applicable. For
avoidance of doubt, the Trust Final
Exchange Amount shall in no event exceed
the then current LIBOR Floating Rate
Payer Currency Amount.
DBAG Final Exchange Amount: The DBAG Final Exchange Amount shall
equal the Trust Final Exchange Amount
converted to EUR using the Constant
Exchange Rate.
Payment of Final Exchange
Amounts: On the Final Exchange Date, the
Trust shall pay the Trust Final Exchange
Amount to DBAG, and, subject to the
terms of the Value Before Value section
of this Confirmation, DBAG shall pay the
DBAG Final Exchange Amount to the Trust.
Additional Interest:
Additional Interest
Exchange Date: The Initial Indenture Reset Date.
Trust Additional Interest
Amount: If the Initial Indenture Reset Date is
an Interim Exchange Date or the Final
Exchange Date, interest on the Trust
Interim Exchange Amount or Trust Final
Exchange Amount, as applicable, for a
period of up to two (2) Business Days,
as selected by the Trust in its sole
discretion, at a per annum interest rate
equal to the sum of the LIBOR Floating
Rate and the LIBOR Spread for the
Calculation Period ending on such
Interim Exchange Date or Final Exchange
Date.
9
DBAG Additional Interest Amount: If the Initial Indenture Reset Date is
an Interim Exchange Date or the Final
Exchange Date, interest on the DBAG
Interim Exchange Amount or DBAG Final
Exchange Amount, as applicable, for the
same time period covered by the Trust
Additional Interest Amount, at a per
annum interest rate equal to the sum of
the EURIBOR Floating Rate and the
EURIBOR Spread for the Calculation
Period ending on such Interim Exchange
Date or Final Exchange Date.
Payment of Additional Interest
Amounts: On the Additional Interest Exchange
Date, the Trust shall pay the Trust
Additional Interest Amount to DBAG, and,
subject to the terms of the Value Before
Value section of this Confirmation, DBAG
shall pay the DBAG Additional Interest
Amount to the Trust.
Other Provisions:
Calculation Agent: DBAG
Business Days: New York, London and TARGET Settlement
Days.
Certain Notifications: The Trust shall cause the Administrator
to notify the Calculation Agent whether
the Trust has the Available Funds to pay
any LIBOR Floating Amounts, Trust
Interim Exchange Amounts or Trust Final
Exchange Amount in full when due on or
before each Payment Date and to provide
the Calculation Agent with such other
information, reports or notices as the
Calculation Agent may reasonably
10
request. The Calculation Agent shall
notify the other party hereto and the
Administrator of the equivalent amount
in EUR to be paid by DBAG in respect of
each LIBOR Floating Amount, Trust
Interim Exchange Payment or Trust Final
Exchange Amounts to be made under the
Agreement on each Floating Rate Payer
Payment Date, each Interim Exchange Date
and the Final Exchange Date, as
applicable, promptly following receipt
by the Calculation Agent from the Trust
(or the Administrator on its behalf) of
the information required to determine
such amounts.
Account Details:
Payments to DBAG:
For EUR:
Account With: Deutsche Bank AG, Frankfurt
Swift Code: XXXXXXXX
Favor Of: Deutsche Bank AG, New York
Account Number: 958409510
For USD:
Account With: DB Trust Co. Americas, New York
Swift Code: XXXXXX00
Favor Of: Deutsche Bank AG, New York
Account Number: 01473969
Payments to the Trust:
For EUR:
Account With: HSBC Bank plc, London
SWIFT: XXXXXX00
Sort Code: 40-05-15
Account No: 00000000
Account Name: Zions Bank as Trustee for Nelnet Student
Loans Trust
Reference: Nelnet
11
For USD:
Account Name: Nelnet Student Loan Trust 2006-1
Account Bank: Zions First National Bank
Account Number: 80000219
ABA: 000000000
Ref: Nelnet SLT 2006-1
Attn: Xxxxx Xxxxxxx Tel: (000) 000-0000
Xxxxx Xxxx Tel: (000) 000-0000
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
12
Please check this confirmation carefully and immediately upon receipt so that
errors and discrepancies can be promptly identified and rectified.
