UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

(Mark One)

		
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the quarterly period ended September 30, 2015
 
or

	
		
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the transition period from   to   .

COMMISSION FILE NUMBER 001-31924

NELNET, INC.
(Exact name of registrant as specified in its charter)

		
NEBRASKA
(State or other jurisdiction of incorporation or organization)	84-0748903
(I.R.S. Employer Identification No.)	
 	 	
121 SOUTH 13TH STREET
SUITE 100
LINCOLN, NEBRASKA
(Address of principal executive offices)	 
68508
(Zip Code)	
  (402) 458-2370
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]                                                  Accelerated filer [ ]
Non-accelerated filer [  ]                                                     Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes[  ] No[X]

As of October 31, 2015 , there were 33,385,821 and 11,476,932 shares of Class A Common Stock and Class B Common Stock, par value $0.01 per share, outstanding, respectively (excluding 11,317,364 shares of Class A Common Stock held by wholly owned subsidiaries).  

NELNET, INC.
FORM 10-Q
INDEX
September 30, 2015

	
				
PART I. FINANCIAL INFORMATION	 	
 	Item 1.	Financial Statements	2	
 	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24	
 	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47	
 	Item 4.	Controls and Procedures	51	
 	 	 	 	
PART II. OTHER INFORMATION	 	
 	Item 1.	Legal Proceedings	51	
 	Item 1A.	Risk Factors	51	
 	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52	
 	Item 5.	Other Information	53	
 	Item 6.	Exhibits	54	
 	 	 	 	
Signatures	 	55	

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

	
								
NELNET, INC. AND SUBSIDIARIES	
CONSOLIDATED BALANCE SHEETS	
(Dollars in thousands, except share data)	
(unaudited)	
 	 	 	 	 	
 	 	As of		As of	
 	 	September 30, 2015		December 31, 2014	
Assets:	 	 	 	 	
Student loans receivable (net of allowance for loan losses of $50,380 and $48,900, respectively)	 	$	28,954,280		 	28,005,195		
Cash and cash equivalents:	 	 		 	 		
Cash and cash equivalents - not held at a related party	 	27,613		 	37,781		
Cash and cash equivalents - held at a related party	 	86,885		 	92,700		
Total cash and cash equivalents	 	114,498		 	130,481		
Investments and notes receivable	 	236,010		 	235,709		
Restricted cash and investments	 	895,271		 	850,440		
Restricted cash - due to customers	 	100,089		 	118,488		
Accrued interest receivable	 	380,441		 	351,588		
Accounts receivable (net of allowance for doubtful accounts of $2,062 and $1,656, respectively)	 	64,640		 	50,552		
Goodwill	 	126,200		 	126,200		
Intangible assets, net	 	35,386		 	42,582		
Property and equipment, net	 	46,706		 	45,894		
Other assets	 	76,133		 	76,622		
Fair value of derivative instruments	 	15,741		 	64,392		
Total assets	 	$	31,045,395		 	30,098,143		
Liabilities:	 	 		 	 		
Bonds and notes payable	 	$	28,827,603		 	28,027,350		
Accrued interest payable	 	31,632		 	25,904		
Other liabilities	 	170,611		 	167,881		
Due to customers	 	100,089		 	118,488		
Fair value of derivative instruments	 	80,061		 	32,842		
Total liabilities	 	29,209,996		 	28,372,465		
Commitments and contingencies	 	 	 	 	
Equity:	 	 	 	 	
  Nelnet, Inc. shareholders' equity:	 	 		 	 		
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding	 	—		 	—		
Common stock:	 	 	 	 	
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 33,388,556 shares and 34,756,384 shares, respectively	 	334		 	348		
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,476,932 shares and 11,486,932 shares, respectively	 	115		 	115		
Additional paid-in capital	 	1,441		 	17,290		
Retained earnings	 	1,830,387		 	1,702,560		
Accumulated other comprehensive earnings	 	2,876		 	5,135		
Total Nelnet, Inc. shareholders' equity	 	1,835,153		 	1,725,448		
Noncontrolling interest	 	246		 	230		
Total equity	 	1,835,399		 	1,725,678		
Total liabilities and equity	 	$	31,045,395		 	30,098,143		
 	 	 	 	 	
Supplemental information - assets and liabilities of consolidated variable interest entities:	 	 	 	 	
Student loans receivable	 	$	29,150,270		 	28,181,244		
Restricted cash and investments	 	853,186		 	846,199		
Other assets	 	381,698		 	351,934		
Bonds and notes payable	 	(29,159,553	)	 	(28,391,530	)	
Other liabilities	 	(391,535	)	 	(280,233	)	
Fair value of derivative instruments, net	 	(53,866	)	 	(20,455	)	
Net assets of consolidated variable interest entities	 	$	780,200		 	687,159		
See accompanying notes to consolidated financial statements.

2

	
													
NELNET, INC. AND SUBSIDIARIES	
CONSOLIDATED STATEMENTS OF INCOME	
(Dollars in thousands, except share data)	
(unaudited)	
 	Three months	 	Nine months	
 	ended September 30,	 	ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Interest income:	 	 	 	 	 	 	 	
Loan interest	$	187,701		 	187,862		 	535,480		 	520,224		
Investment interest	1,456		 	1,562		 	5,548		 	5,023		
Total interest income	189,157		 	189,424		 	541,028		 	525,247		
Interest expense:	 		 	 		 	 		 	 		
Interest on bonds and notes payable	77,164		 	71,937		 	221,344		 	201,176		
Net interest income	111,993		 	117,487		 	319,684		 	324,071		
Less provision for loan losses	3,000		 	2,000		 	7,150		 	6,000		
Net interest income after provision for loan losses	108,993		 	115,487		 	312,534		 	318,071		
Other income:	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	61,520		 	52,659		 	183,164		 	183,876		
Tuition payment processing, school information, and campus commerce revenue	30,439		 	26,399		 	92,805		 	73,468		
Enrollment services revenue	19,500		 	22,936		 	54,524		 	65,092		
Other income	6,523		 	7,650		 	20,945		 	41,096		
Gain on sale of loans and debt repurchases	597		 	—		 	4,987		 	57		
Derivative market value and foreign currency adjustments and derivative settlements, net	(30,658	)	 	24,203		 	(27,234	)	 	21,508		
Total other income	87,921		 	133,847		 	329,191		 	385,097		
Operating expenses:	 		 	 		 	 		 	 		
Salaries and benefits	63,215		 	61,098		 	183,052		 	167,470		
Cost to provide enrollment services	12,534		 	14,178		 	35,398		 	41,964		
Loan servicing fees	7,793		 	7,077		 	22,829		 	19,798		
Depreciation and amortization	6,977		 	5,493		 	19,140		 	15,490		
Other	30,419		 	29,599		 	91,575		 	92,882		
Total operating expenses	120,938		 	117,445		 	351,994		 	337,604		
Income before income taxes	75,976		 	131,889		 	289,731		 	365,564		
Income tax expense	26,999		 	46,513		 	104,985		 	130,202		
Net income	48,977		 	85,376		 	184,746		 	235,362		
Net income attributable to noncontrolling interest	22		 	157		 	117		 	1,363		
Net income attributable to Nelnet, Inc.	$	48,955		 	85,219		 	184,629		 	233,999		
Earnings per common share:	 	 	 	 	 	 	 	
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	1.09		 	1.84		 	4.03		 	5.03		
Weighted average common shares outstanding - basic and diluted	45,047,777		 	46,432,680		 	45,763,443		 	46,496,309		

 See accompanying notes to consolidated financial statements.

3

	
													
NELNET, INC. AND SUBSIDIARIES	
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	
(Dollars in thousands)	
(unaudited)	
 	Three months	 	Nine months	
 	ended September 30,	 	ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Net income	$	48,977		 	85,376		 	184,746		 	235,362		
Other comprehensive (loss) income:	 	 	 	 	 	 	 	
Available-for-sale securities:	 	 	 	 	 	 	 	
Unrealized holding (losses) gains arising during period, net	(568	)	 	(738	)	 	(1,217	)	 	8,763		
Less reclassification adjustment for gains recognized in net income, net of losses	(73	)	 	(8	)	 	(2,370	)	 	(8,319	)	
Income tax effect	234		 	276		 	1,328		 	(164	)	
Total other comprehensive (loss) income	(407	)	 	(470	)	 	(2,259	)	 	280		
Comprehensive income	48,570		 	84,906		 	182,487		 	235,642		
Comprehensive income attributable to noncontrolling interest	22		 	157		 	117		 	1,363		
Comprehensive income attributable to Nelnet, Inc.	$	48,548		 	84,749		 	182,370		 	234,279		

See accompanying notes to consolidated financial statements.

4

	
																																		
NELNET, INC. AND SUBSIDIARIES	
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY	
(Dollars in thousands, except share data)	
(unaudited)	
 	Nelnet, Inc. Shareholders	 	 	 	
 	Preferred stock shares	 	Common stock shares	 	Preferred stock	 	Class A common stock	 	Class B common stock	 	Additional paid-in capital	 	 Retained earnings	 	Accumulated other comprehensive earnings	 	Noncontrolling interest	 	Total equity	
 		 	Class A	 	Class B	 		 		 		 		 		 		 		 		
Balance as of June 30, 2014	—		 	34,859,786		 	11,491,932		 	$	—		 	349		 	115		 	20,721		 	1,552,988		 	5,569		 	386		 	1,580,128		
Net income	—		 	—		 	—		 	—		 	—		 	—		 	—		 	85,219		 	—		 	157		 	85,376		
Other comprehensive loss	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(470	)	 	—		 	(470	)	
Distribution to noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(275	)	 	(275	)	
Cash dividend on Class A and Class B common stock - $0.10 per share	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(4,630	)	 	—		 	—		 	(4,630	)	
Issuance of common stock, net of forfeitures	—		 	28,729		 	—		 	—		 	—		 	—		 	213		 	—		 	—		 	—		 	213		
Compensation expense for stock based awards	—		 	—		 	—		 	—		 	—		 	—		 	1,248		 	—		 	—		 	—		 	1,248		
Repurchase of common stock	—		 	(96,792	)	 	—		 	—		 	(1	)	 	—		 	(4,032	)	 	—		 	—		 	—		 	(4,033	)	
Conversion of common stock	—		 	5,000		 	(5,000	)	 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Balance as of September 30, 2014	—		 	34,796,723		 	11,486,932		 	$	—		 	348		 	115		 	18,150		 	1,633,577		 	5,099		 	268		 	1,657,557		
Balance as of June 30, 2015	—		 	33,724,471		 	11,486,932		 	$	—		 	337		 	115		 	—		 	1,801,457		 	3,283		 	300		 	1,805,492		
Issuance of noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	4		 	4		
Net income	—		 	—		 	—		 	—		 	—		 	—		 	—		 	48,955		 	—		 	22		 	48,977		
Other comprehensive loss	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(407	)	 	—		 	(407	)	
Distribution to noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(80	)	 	(80	)	
Cash dividend on Class A and Class B common stock - $0.10 per share	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(4,486	)	 	—		 	—		 	(4,486	)	
Issuance of common stock, net of forfeitures	—		 	10,669		 	—		 	—		 	1		 	—		 	267		 	—		 	—		 	—		 	268		
Compensation expense for stock based awards	—		 	—		 	—		 	—		 	—		 	—		 	1,246		 	—		 	—		 	—		 	1,246		
Repurchase of common stock	—		 	(356,584	)	 	—		 	—		 	(4	)	 	—		 	(72	)	 	(15,539	)	 	—		 	—		 	(15,615	)	
Conversion of common stock	—		 	10,000		 	(10,000	)	 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Balance as of September 30, 2015	—		 	33,388,556		 	11,476,932		 	$	—		 	334		 	115		 	1,441		 	1,830,387		 	2,876		 	246		 	1,835,399		
Balance as of December 31, 2013	—		 	34,881,338		 	11,495,377		 	$	—		 	349		 	115		 	24,887		 	1,413,492		 	4,819		 	328		 	1,443,990		
Issuance of noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	201		 	201		
Net income	—		 	—		 	—		 	—		 	—		 	—		 	—		 	233,999		 	—		 	1,363		 	235,362		
Other comprehensive income	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	280		 	—		 	280		
Distribution to noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(1,624	)	 	(1,624	)	
Cash dividends on Class A and Class B common stock - $0.30 per share	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(13,914	)	 	—		 	—		 	(13,914	)	
Issuance of common stock, net of forfeitures	—		 	234,236		 	—		 	—		 	2		 	—		 	3,339		 	—		 	—		 	—		 	3,341		
Compensation expense for stock based awards	—		 	—		 	—		 	—		 	—		 	—		 	3,258		 	—		 	—		 	—		 	3,258		
Repurchase of common stock	—		 	(327,296	)	 	—		 	—		 	(3	)	 	—		 	(13,334	)	 	—		 	—		 	—		 	(13,337	)	
Conversion of common stock	—		 	8,445		 	(8,445	)	 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Balance as of September 30, 2014	—		 	34,796,723		 	11,486,932		 	$	—		 	348		 	115		 	18,150		 	1,633,577		 	5,099		 	268		 	1,657,557		
Balance as of December 31, 2014	—		 	34,756,384		 	11,486,932		 	$	—		 	348		 	115		 	17,290		 	1,702,560		 	5,135		 	230		 	1,725,678		
Issuance of noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	23		 	23		
Net income	—		 	—		 	—		 	—		 	—		 	—		 	—		 	184,629		 	—		 	117		 	184,746		
Other comprehensive loss	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(2,259	)	 	—		 	(2,259	)	
Distribution to noncontrolling interest	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(124	)	 	(124	)	
Cash dividends on Class A and Class B common stock - $0.30 per share	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(13,659	)	 	—		 	—		 	(13,659	)	
Issuance of common stock, net of forfeitures	—		 	152,764		 	—		 	—		 	2		 	—		 	3,678		 	—		 	—		 	—		 	3,680		
Compensation expense for stock based awards	—		 	—		 	—		 	—		 	—		 	—		 	3,957		 	—		 	—		 	—		 	3,957		
Repurchase of common stock	—		 	(1,530,592	)	 	—		 	—		 	(16	)	 	—		 	(23,484	)	 	(43,143	)	 	—		 	—		 	(66,643	)	
Conversion of common stock	—		 	10,000		 	(10,000	)	 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Balance as of September 30, 2015	—		 	33,388,556		 	11,476,932		 	$	—		 	334		 	115		 	1,441		 	1,830,387		 	2,876		 	246		 	1,835,399		

 See accompanying notes to consolidated financial statements.

5

	
							
NELNET, INC. AND SUBSIDIARIES	
CONSOLIDATED STATEMENTS OF CASH FLOWS	
(Dollars in thousands)	
(unaudited)	
 	Nine months	
 	ended September 30,	
 	2015	 	2014	
Net income attributable to Nelnet, Inc.	$	184,629		 	233,999		
Net income attributable to noncontrolling interest	117		 	1,363		
Net income	184,746		 	235,362		
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions:	 		 	 		
Depreciation and amortization, including debt discounts and student loan premiums and deferred origination costs	91,045		 	78,318		
Student loan discount accretion	(32,684	)	 	(32,393	)	
Provision for loan losses	7,150		 	6,000		
Derivative market value adjustment	43,179		 	431		
Foreign currency transaction adjustment	(32,480	)	 	(39,216	)	
Proceeds from termination of derivative instruments	55,627		 	—		
Payment to enter into derivative instruments	(2,936	)	 	(9,087	)	
Gain on sale of loans	(351	)	 	—		
Gain from debt repurchases	(4,636	)	 	(57	)	
 Gain from sales of available-for-sale securities, net	(2,370	)	 	(8,319	)	
Payments for purchases of trading securities, net	(8,168	)	 	(3,380	)	
Deferred income tax (benefit) expense	(7,901	)	 	21,391		
Non-cash compensation expense	4,120		 	3,364		
Other	2,469		 	5,638		
(Increase) decrease in accrued interest receivable	(435	)	 	4,303		
Increase in accounts receivable	(14,088	)	 	(1,884	)	
Decrease in other assets	1,848		 	2,723		
Increase in accrued interest payable	5,242		 	2,314		
Increase (decrease) in other liabilities	17,978		 	(2,441	)	
Net cash provided by operating activities	307,355		 	263,067		
Cash flows from investing activities, net of acquisitions:	 		 	 		
Purchases of student loans and student loan residual interests	(1,994,416	)	 	(3,211,328	)	
Net proceeds from student loan repayments, claims, capitalized interest, and other	2,843,119		 	2,721,886		
Proceeds from sale of student loans	3,996		 	8		
Purchases of available-for-sale securities	(6,939	)	 	(143,695	)	
Proceeds from sales of available-for-sale securities	49,278		 	200,098		
Purchases of investments and issuance of notes receivable	(65,548	)	 	(35,454	)	
Proceeds from investments and notes receivable	27,773		 	11,006		
Purchases of property and equipment, net	(12,756	)	 	(21,691	)	
Decrease (increase) in restricted cash and investments, net	3,611		 	(32,720	)	
Business acquisitions, net of cash acquired	—		 	(45,583	)	
Net cash provided by (used in) investing activities	848,118		 	(557,473	)	
Cash flows from financing activities, net of borrowings assumed:	 		 	 		
Payments on bonds and notes payable	(3,483,804	)	 	(3,013,378	)	
Proceeds from issuance of bonds and notes payable	2,401,993		 	3,362,227		
Payments of debt issuance costs	(9,859	)	 	(14,933	)	
Dividends paid	(13,659	)	 	(13,914	)	
Repurchases of common stock	(66,643	)	 	(13,337	)	
Proceeds from issuance of common stock	617		 	476		
Issuance of noncontrolling interest	23		 	201		
Distribution to noncontrolling interest	(124	)	 	(1,624	)	
Net cash (used in) provided by financing activities	(1,171,456	)	 	305,718		
Net (decrease) increase in cash and cash equivalents	(15,983	)	 	11,312		
Cash and cash equivalents, beginning of period	130,481		 	63,267		
Cash and cash equivalents, end of period	$	114,498		 	74,579		
 	 	 	 	