We are pleased to have executed this Swap Transaction with you.
DEUTSCHE BANK AG, acting through its New York Branch
By:/s/ Xxxx Xxxxxxx /s/ Cloris Eng
-------------------------- ---------------------------
Name:
Title:
Accepted and confirmed as of the Trade Date first above written:
NELNET STUDENT LOAN TRUST 2006-1
By: XXXXX FARGO DELAWARE TRUST COMPANY,
not in its individual capacity but solely in its capacity as
Delaware Trustee
By: /s/ Xxx Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxx Xxxxxxx Xxxxxx
Title: Vice President
PARAGRAPH 13. ELECTIONS AND VARIABLES
(a) SECURITY INTEREST FOR "OBLIGATIONS". The term "OBLIGATIONS" as used in
this Annex includes the following additional obligations with respect to
Party A and Party B: None.
(b) CREDIT SUPPORT OBLIGATIONS.
(i) Delivery Amount, Return Amount, Credit Support Amount, Exposure
and Rating Agency Amount.
(A) "DELIVERY AMOUNT" has the meaning specified in Paragraph
3, except that the words "on or promptly following a
Valuation Date, or" shall be added before the words
"upon a demand made by the Secured Party on or promptly
following a Valuation Date".
(B) "RETURN AMOUNT" has the meaning specified in Paragraph
3.
(C) "CREDIT SUPPORT AMOUNT" has the meaning specified in
Paragraph 3; provided that the words "plus the
applicable Rating Agency Amount" shall be added after
the words "the Secured Party's Exposure in clause (i)
thereof; and provided further that, consistent with Part
1(i) of the Schedule and notwithstanding any other
provision of this Annex, calculation of the Credit
Support Amount (or any portion thereof) shall not
commence prior to the Valuation Date (if any) on which
Part 1(i) of the Schedule requires the collateralization
of Transactions to commence pursuant to this Annex.
(D) "EXPOSURE" has the meaning specified in Paragraph 12.
(E) "RATING AGENCY AMOUNT" means with respect to Party A,
for any Valuation Date and for each Transaction in which
Party A is the Currency Swap Counterparty, the highest
of the following:
(x) if an S&P Downgrade has occurred and is
continuing, then an amount equal to the product
of the applicable VB and the EURIBOR Floating
Rate Payer Currency Amount for the relevant
Transaction, where "VB" means the applicable
Volatility Buffer (%) from Table 2 (Cross
Currency Swaps) of the S&P publication entitled
"Global Interest Rate and Currency Swaps:
Calculating the Collateral Required Amount"
dated February 26, 2004, as such publication may
be modified or amended from time to time;
(y) if a Moody's Downgrade has occurred and is
continuing, then an amount equal to the sum of
(i) the product of 1.00% and the EURIBOR
Floating Rate Payer Currency Amount for the
relevant Transaction and (ii) the product of 10
and DVO1, where "DVO1" means the change in the
Exposure of the relevant Transaction resulting
from a one basis point change in the relevant
swap curve, as such standards are set forth in
Table 4A (First Trigger Calculation Amount) of
the Moody's publication entitled "Framework for
De-Linking Hedge Counterparty Risks from Global
Structured Finance Cashflow Transactions" dated
December 6, 2005, as such publication may be
modified or amended from time to time; or
(z) if a Fitch Downgrade has occurred and is
continuing, then an amount equal to the product
of the applicable VC and the EURIBOR Floating
Rate Payer Currency Amount for the relevant
Transaction, where "VC" means the applicable
Volatility Cushion (%) for "USD/EURO (e.v.v.)
Cross Currency Swap Interest Rate Swaps" as set
forth in Appendix 2 (Volatility Cushions for
various Swap Types: Methodology and Amounts) of
the Fitch publication entitled "Counterparty
Risk in Structured Finance Transactions: Swap
Criteria" dated September 13, 2004, as such
publication may be modified or amended from time
to time.
(ii) ELIGIBLE COLLATERAL. The following items will qualify as
"ELIGIBLE COLLATERAL" for Party A:
Valuation
Eligible Collateral Party A Percentage
------------------------------------- -------- ----------
(A) EUR Cash [X] 100%
(B) USD Cash [X] 98%
(C) Treasury Securities with a remaining [X] 97%
maturity of 52 weeks or less
(D) Treasury Securities with a remaining [X] 94%
maturity of more than 52 weeks but
no more than 3 years
(E) Treasury Securities with a remaining [X] 91%
maturity of more than 3 years weeks
but no more than 5 years
(F) Treasury Securities with a remaining [X] 89%
maturity of more than 5 years but no
more than 7 years
(G) Treasury Securities with a remaining [X] 86%
maturity of more than 7 years but no
more than 10 years
(H) Treasury Securities with a remaining [X] 83%
maturity of more than 10 years but no
more than 20 years
(I) Treasury Securities with a remaining [X] 79%
maturity of more than 20 years
(iii) OTHER ELIGIBLE SUPPORT: Not applicable.
(iv) THRESHOLDS.
(A) "INDEPENDENT AMOUNT" means with respect to Party A:
zero.
(B) "THRESHOLD" means with respect to Party A: zero.
(C) "MINIMUM TRANSFER AMOUNT" means with respect to Party A
and with respect to Party B: $100,000; provided,
however, that if such party is a Defaulting Party at the
time, "Minimum Transfer Amount" shall mean zero with
respect to such party.
(D) ROUNDING. The Delivery Amount and the Return Amount will
not be rounded up or down.
(c) VALUATION AND TIMING.
(i) "VALUATION AGENT" means Party A, unless either (A) an Event of
Default has occurred and is continuing with respect to Party A,
or (B) a Downgrade Event has occurred and is continuing and
Party A has not yet acted under Part 1(i) to avoid posting
collateral, in which case Party B may elect to nominate a
third-party Valuation Agent by giving notice of same to Party A.
(ii) "VALUATION DATE" means each New York Banking Day (as defined in
the 2000 ISDA Definitions as published by the International
Swaps and Derivatives Association, Inc. ("ISDA") without regard
to any amendment after the date hereof) (the "ISDA
DEFINITIONS").
(iii) "VALUATION TIME" means the close of business in New York on the
New York Banking Day before the Valuation Date or before the
date of calculation, as applicable, or any time on the Valuation
Date or date of calculation, as applicable; provided that the
calculations of Value and Exposure will be made as of
approximately the same time on the same date.
(iv) "NOTIFICATION TIME" means 1:00 p.m., New York time, on a Local
Business Day.
(d) CONDITIONS PRECEDENT AND SECURED PARTY'S RIGHTS AND REMEDIES. The
following Termination Events will be a "SPECIFIED CONDITION" for the
party specified (that party being the Affected Party if the Termination
Event occurs with respect to that party): Not Applicable.
(e) SUBSTITUTION.
(i) "SUBSTITUTION DATE" has the meaning specified in Paragraph
4(d)(ii).
(ii) CONSENT. The Pledgor need not obtain the Secured Party's consent
for any substitution pursuant to Paragraph 4(d).
(f) DISPUTE RESOLUTION.
(i) "RESOLUTION TIME" means 1:00 p.m., New York time, on the Local
Business Day following the date on which the notice of the
dispute is given under Paragraph 5.
(ii) VALUE. For the purpose of Paragraphs 5(i)(C) and 5(ii), the
Value of Posted Credit Support or of any Transfer of Eligible
Credit Support or Posted Credit Support, as the case may be,
will be calculated by the Valuation Agent in accordance with
standard market practice using third party sources (such as, by
way of example only, Bloomberg or Reuters) where available.
(iii) ALTERNATIVE. The provisions of Paragraph 5 will apply.
(g) HOLDING AND USING POSTED COLLATERAL.
(i) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIAN.