Cash disbursements made for:	 		 	 		
Interest	$	165,885		 	155,962		
Income taxes, net of refunds	$	104,403		 	118,866		
Noncash activity:	 	 	 	
Investing activity - student loans and other assets acquired	$	2,025,453		 	2,571,997		
Financing activity - borrowings and other liabilities assumed in acquisition of student loans	$	1,885,453		 	2,444,874		

See accompanying notes to consolidated financial statements.

6

NELNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise noted)
(unaudited)

1.    Basis of Financial Reporting

The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of September 30, 2015 and for the three and nine months ended September 30, 2015 and 2014 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2014 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results for the year ending December 31, 2015 . The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the " 2014 Annual Report").

Reclassifications

Certain amounts previously reported within the Company's consolidated balance sheet and statements of income have been reclassified to conform to the current period presentation. These reclassifications include:

•	Reclassifying certain investments and notes receivable, which were previously included in "other assets" to "investments and notes receivable."	

•	Reclassifying third-party loan servicing fees, which were previously included in "other" operating expenses to "loan servicing fees."	

The reclassifications had no effect on consolidated net income or consolidated assets and liabilities.

2.    Student Loans Receivable and Allowance for Loan Losses

Student loans receivable consisted of the following:

							
 	As of	 	As of	
 	September 30, 2015	 	December 31, 2014	
Federally insured loans	 	 	 	
Stafford and other	$	6,375,336		 	6,030,825		
Consolidation	22,580,043		 	22,165,605		
Total	28,955,379		 	28,196,430		
Private education loans	232,824		 	27,478		
 	29,188,203		 	28,223,908		
Loan discount, net of unamortized loan premiums and deferred origination costs (a)	(183,543	)	 	(169,813	)	
Allowance for loan losses – federally insured loans	(35,945	)	 	(39,170	)	
Allowance for loan losses – private education loans	(14,435	)	 	(9,730	)	
 	$	28,954,280		 	28,005,195		

(a)	As of September 30, 2015 and December 31, 2014 , "loan discount, net of unamortized loan premiums and deferred origination costs" included $35.4 million and $28.8 million , respectively, of non-accretable discount associated with purchased loans of $10.9 billion and $8.5 billion , respectively.	

7

Private Education Loans

During the first quarter of 2015, the Company entered into an agreement with CommonBond, Inc. ("CommonBond"), a student lending company that provides private education loans to graduate students, under which the Company committed to purchase private education loans for a period of 18 months , with the total purchase obligation limited to $150.0 million . On August 17, 2015, the Company amended the agreement with CommonBond to increase the maximum purchase obligation to $200.0 million . As of September 30, 2015 , the Company had purchased $127.8 million in private education loans from CommonBond pursuant to this agreement.

Acquisition of Student Loan Residual Interests

On May 26, 2015, the Company acquired the ownership interest in a federally insured student loan securitization trust (the "May Trust"), giving the Company rights to the residual interest in $504.2 million of securitized federally insured loans. The trust includes loans funded to term with $448.9 million (par value) of bonds and notes payable.

On August 3, 2015, the Company acquired the ownership interest in two federally insured student loan securitization trusts (the "August Trusts"), giving the Company rights to the residual interest in $1.5 billion of securitized federally insured loans. The two trusts include loans funded to term with $1.5 billion (par value) of bonds and notes payable.

The Company has consolidated the May Trust and August Trusts on its consolidated balance sheet because management has determined the Company is the primary beneficiary of the trusts. Upon acquisition of the May Trust and August Trusts, the Company recorded all assets and liabilities of the trusts at fair value, resulting in the recognition of a student loan fair value discount of $20.7 million and $20.2 million , respectively, and a bonds and notes payable fair value premium of $2.2 million and a fair value discount of $86.7 million , respectively. The discounts/premium will be accreted/amortized using the effective interest method over the lives of the underlying assets and liabilities. All other assets acquired and liabilities assumed (restricted cash, accrued interest receivable/payable, and other assets/liabilities) were recorded at cost, which approximates fair value.

Activity in the Allowance for Loan Losses

The provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb losses, net of recoveries, inherent in the portfolio of student loans. Activity in the allowance for loan losses is shown below.

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Balance at beginning of period	$	50,024		 	52,467		 	48,900		 	55,122		
Provision for loan losses:	 	 	 	 	 		 	 		
Federally insured loans	2,000		 	2,000		 	6,000		 	7,000		
Private education loans	1,000		 	—		 	1,150		 	(1,000	)	
Total provision for loan losses	3,000		 	2,000		 	7,150		 	6,000		
Charge-offs:	 		 	 		 	 		 	 		
Federally insured loans	(2,817	)	 	(3,521	)	 	(9,225	)	 	(11,290	)	
Private education loans	(357	)	 	(623	)	 	(1,479	)	 	(1,642	)	
Total charge-offs	(3,174	)	 	(4,144	)	 	(10,704	)	 	(12,932	)	
Recoveries - private education loans	250		 	279		 	742		 	989		
Purchase (sale) of federally insured and private education loans, net	30		 	70		 	(200	)	 	320		
Transfer from repurchase obligation related to private education loans repurchased	250		 	1,296		 	4,492		 	2,469		
Balance at end of period	$	50,380		 	51,968		 	50,380		 	51,968		
 	 	 	 	 	 	 	 	
Allocation of the allowance for loan losses:	 	 	 		 	 		 	 		
Federally insured loans	$	35,945		 	39,470		 	35,945		 	39,470		
Private education loans	14,435		 	12,498		 	14,435		 	12,498		
Total allowance for loan losses	$	50,380		 	51,968		 	50,380		 	51,968		

8

Repurchase Obligation

The Company has sold various portfolios of private education loans to third-parties. Per the terms of the servicing agreements, the Company’s servicing operations are obligated to repurchase loans subject to the sale agreements in the event such loans become 60 or 90 days delinquent. As of September 30, 2015 and December 31, 2014, the balance of loans subject to these repurchase obligations was $53.1 million and $155.3 million , respectively. The Company repurchased $94.1 million of private education loans during the first quarter of 2015. The Company's estimate related to its obligation to repurchase these loans is included in "other liabilities" in the Company's consolidated balance sheets and was $3.3 million and $11.8 million as of September 30, 2015 and December 31, 2014, respectively.

Student Loan Status and Delinquencies

Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs.  The table below shows the Company’s loan delinquency amounts.

	
																					
 	As of September 30, 2015	 	As of December 31, 2014	 	As of September 30, 2014	
Federally insured loans:	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	$	2,638,639		 	 	 	$	2,805,228		 	 	 	$	3,072,318		 	 	
Loans in forbearance	2,993,844		 	 	 	3,288,412		 	 	 	3,505,103		 	 	
Loans in repayment status:	 	 	 	 	 	 	 	 	 	 	 	
Loans current	19,681,517		 	84.4	%	 	18,460,279		 	83.5	%	 	18,672,178		 	83.8	%	
Loans delinquent 31-60 days	1,021,515		 	4.4		 	1,043,119		 	4.8		 	990,696		 	4.5		
Loans delinquent 61-90 days	638,037		 	2.7		 	588,777		 	2.7		 	569,879		 	2.6		
Loans delinquent 91-120 days	465,261		 	2.0		 	404,905		 	1.8		 	452,463		 	2.0		
Loans delinquent 121-270 days	1,139,864		 	4.9		 	1,204,405		 	5.4		 	1,183,616		 	5.3		
Loans delinquent 271 days or greater	376,702		 	1.6		 	401,305		 	1.8		 	405,346		 	1.8		
Total loans in repayment	23,322,896		 	100.0	%	 	22,102,790		 	100.0	%	 	22,274,178		 	100.0	%	
Total federally insured loans	$	28,955,379		 	 		 	$	28,196,430		 	 		 	$	28,851,599		 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Private education loans:	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	$	7,724		 	 	 	$	905		 	 	 	$	2,958		 	 	
Loans in forbearance	16		 	 	 	—		 	 	 	—		 	 	
Loans in repayment status:	 	 	 	 	 	 	 	 	 	 	 	
Loans current	216,502		 	96.2	%	 	18,390		 	69.2	%	 	65,560		 	87.8	%	
Loans delinquent 31-60 days	1,999		 	0.9		 	1,078		 	4.1		 	1,340		 	1.8		
Loans delinquent 61-90 days	1,206		 	0.5		 	1,035		 	3.9		 	1,516		 	2.0		
Loans delinquent 91 days or greater	5,377		 	2.4		 	6,070		 	22.8		 	6,249		 	8.4		
Total loans in repayment	225,084		 	100.0	%	 	26,573		 	100.0	%	 	74,665		 	100.0	%	
Total non-federally insured loans	$	232,824		 	 		 	$	27,478		 	 		 	$	77,623		 	 	

9

3.    Bonds and Notes Payable

The following tables summarize the Company’s outstanding debt obligations by type of instrument:

								
 	As of September 30, 2015	
 	Carrying
amount	 	Interest rate
range	 	Final maturity	
Variable-rate bonds and notes issued in asset-backed securitizations:	 	 	 	 	 	
Bonds and notes based on indices	$	26,346,635		 	0.08% - 6.90%	 	8/26/19 - 8/26/52	
Bonds and notes based on auction	1,161,515		 	1.11% - 2.13%	 	3/22/32 - 11/26/46	
Total variable-rate bonds and notes	27,508,150		 	 	 	 	
FFELP warehouse facilities	1,391,877		 	0.20% - 0.41%	 	12/17/17 - 7/9/18	
Private education loan warehouse facility	170,081		 	0.42%	 	12/26/16	
Unsecured line of credit	70,000		 	1.72%	 	6/30/19	
Unsecured debt - Junior Subordinated Hybrid Securities	57,582		 	3.70%	 	9/15/61	
Other borrowings	75,000		 	1.69%	 	10/31/16	
 	29,272,690		 	 	 	 	
Discount on bonds and notes payable	(445,087	)	 	 	 	 	
Total	$	28,827,603		 	 	 	 	

								
 	As of December 31, 2014	
 	Carrying
amount	 	Interest rate
range	 	Final maturity	
Variable-rate bonds and notes issued in asset-backed securitizations:	 	 	 	 	 	
Bonds and notes based on indices	$	25,713,431		 	0.19% - 6.90%	 	5/25/18 - 8/26/52	
Bonds and notes based on auction	1,311,669		 	0.47% - 2.17%	 	3/22/32 - 11/26/46	
Total variable-rate bonds and notes	27,025,100		 	 	 	 	
FFELP warehouse facilities	1,241,665		 	0.16% - 0.26%	 	1/17/16 - 6/11/17	
Unsecured line of credit	—		 	—	 	6/30/19	
Unsecured debt - Junior Subordinated Hybrid Securities	71,688		 	3.63%	 	9/15/61	
Other borrowings	81,969		 	1.67% - 5.10%	 	11/11/15 - 12/31/18	
 	28,420,422		 	 	 	 	
Discount on bonds and notes payable	(393,072	)	 	 	 	 	
Total	$	28,027,350		 	 	 	 	

10

FFELP Warehouse Facilities

The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.

As of September 30, 2015 , the Company had three FFELP warehouse facilities as summarized below.

														
 	 	NHELP-II	 	NHELP-III	 	NFSLW-I (a)	 	Total	
Maximum financing amount	 	$	500,000		 	750,000		 	875,000		 	2,125,000		
Amount outstanding	 	446,624		 	395,631		 	549,622		 	1,391,877		
Amount available	 	$	53,376		 	354,369		 	325,378		 	733,123		
Expiration of liquidity provisions	 	December 17, 2015		 	April 29, 2016		 	July 8, 2016		 	 	
Final maturity date	 	December 17, 2017		 	April 29, 2018		 	July 9, 2018		 	 	
Maximum advance rates	 	91.0 - 97.0%		 	92.2 - 95.0%		 	92.0 - 98.0%		 	 	
Minimum advance rates	 	91.0 - 97.0%		 	92.2 - 95.0%		 	84.0 - 90.0%		 	 	
Advanced as equity support	 	$	24,538		 	22,427		 	26,124		 	73,089		

(a)	On July 10, 2015, the Company amended the agreement for this warehouse facility to temporarily increase the maximum financing amount to $875.0 million, extend the expiration of the liquidity provisions to July 8, 2016, and extend the maturity date to July 9, 2018. The maximum financing amount is scheduled to decrease by $125.0 million on March 31, 2016 .	

Asset-backed Securitizations

The following table summarizes the asset-backed securitization transactions completed during the nine months ended September 30, 2015 .

																														
 	 	2015-1	 	2015-2	 	2015-3	 	Total	
 	 	 	 	Class A-1 notes	 	Class A-2 notes	 	2015-2 total	 	Class A-1 notes	 	Class A-2 notes	 	Class A-3 notes	 	2015-3 total	 	 	
Date securities issued	 	2/27/15	 	3/26/15	 	3/26/15	 	3/26/15	 	5/21/15	 	5/21/15	 	5/21/15	 	5/21/15	 	 	
Total original principal amount	 	$	566,346		 	122,500		 	584,500		 	722,000		 	82,500		 	270,000		 	41,400		 	401,400		 	$	1,689,746		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Class A senior notes:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total original principal amount	 	$	553,232		 	122,500		 	584,500		 	707,000		 	82,500		 	270,000		 	41,400		 	393,900		 	1,654,132		
Bond discount	 	—		 	—		 	—		 	—		 	—		 	(380	)	 	(1,095	)	 	(1,475	)	 	(1,475	)	
Issue price	 	$	553,232		 	122,500		 	584,500		 	707,000		 	82,500		 	269,620		 	40,305		 	392,425		 	1,652,657		
Cost of funds (1-month LIBOR plus:)	 	0.59	%	 	0.27	%	 	0.60	%	 	 	 	0.30	%	 	0.60	%	 	0.90	%	 	 	 	 	
Final maturity date	 	4/25/41		 	3/25/20		 	9/25/42		 	 	 	1/27/25		 	2/26/46		 	6/25/49		 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Class B subordinated notes:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total original principal amount	 	$	13,114		 	 	 	 	 	15,000		 		 	 	 	 	 	7,500		 	35,614		
Bond discount	 	(1,157	)	 	 	 	 	 	(1,793	)	 		 	 	 	 	 	(968	)	 	(3,918	)	
Issue price	 	$	11,957		 		 	 	 	13,207		 		 	 	 	 	 	6,532		 	31,696		
Cost of funds (1-month LIBOR plus:)	 	1.50	%	 	 	 	 	 	1.50	%	 		 	 	 	 	 	1.50	%	 	 	
Final maturity date	 	6/25/46		 	 	 	 	 	5/25/49		 	 	 	 	 	 	 	6/27/50		 	 	

11

Private Education Loan Warehouse Facility
On June 26, 2015, the Company entered into a $275.0 million private education loan warehouse facility. As of September 30, 2015 , there was $170.1 million outstanding on the facility and $104.9 million was available for future use. The facility has a static advance rate that requires initial equity for loan funding, but does not require increased equity based on market movements. The maximum advance rate on the entire facility is 88 percent and minimum advance rates, depending on loan characteristics and program type, range from 64 percent to 99 percent . As of September 30, 2015 , $23.7 million was advanced on the facility as equity support. The facility is supported by liquidity provisions, which have a defined expiration date of June 24, 2016 . In the event the Company is unable to renew the liquidity provisions by such date, the facility would become a term facility at a stepped-up cost, with no additional student loans being eligible for financing, and the Company would be required to refinance the existing loans in the facility by the facility's final maturity date of December 26, 2016 .
Unsecured Line of Credit

On October 30, 2015, the Company entered into an amended and restated credit agreement for its $350.0 million line of credit. Under the amended terms, the maturity date of the credit agreement was extended from June 30, 2019 to October 30, 2020 .  In addition, the following revisions were made to certain covenants:

•	A provision was added to permit acquisitions of businesses, for consideration of up to $75.0 million per fiscal year, that are not in one of the Company's existing lines of business.	

•	The cap for other non-specified permitted investments increased to 20 percent of the Company's consolidated net worth, with the cap excluding all existing investments at the time of the amendment.	