Party B and its Custodian will be entitled to hold Posted
Collateral pursuant to Paragraph 6(b); provided that the
following conditions applicable to it are satisfied:
(A) If Party B is a Defaulting Party, it may not hold Posted
Collateral, but Posted Collateral may still be held by
Party B's Custodian in accordance with the terms of the
Indenture.
(B) Posted Collateral may be held only in the following
jurisdictions: the United States of America.
Initially, the CUSTODIAN for Party B is the Trustee.
(ii) USE OF POSTED COLLATERAL. The provisions of Paragraph 6(c) will
not apply.
(h) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) "INTEREST RATE". The "Interest Rate" shall be the rate actually earned
by the Custodian on Posted Collateral in the form of Cash.
(i) TRANSFER OF INTEREST AMOUNT. The Transfer of the Interest Amount
will be made on the last Local Business Day of each calendar
month and on any Local Business Day that Posted Collateral in
the form of cash in the relevant currency is Transferred to the
Pledgor pursuant to Paragraph 3(b).
(ii) ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph
6(d)(ii) will apply.
(iii) ADDITIONAL REPRESENTATION(S). None.
(j) OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT. "VALUE" and "TRANSFER"
with respect to Other Eligible Support and Other Posted Support each
means: Not applicable.
(k) DEMANDS AND NOTICES.
All demands, specifications and notices to Party A under this Annex will
be made to:
Deutsche Bank AG
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Collateral Management and Valuations
and all demands, specifications and notices to Party B under this Annex
will be made to:
Xxxxx Fargo Delaware Trust Company
Corporate Trust Services
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Phone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Nelnet Student Loan Trust 2006-1
000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Assistant Vice President
Phone: 000-000-0000
Facsimile: 000-000-0000
; PROVIDED that any demand, specification or notice may be made by
telephone ("TELEPHONE NOTICE") between employees of each party if such
Telephone Notice is confirmed by a subsequent written instruction (which
may be delivered via facsimile or email) by the close of business on the
same day that such Telephone Notice is given.
(l) ADDRESSES FOR TRANSFERS.
Party A: For Cash: DBAG NY, ABA: 000000000, Ref: A / C#
[to be provided]
For Certain Other Eligible Collateral:
Fed Eligible Settlements:
Bk of NYC/Cust/604000
Acct: Deutsche Bank AG CMV Group
DTC Eligible Settlements:
DTC# 901
A/c# 604000
Acct: Deutsche Bank AG CMV Group
Euroclear Settlements:
Euroclear # 10104
Ref: Acct: Deutsche Bank AG CMV Group 000000
Canadian Settlements:
Royal Bank of Canada
BIC Code: XXXXXXX0
Acct: Bank of New York, Brussels
Ref: Acct: Deutsche Bank AG CMV Group 604000
Party B:
For USD Cash:
Zions First National Bank
Salt Lake City, UT
ABA# 000000000
A/C# 80000219
Ref: Nelnet SLT 2006-1
Attn: Xxxxx Xxxxxxx
For Certain Other Eligible Collateral:
DTC: DTC # 2669
Custodian Account # 17-74574 WNTC Institutional #
27630 Institutional Interested Party # 27630 Agent
Bank Custodian # 20290
Agent Bank Name: The Northern Trust Company of
New York
Further Credit to: Nelnet SLT 2006-1 Collection
a/c# 5997031
Physical: The Northern Trust Company of New York
00 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Account # 17-74574 Zions First National
Further Credit to: Nelnet SLT 2006-1 Collection
a/c# 5997031]
FED (Securities): NORTHERN CHGO/TRUST
Agent Bank Custodian # 20290
ABA # 000-000-000
Account # 17-74574
Zions First National Bank
Further Credit to: Nelnet SLT 2006-1 Collection
a/c# 5997031
(m) OTHER PROVISIONS.