•	The current cap related to the volume of private education loans that the Company may hold was reduced from $900.0 million to a revised level of $500.0 million .  All private education loans that are held within securitization vehicles are excluded from the $500.0 million threshold.	

•	The minimum consolidated net worth threshold changed beginning as of September 30, 2015 to be not less than the sum of (i) $1.35 billion , plus, in each case for periods after September 30, 2015, (ii) 50 percent of consolidated net income; plus (iii) 100 percent of the increase to consolidated net worth from the issuance of capital stock.	

The facility size of $350.0 million and cost of funds did not change as part of the amendment.   

As of September 30, 2015 , the unsecured line of credit had an outstanding balance of $70.0 million and $280.0 million was available for future use.

Debt Repurchases

The following table summarizes the Company's repurchases of its own debt. Gains recorded by the Company from the repurchase of debt are included in "gain on sale of loans and debt repurchases" on the Company’s consolidated statements of income.

	
																			
 	Par value	 	Purchase price	 	Gain	 	Par value	 	Purchase price	 	Gain	
 	Three months ended	
 	September 30, 2015	 	September 30, 2014	
Unsecured debt - Hybrid Securities	$	—		 	—		 	—		 	—		 	—		 	—		
   Asset-backed securities	9,650		 	9,053		 	597		 	2,500		 	2,500		 	—		
 	$	9,650		 	9,053		 	597		 	2,500		 	2,500		 	—		
 	 	 	 	 	 	 	 	 	 	 	 	
 	Nine months ended	
 	September 30, 2015	 	September 30, 2014	
Unsecured debt - Hybrid Securities	$	14,106		 	11,108		 	2,998		 	—		 	—		 	—		
   Asset-backed securities	31,800		 	30,162		 	1,638		 	4,000		 	3,943		 	57		
 	$	45,906		 	41,270		 	4,636		 	4,000		 	3,943		 	57		

12

4.   Derivative Financial Instruments

The Company uses derivative financial instruments primarily to manage interest rate risk and foreign currency exchange risk. Derivative instruments used as part of the Company's risk management strategy are further described in note 5 of the notes to consolidated financial statements included in the 2014 Annual Report. A tabular presentation of such derivatives outstanding as of September 30, 2015 and December 31, 2014 is presented below.

Basis Swaps

The following table summarizes the Company’s basis swaps outstanding as of September 30, 2015 and December 31, 2014 in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").

	
										
 	 	 	As of September 30,	 	As of December 31,	
 	 	 	2015	 	2014	
Maturity	 	Notional amount	 	Notional amount	
2016	 	 	$	5,500,000		 	$	—		
2021	 	 	—		 	250,000		
2022	 	 	450,000		 	1,900,000		
2023	 	 	1,050,000		 	3,650,000		
2024	 	 	—		 	250,000		
2026	 	 	200,000		 	800,000		
2028	 	 	—		 	100,000		
2036	 	 	—		 	700,000		
2039	 	 	—		 	150,000		
 	 	 	$	7,200,000		 	$	7,800,000		
The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2015 and December 31, 2014 was one-month LIBOR plus 9.0 basis points and 3.5 basis points, respectively.
Interest Rate Swaps – Floor Income Hedges

The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.

															
 	 	As of September 30, 2015	 	As of December 31, 2014	
Maturity	 	Notional amount	 	Weighted average fixed rate paid by the Company (a)	 	Notional amount	 	Weighted average fixed rate paid by the Company (a)	
	 		 		 		 		
2015	 	$	—		 	—	%	 	$	1,100,000		 	0.89	%	
2016	 	1,000,000		 	0.76		 	750,000		 	0.85		
2017	 	2,100,000		 	0.84		 	1,250,000		 	0.86		
2018	 	1,350,000		 	1.11		 	—		 	—		
2025	 	100,000		 	2.32		 	—		 	—		
 	 	$	4,550,000		 	0.93	%	 	$	3,100,000		 	0.87	%	

(a)	For all interest rate derivatives, the Company receives discrete three-month LIBOR.	

On August 20, 2014, the Company paid $9.1 million for an interest rate swap option to economically hedge loans earning fixed rate floor income. The interest rate swap option gives the Company the right, but not the obligation, to enter into a $250 million notional interest rate swap in which the Company would pay a fixed amount of 3.30% and receive discrete one-month LIBOR. If the interest rate swap option is exercised, the swap would become effective in 2019 and mature in 2024.

13

Interest Rate Swaps – Unsecured Debt Hedges

The Company had the following derivatives outstanding as of September 30, 2015 and December 31, 2014 that are used to effectively convert the variable interest rate on a portion of the Junior Subordinated Hybrid Securities to a fixed rate of 7.66% .

	
								
Maturity	 	Notional amount	 	Weighted average fixed rate paid by the Company (a)	
2036	 	$	25,000		 	4.28	%	

(a)	For all interest rate derivatives, the Company receives discrete three-month LIBOR.	

Interest Rate Caps

In June 2015, in conjunction with the entry into the $275.0 million private education loan warehouse facility, the Company paid $2.9 million for two interest rate cap contracts with a total notional amount of $275.0 million . The first interest rate cap has a notional amount of $125.0 million and a one-month LIBOR strike rate of 2.50% , and the second interest rate cap has a notional amount of $150.0 million and a one-month LIBOR strike rate of 4.99% . In the event that the one-month LIBOR rate rises above the applicable strike rate, the Company would receive monthly payments related to the spread difference. Both interest rate cap contracts have a maturity date of July 15, 2020.

Foreign Currency Exchange Risk

In 2006, the Company issued €352.7 million of student loan asset-backed Euro Notes (the "Euro Notes") with an interest rate based on a spread to the EURIBOR index. As a result of the Euro Notes, the Company is exposed to market risk related to fluctuations in foreign currency exchange rates between the U.S. dollar and Euro. The principal and accrued interest on these notes are re-measured at each reporting period and recorded in the Company’s consolidated balance sheet in U.S. dollars based on the foreign currency exchange rate on that date.

The Company entered into a cross-currency interest rate swap in connection with the issuance of the Euro Notes. Under the terms of the cross-currency interest rate swap, the Company receives from the counterparty a spread to the EURIBOR index based on a notional amount of €352.7 million and pays a spread to the LIBOR index based on a notional amount of $450.0 million . In addition, under the terms of this agreement, all principal payments on the Euro Notes will effectively be paid at the exchange rate in effect between the U.S. dollar and Euro as of the issuance of the notes.

The following table shows the income statement impact as a result of the re-measurement of the Euro Notes and the change in the fair value of the related derivative instrument.

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Re-measurement of Euro Notes	$	(1,058	)	 	37,418		 	32,480		 	39,216		
Change in fair value of cross-currency interest rate swap	666		 	(37,224	)	 	(35,207	)	 	(40,261	)	
Total impact to consolidated statements of income - (expense) income (a)	$	(392	)	 	194		 	(2,727	)	 	(1,045	)	

(a)	The financial statement impact of the above items is included in "Derivative market value and foreign currency adjustments and derivative settlements, net" in the Company's consolidated statements of income.	
The re-measurement of the Euro-denominated bonds generally correlates with the change in fair value of the corresponding cross-currency interest rate swap. However, the Company will experience unrealized gains or losses related to the cross-currency interest rate swap if the two underlying indices (and related forward curve) do not move in parallel.

14

Consolidated Financial Statement Impact Related to Derivatives  

The following table summarizes the fair value of the Company’s derivatives as reflected in the consolidated balance sheets:

													
 	Fair value of asset derivatives	 	Fair value of liability derivatives	
 	As of	 	As of	 	As of	 	As of	
 	September 30,
2015	 	December 31,
2014	 	September 30,
2015	 	December 31,
2014	
1:3 basis swaps	$	8,477		 	53,549		 	44		 	—		
Interest rate swaps - floor income hedges	—		 	5,165		 	16,142		 	5,034		
Interest rate swap option - floor income hedge	3,943		 	5,678		 	—		 	—		
Interest rate swaps - hybrid debt hedges	—		 	—		 	8,212		 	7,353		
Interest rate caps	1,796		 	—		 	—		 	—		
Cross-currency interest rate swap	—			—		 	55,663		 	20,455		
Other	1,525		 	—		 	—		 	—		
Total	$	15,741		 	64,392		 	80,061		 	32,842		

During the nine months ended September 30, 2015 , the Company terminated a total notional amount of $6.1 billion of 1:3 Basis Swaps for gross proceeds of $55.6 million . There were no derivative terminations during the first nine months of 2014.

Offsetting of Derivative Assets/Liabilities

The Company records derivative instruments in the consolidated balance sheets on a gross basis as either an asset or liability measured at its fair value. Certain of the Company's derivative instruments are subject to right of offset provisions with counterparties. The following tables include the gross amounts related to the Company's derivative portfolio recognized in the consolidated balance sheets, reconciled to the net amount when excluding derivatives subject to enforceable master netting arrangements and cash collateral received/pledged:

	
														
 	 	 	 	Gross amounts not offset in the consolidated balance sheets	 	 	
Derivative assets	 	Gross amounts of recognized assets presented in the consolidated balance sheets	 	Derivatives subject to enforceable master netting arrangement	 	Cash collateral pledged (received)	 	Net asset (liability)	
Balance as of September 30, 2015	 	$	15,741		 	(8,620	)	 	—		 	7,121		
Balance as of December 31, 2014	 	64,392		 	(12,387	)	 	—		 	52,005		

	
														
 	 	 	 	Gross amounts not offset in the consolidated balance sheets	 	 	
Derivative liabilities	 	Gross amounts of recognized liabilities presented in the consolidated balance sheets	 	Derivatives subject to enforceable master netting arrangement	 	Cash collateral pledged (received)	 	Net asset (liability)	
Balance as of September 30, 2015	 	$	(80,061	)	 	8,620		 	37,274		 	(34,167	)	
Balance as of December 31, 2014	 	(32,842	)	 	12,387		 	(1,454	)	 	(21,909	)	

15

The following table summarizes the effect of derivative instruments in the consolidated statements of income.

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Settlements:	 		 	 		 	 		 	 		
1:3 basis swaps	$	179		 	808		 	568		 	2,547		
Interest rate swaps - floor income hedges	(5,456	)	 	(5,421	)	 	(15,490	)	 	(19,345	)	
Interest rate swaps - hybrid debt hedges	(255	)	 	(259	)	 	(760	)	 	(767	)	
Cross-currency interest rate swap	(346	)	 	38		 	(853	)	 	288		
Total settlements - expense	(5,878	)	 	(4,834	)	 	(16,535	)	 	(17,277	)	
Change in fair value:	 		 	 		 	 		 	 		
1:3 basis swaps	(1,886	)	 	19,455		 	10,513		 	32,475		
Interest rate swaps - floor income hedges	(18,935	)	 	10,628		 	(16,273	)	 	11,173		
Interest rate swap option - floor income hedge	(2,205	)	 	(847	)	 	(1,736	)	 	(847	)	
Interest rate swaps - hybrid debt hedges	(1,948	)	 	(393	)	 	(861	)	 	(2,971	)	
Interest rate caps	(939	)	 	—		 	(1,140	)	 	—		
Cross-currency interest rate swap	666		 	(37,224	)	 	(35,207	)	 	(40,261	)	
Other	1,525		 	—		 	1,525		 	—		
Total change in fair value - expense	(23,722	)	 	(8,381	)	 	(43,179	)	 	(431	)	
Re-measurement of Euro Notes (foreign currency transaction adjustment) - (expense) income	(1,058	)	 	37,418		 	32,480		 	39,216		
Derivative market value and foreign currency adjustments and derivative settlements, net - (expense) income	$	(30,658	)	 	24,203		 	(27,234	)	 	21,508		

5.    Investments and Notes Receivable

A summary of the Company's investments and notes receivable follows:

																										
 	As of September 30, 2015	 	As of December 31, 2014	
 	Amortized cost	 	Gross unrealized gains	 	Gross unrealized losses (a)	 	Fair value	 	Amortized cost	 	Gross unrealized gains	 	Gross unrealized losses	 	Fair value	
 		 		 		 		 		 		 		 		
Investments (at fair value):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Available-for-sale investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loan asset-backed and other debt securities (b)	$	92,327		 	3,797		 	(712	)	 	95,412		 	131,589		 	6,204		 	(236	)	 	137,557		
Equity securities	846		 	1,579		 	(100	)	 	2,325		 	1,553		 	2,216		 	(33	)	 	3,736		
Total available-for-sale investments	$	93,173		 	5,376		 	(812	)	 	97,737		 	133,142		 	8,420		 	(269	)	 	141,293		
Trading investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loan asset-backed securities	 	 	 	 	 	 	6,146		 	 	 	 	 	 	 	7,830		
Equity securities	 	 	 	 	 	 	9,852		 	 	 	 	 	 	 	—		
Total trading investments	 	 	 	 	 	 	15,998		 	 	 	 	 	 	 	7,830		
Total available-for-sale and trading investments		 		 		 	113,735		 	 	 	 	 			 	149,123		
Other Investments and Notes Receivable (not measured at fair value):	 	 	 	 	 	 	 	 	 	 	 	 	
Investments accounted for under the cost and equity methods	 	 	 	 	 	 	80,372		 	 	 	 	 	 	 	36,991		
Notes receivable	 	 	 	 	 	 	30,964		 	 	 	 	 	 	 	30,643		
Other	 	 	 	 	 	 	10,939		 	 	 	 	 	 	 	18,952		
Total investments and notes receivable	 	 	 	 	 	 	$	236,010		 	 	 	 	 	 	 	235,709		

(a)	As of September 30, 2015 , the Company considered the decline in market value of its available-for-sale investments to be temporary in nature and did not consider any of its investments other-than-temporarily impaired.	

(b)	As of September 30, 2015 , the stated maturities of the majority of the Company's student loan asset-backed and other debt securities classified as available-for-sale were greater than 10 years.	

16

6. Intangible Assets and Goodwill

Intangible assets consist of the following:

									
 	Weighted average remaining useful life as of September 30, 2015 (months)	 	As of September 30, 2015	 	As of December 31, 2014	
 		 		 		
Amortizable intangible assets:	 	 	 	
Customer relationships (net of accumulated amortization of $21,736 and $17,361, respectively)	217	 	$	22,954		 	27,330		
Trade names (net of accumulated amortization of $664 and $272, respectively)	224	 	5,758		 	6,150		
Computer software (net of accumulated amortization of $3,624 and $1,896, respectively)	35	 	5,242		 	6,969		
Content (net of accumulated amortization of $675 and $0, respectively)	15	 	1,125		 	1,800		
Covenants not to compete (net of accumulated amortization of $47 and $21, respectively)	104	 	307		 	333		
Total - amortizable intangible assets	184	 	$	35,386		 	42,582		

The Company recorded amortization expense on its intangible assets of $2.4 million and $2.0 million during the three months ended September 30, 2015 and 2014 , respectively, and $7.2 million and $4.4 million during the nine months ended September 30, 2015 and 2014 , respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of September 30, 2015 , the Company estimates it will record amortization expense as follows:

	
				
2015 (October 1 - December 31)	$	2,399		
2016	6,249		
2017	3,752		
2018	3,533		
2019	2,861		
2020 and thereafter	16,592		
 	$	35,386		

There were no changes in the carrying amount of goodwill during the nine months ended September 30, 2015 . The carrying amount of goodwill by reportable operating segment as of September 30, 2015 and December 31, 2014 is shown in the table below.

																
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset Generation and Management	 	Corporate and Other Activities	 	Total	
Balance as of December 31, 2014 and September 30, 2015	$	8,596		 	67,168		 	41,883		 	8,553		 	126,200		

17

7.   Earnings per Common Share

Presented below is a summary of the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.

																			
 	Three months ended September 30,	
 	2015	 	2014	
 	Common shareholders	 	Unvested restricted stock shareholders	 	Total	 	Common shareholders	 	Unvested restricted stock shareholders	 	Total	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Nelnet, Inc.	$	48,436		 	519		 	48,955		 	84,330		 	889		 	85,219		
 	 	 	 	 			 	 	 	 	 	 	
Denominator:			 			 			 	 	 	 	 	 	
Weighted-average common shares outstanding - basic and diluted	44,570,519		 	477,258		 	45,047,777		 	45,948,255		 	484,425		 	46,432,680		
Earnings per share - basic and diluted	$	1.09		 	1.09		 	1.09		 	1.84		 	1.84		 	1.84		
 	 	 	 	 	 	 	 	 	 	 	 	
 	Nine months ended September 30,	
 	2015	 	2014	
 	Common shareholders	 	Unvested restricted stock shareholders	 	Total	 	Common shareholders	 	Unvested restricted stock shareholders	 	Total	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Nelnet, Inc.	$	182,664		 	1,965		 	184,629		 	231,725		 	2,274		 	233,999		
 	 	 	 	 	 	 	 	 	 	 	 	
Denominator:	 	 	 	 	 	 	 	 	 	 	 	
Weighted-average common shares outstanding - basic and diluted	45,276,376		 	487,067		 	45,763,443		 	46,044,429		 	451,880		 	46,496,309		
Earnings per share - basic and diluted	$	4.03		 	4.03		 	4.03		 	5.03		 	5.03		 	5.03		

Unvested restricted stock awards are the Company's only potential common shares and, accordingly, there were no awards that were antidilutive and not included in average shares outstanding for the diluted earnings per share calculation.