(i) Notwithstanding any other provision in this Agreement to the
contrary, no full or partial failure to exercise and no delay in
exercising, on the part of Party A or Party B, any right,
remedy, power or privilege permitted hereunder shall operate in
any way as a waiver thereof by such party, including without
limitation any failure to exercise or any delay in exercising to
any or to the full extent of such party's rights with respect to
transfer timing pursuant to Paragraph 4(b), regardless of the
frequency of such failure or delay.
(ii) In all cases, in order to facilitate calculation of the Delivery
Amount and the Return Amount for a particular Valuation Date in
accordance with Paragraph 3 of this Annex:
(A) Eligible Collateral;
(B) Exposure and Rating Agency Amount; and
(C) Posted Collateral
shall each be expressed in US Dollars. If any of these items are
expressed in a currency other than US Dollars, then they shall be
converted into US Dollar amounts at the spot exchange rate
reasonably determined by the Valuation Agent on that Valuation
Date.
(iii) Party A shall pay all costs and expenses (including any related
taxes) in respect of the Posted Collateral.
(iv) Exposure Verification. The Parties agree that in the event of a
Downgrade Event (as defined in the Schedule) relating to an
action taken by S&P, the Valuation Agent shall verify its
calculation of the Secured Party's Exposure on a weekly basis
but shall verify such valuation by seeking two quotations from
Reference Market-makers at the end of each quarter. For the
avoidance of doubt, the Valuation Agent must (i) obtain at least
two Market Quotations (as stated above) and (ii) may not obtain
the quotations referred to above from the same Reference
Market-maker in excess of four times during any 12 month period.
Furthermore, the Exposure valuations should reflect the higher
of two bids from Reference Market-makers that would be eligible
and willing to provide the market quotation in the absence of
the current provider. The collateral requirement should be based
on the greater of the internal and external market quotations.
In the event the verification procedures set forth above
indicate that there is a deficiency in the amount of Eligible
Collateral that has been posted to the Secured Party, the
Pledgor shall post the amount of Eligible Collateral necessary
to cure such deficiency to the Secured Party within three Local
Business Days.
(n) AGREEMENT AS TO SINGLE SECURED PARTY AND PLEDGOR. Party A and Party B
agree that, notwithstanding anything to the contrary in the recital to
this Annex, Paragraph 1(b) or Paragraph 2 or the definitions of
Paragraph 12, (a) the term "Secured Party" as used in this Annex shall
mean only Party B, (b) the term "Pledgor" as used in this Annex shall
mean only Party A, (c) only Party A makes the pledge and grant in
Paragraph 2, the acknowledgement in the final sentence of Paragraph 8(a)
and the representations in paragraph 9 and (d) only Party A will be
required to make Transfers of Eligible Credit Support hereunder.
(o) ADDITIONAL DEFINITIONS
"FITCH DOWNGRADE" has the meaning specified in Part 1(i) of the
Schedule.
"MOODY'S DOWNGRADE" has the meaning specified in Part 1(i) of
the Schedule.
"RATING AGENCIES" shall mean Xxxxx'x Investors Service (and any
successor or successors thereto), Standard & Poor's Ratings
Services, a division of The XxXxxx-Xxxx Companies, Inc. (and any
successor or successors thereto), and Fitch, Inc. d/b/a Fitch
Ratings (and any successor or successors thereto).
"S&P DOWNGRADE" has the meaning specified in Part 1(i) of the
Schedule.
"TREASURY SECURITIES" means U.S. Dollar-denominated senior debt
securities of the United States of America issued by the U.S.
Treasury Department and backed by the full faith and credit of
the United States of America.
IN WITNESS WHEREOF, the parties have executed this Credit Support Annex
by their duly authorized officers as of the date hereof.
DEUTSCHE BANK AG, acting through its
New York Branch
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Director
Date: February 21, 2006
NELNET STUDENT LOAN TRUST 2006-1
By: Xxxxx Fargo Delaware Trust Company, not
in its individual capacity but solely in
its capacity as Delaware Trustee of the
Nelnet Student Loan Trust 2006-1
By: /s/ Xxx Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxx Xxxxxxx Xxxxxx
Title: Vice President
Date: February 21, 2006