18

8.    Segment Reporting

See note 14 of the notes to consolidated financial statements included in the 2014 Annual Report for a description of the Company's operating segments. The following tables include the results of each of the Company's operating segments reconciled to the consolidated financial statements.

Effective January 1, 2015, internal reporting to executive management (the "chief operating decision maker") changed to reflect operational changes made within the organization. The operational and internal reporting changes included moving the majority of information technology infrastructure personnel and related functions to Corporate and Other Activities. The associated costs are allocated to the other operating segments based on those segments' actual use of information technology related products and services. Information technology infrastructure personnel and related functions were historically included within the Student Loan and Guaranty Servicing operating segment, and associated costs were allocated to the other operating segments based on those segments' actual use of the related products and services. Prior period segment operating results have been reclassified to reflect these changes; however, the reclassifications had no effect on any operating segment's net income.

																			
 	Three months ended September 30, 2015	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other
Activities	 	Eliminations	 	Total	
Total interest income	$	14		 	—		 	188,197		 	1,385		 	(439	)	 	189,157		
Interest expense	—		 	—		 	76,040		 	1,563		 	(439	)	 	77,164		
Net interest income	14		 	—		 	112,157		 	(178	)	 	—		 	111,993		
Less provision for loan losses	—		 	—		 	3,000		 	—		 	—		 	3,000		
Net interest income after provision for loan losses	14		 	—		 	109,157		 	(178	)	 	—		 	108,993		
Other income:	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	61,900		 	—		 	—		 	—		 	(380	)	 	61,520		
Intersegment servicing revenue	12,027		 	—		 	—		 	—		 	(12,027	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	30,439		 	—		 	—		 	—		 	30,439		
Enrollment services revenue	—		 	—		 	—		 	19,500		 	—		 	19,500		
Other income	—		 	—		 	3,312		 	3,211		 	—		 	6,523		
Gain on sale of loans and debt repurchases	—		 	—		 	608		 	(11	)	 	—		 	597		
Derivative market value and foreign currency adjustments, net	—		 	—		 	(24,357	)	 	(423	)	 	—		 	(24,780	)	
Derivative settlements, net	—		 	—		 	(5,623	)	 	(255	)	 	—		 	(5,878	)	
Total other income	73,927		 	30,439		 	(26,060	)	 	22,022		 	(12,407	)	 	87,921		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	34,525		 	13,983		 	558		 	14,149		 	—		 	63,215		
Cost to provide enrollment services	—		 	—		 	—		 	12,534		 	—		 	12,534		
Loan servicing fees	—		 	—		 	7,793		 	—		 	—		 	7,793		
Depreciation and amortization	484		 	2,202		 	—		 	4,291		 	—		 	6,977		
Other	14,602		 	3,579		 	1,421		 	10,817		 	—		 	30,419		
Intersegment expenses, net	10,886		 	2,872		 	12,578		 	(13,929	)	 	(12,407	)	 	—		
Total operating expenses	60,497		 	22,636		 	22,350		 	27,862		 	(12,407	)	 	120,938		
Income (loss) before income taxes and corporate overhead allocation	13,444		 	7,803		 	60,747		 	(6,018	)	 	—		 	75,976		
Corporate overhead allocation	(2,351	)	 	(941	)	 	(1,176	)	 	4,468		 	—		 	—		
Income (loss) before income taxes	11,093		 	6,862		 	59,571		 	(1,550	)	 	—		 	75,976		
Income tax (expense) benefit	(4,215	)	 	(2,606	)	 	(22,639	)	 	2,461		 	—		 	(26,999	)	
Net income	6,878		 	4,256		 	36,932		 	911		 	—		 	48,977		
  Net (loss) income attributable to noncontrolling interest	(5	)	 	—		 	—		 	27		 	—		 	22		
Net income attributable to Nelnet, Inc.	$	6,883		 	4,256		 	36,932		 	884		 	—		 	48,955		

19

	
																			
 	Three months ended September 30, 2014	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other
Activities	 	Eliminations	 	Total	
Total interest income	$	5		 	2		 	187,949		 	1,814		 	(346	)	 	189,424		
Interest expense	—		 	—		 	71,037		 	1,246		 	(346	)	 	71,937		
Net interest income	5		 	2		 	116,912		 	568		 	—		 	117,487		
Less provision for loan losses	—		 	—		 	2,000		 	—		 	—		 	2,000		
Net interest income after provision for loan losses	5		 	2		 	114,912		 	568		 	—		 	115,487		
Other income:	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	52,659		 	—		 	—		 	—		 	—		 	52,659		
Intersegment servicing revenue	13,432		 	—		 	—		 	—		 	(13,432	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	26,399		 	—		 	—		 	—		 	26,399		
Enrollment services revenue	—		 	—		 	—		 	22,936		 	—		 	22,936		
Other income	—		 	—		 	4,294		 	3,356		 	—		 	7,650		
Gain on sale of loans and debt repurchases	—		 	—		 	—		 	—		 	—		 	—		
Derivative market value and foreign currency adjustments, net	—		 	—		 	29,430		 	(393	)	 	—		 	29,037		
Derivative settlements, net	—		 	—		 	(4,575	)	 	(259	)	 	—		 	(4,834	)	
Total other income	66,091		 	26,399		 	29,149		 	25,640		 	(13,432	)	 	133,847		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	33,627		 	13,288		 	565		 	13,618		 	—		 	61,098		
Cost to provide enrollment services	—		 	—		 	—		 	14,178		 	—		 	14,178		
Loan servicing fees	—		 	—		 	7,077		 	—		 	—		 	7,077		
Depreciation and amortization	441		 	2,396		 	—		 	2,656		 	—		 	5,493		
Other	12,643		 	3,312		 	1,559		 	12,085		 	—		 	29,599		
Intersegment expenses, net	8,843		 	1,481		 	13,611		 	(10,503	)	 	(13,432	)	 	—		
Total operating expenses	55,554		 	20,477		 	22,812		 	32,034		 	(13,432	)	 	117,445		
Income (loss) before income taxes and corporate overhead allocation	10,542		 	5,924		 	121,249		 	(5,826	)	 	—		 	131,889		
Corporate overhead allocation	(2,567	)	 	(856	)	 	(1,026	)	 	4,449		 	—		 	—		
Income (loss) before income taxes	7,975		 	5,068		 	120,223		 	(1,377	)	 	—		 	131,889		
Income tax (expense) benefit	(3,030	)	 	(1,926	)	 	(45,684	)	 	4,127		 	—		 	(46,513	)	
Net income	4,945		 	3,142		 	74,539		 	2,750		 	—		 	85,376		
  Net income attributable to noncontrolling interest	—		 	—		 	—		 	157		 	—		 	157		
Net income attributable to Nelnet, Inc.	$	4,945		 	3,142		 	74,539		 	2,593		 	—		 	85,219		

 	 	 	 	 	 	 	 	 	 	 	 	

20

	
																			
 	Nine months ended September 30, 2015	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other
Activities	 	Eliminations	 	Total	
Total interest income	$	34		 	3		 	536,899		 	5,352		 	(1,260	)	 	541,028		
Interest expense	—		 	—		 	218,021		 	4,583		 	(1,260	)	 	221,344		
Net interest income	34		 	3		 	318,878		 	769		 	—		 	319,684		
Less provision for loan losses	—		 	—		 	7,150		 	—		 	—		 	7,150		
Net interest income after provision for loan losses	34		 	3		 	311,728		 	769		 	—		 	312,534		
Other income:	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	183,544		 	—		 	—		 	—		 	(380	)	 	183,164		
Intersegment servicing revenue	37,121		 	—		 	—		 	—		 	(37,121	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	92,805		 	—		 	—		 	—		 	92,805		
Enrollment services revenue	—		 	—		 	—		 	54,524		 	—		 	54,524		
Other income	—		 	—		 	11,838		 	9,107		 	—		 	20,945		
Gain on sale of loans and debt repurchases	—		 	—		 	2,000		 	2,987		 	—		 	4,987		
Derivative market value and foreign currency adjustments, net	—		 	—		 	(11,363	)	 	664		 	—		 	(10,699	)	
Derivative settlements, net	—		 	—		 	(15,775	)	 	(760	)	 	—		 	(16,535	)	
Total other income	220,665		 	92,805		 	(13,300	)	 	66,522		 	(37,501	)	 	329,191		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	99,813		 	40,887		 	1,623		 	40,729		 	—		 	183,052		
Cost to provide enrollment services	—		 	—		 	—		 	35,398		 	—		 	35,398		
Loan servicing fees	—		 	—		 	22,829		 	—		 	—		 	22,829		
Depreciation and amortization	1,457		 	6,592		 	—		 	11,091		 	—		 	19,140		
Other	44,578		 	11,493		 	3,828		 	31,676		 	—		 	91,575		
Intersegment expenses, net	32,152		 	8,271		 	38,016		 	(40,938	)	 	(37,501	)	 	—		
Total operating expenses	178,000		 	67,243		 	66,296		 	77,956		 	(37,501	)	 	351,994		
Income (loss) before income taxes and corporate overhead allocation	42,699		 	25,565		 	232,132		 	(10,665	)	 	—		 	289,731		
Corporate overhead allocation	(6,798	)	 	(2,721	)	 	(3,401	)	 	12,920		 	—		 	—		
Income before income taxes	35,901		 	22,844		 	228,731		 	2,255		 	—		 	289,731		
Income tax (expense) benefit	(13,643	)	 	(8,680	)	 	(86,919	)	 	4,257		 	—		 	(104,985	)	
Net income	22,258		 	14,164		 	141,812		 	6,512		 	—		 	184,746		
  Net (loss) income attributable to noncontrolling interest	(5	)	 	—		 	—		 	122		 	—		 	117		
Net income attributable to Nelnet, Inc.	$	22,263		 	14,164		 	141,812		 	6,390		 	—		 	184,629		

21

	
																			
 	Nine months ended September 30, 2014	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other
Activities	 	Eliminations	 	Total	
Total interest income	$	25		 	5		 	520,514		 	6,508		 	(1,805	)	 	525,247		
Interest expense	—		 	—		 	198,449		 	4,532		 	(1,805	)	 	201,176		
Net interest income	25		 	5		 	322,065		 	1,976		 	—		 	324,071		
Less provision for loan losses	—		 	—		 	6,000		 	—		 	—		 	6,000		
Net interest income after provision for loan losses	25		 	5		 	316,065		 	1,976		 	—		 	318,071		
Other income:	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	183,876		 	—		 	—		 	—		 	—		 	183,876		
Intersegment servicing revenue	41,453		 	—		 	—		 	—		 	(41,453	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	73,468		 	—		 	—		 	—		 	73,468		
Enrollment services revenue	—		 	—		 	—		 	65,092		 	—		 	65,092		
Other income	—		 	—		 	12,954		 	28,142		 	—		 	41,096		
Gain on sale of loans and debt repurchases	—		 	—		 	57		 	—		 	—		 	57		
Derivative market value and foreign currency adjustments, net	—		 	—		 	41,755		 	(2,970	)	 	—		 	38,785		
Derivative settlements, net	—		 	—		 	(16,510	)	 	(767	)	 	—		 	(17,277	)	
Total other income	225,329		 	73,468		 	38,256		 	89,497		 	(41,453	)	 	385,097		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	93,107		 	34,427		 	1,744		 	38,192		 	—		 	167,470		
Cost to provide enrollment services	—		 	—		 	—		 	41,964		 	—		 	41,964		
Loan servicing fees	—		 	—		 	19,798		 	—		 	—		 	19,798		
Depreciation and amortization	1,298		 	5,669		 	—		 	8,523		 	—		 	15,490		
Other	45,269		 	8,915		 	4,829		 	33,869		 	—		 	92,882		
Intersegment expenses, net	27,362		 	4,305		 	41,950		 	(32,164	)	 	(41,453	)	 	—		
Total operating expenses	167,036		 	53,316		 	68,321		 	90,384		 	(41,453	)	 	337,604		
Income before income taxes and corporate overhead allocation	58,318		 	20,157		 	286,000		 	1,089		 	—		 	365,564		
Corporate overhead allocation	(6,487	)	 	(2,163	)	 	(3,604	)	 	12,254		 	—		 	—		
Income before income taxes	51,831		 	17,994		 	282,396		 	13,343		 	—		 	365,564		
Income tax (expense) benefit	(19,695	)	 	(6,837	)	 	(107,309	)	 	3,639		 	—		 	(130,202	)	
Net income	32,136		 	11,157		 	175,087		 	16,982		 	—		 	235,362		
  Net income attributable to noncontrolling interest	—		 	—		 	—		 	1,363		 	—		 	1,363		
Net income attributable to Nelnet, Inc.	$	32,136		 	11,157		 	175,087		 	15,619		 	—		 	233,999		

9.    Major Customer
The Company earns loan servicing revenue from a servicing contract with the U.S. Department of Education that currently expires on June 16, 2019. Revenue earned by the Company's Student Loan and Guaranty Servicing operating segment related to this contract was $33.2 million and $31.2 million for the three months ended September 30, 2015 and 2014 , respectively, and $99.3 million and $92.1 million for the nine months ended September 30, 2015 and 2014 , respectively.

10. Related Parties
The Company has entered into certain contractual arrangements with related parties as described in note 20 of the notes to consolidated financial statements included in the 2014 Annual Report.  The following provides an update for related party transactions that occurred during the first nine months of 2015 .
On December 22, 2014, the Company entered into an agreement with Union Bank and Trust Company ("Union Bank") in which the Company provides marketing, origination, and loan servicing services to Union Bank related to private education loans. The Company is committed to purchase, or arrange for a designee to purchase, all volume originated by Union Bank under this agreement. During the third quarter of 2015, the Company purchased $0.4 million (par value) of private education loans from Union Bank, pursuant to this agreement. As of September 30, 2015, the balance of private education loans held by Union Bank pursuant to this agreement was $8.5 million .
On March 17, 2015, the Company made a $40.5 million equity investment in Agile Sports Technologies, Inc. (doing business as "Hudl"). David Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director

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of Hudl. Prior to the 2015 investment, the Company and Michael Dunlap, the Company's Executive Chairman and a principal shareholder, made separate equity investments in Hudl. Subsequent to the Company's March 2015 investment, the Company and Mr. Dunlap hold combined direct and indirect equity ownership interests in Hudl of 18.7% and 2.8% , respectively. The Company's and Mr. Dunlap's direct and indirect equity ownership interests in Hudl consist of preferred stock with certain liquidation preferences that are considered substantive. Accordingly, for accounting purposes, the Company's and Mr. Dunlap's equity ownership interests are not considered in-substance common stock and the Company is accounting for its equity investment in Hudl under the cost method. The Company's investment in Hudl is included in "investments and notes receivable" in the Company's consolidated balance sheet.

On January 1, 2014, the Company subparticipated the Company's participation interest in a loan receivable from an unrelated third party to Union Bank. On May 22, 2015, the Company paid Union Bank $3.1 million to pay off the outstanding loan balance and terminated the subparticipation agreement.

11.   Fair Value

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. There were no transfers into or out of level 1, level 2, or level 3 for the nine months ended September 30, 2015 .

																			
 	As of September 30, 2015	 	As of December 31, 2014	
 	Level 1	 	Level 2	 	Total	 	Level 1	 	Level 2	 	Total	
Assets:	 	 	 	 	 	 	 	 	 	 	 	
Investments (available-for-sale and trading):	 	 	 	 			 	 	 	 	 	 	
Student loan asset-backed securities	$	—		 	101,237		 	101,237		 	—		 	145,000		 	145,000		
Equity securities	12,177		 	—		 	12,177		 	3,736		 	—		 	3,736		
Debt securities	321		 	—		 	321		 	387		 	—		 	387		
Total investments (available-for-sale and trading)	12,498		 	101,237		 	113,735		 	4,123		 	145,000		 	149,123		
Fair value of derivative instruments	—		 	15,741		 	15,741		 	—		 	64,392		 	64,392		
Total assets	$	12,498		 	116,978		 	129,476		 	4,123		 	209,392		 	213,515		
Liabilities:	 		 	 		 	 		 	 	 	 	 	 	
Fair value of derivative instruments	$	—		 	80,061		 	80,061		 	—		 	32,842		 	32,842		
Total liabilities	$	—		 	80,061		 	80,061		 	—		 	32,842		 	32,842		

The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets:

																
 	As of September 30, 2015	
 	Fair value	 	Carrying value	 	Level 1	 	Level 2	 	Level 3	
Financial assets:	 	 	 	 	 	 	 	 	 	
Student loans receivable	$	29,390,728		 	28,954,280		 	—		 	—		 	29,390,728		
Cash and cash equivalents	114,498		 	114,498		 	114,498		 	—		 	—		
Investments (available-for-sale and trading)	113,735		 	113,735		 	12,498		 	101,237		 	—		
Notes receivable	28,616		 	30,964		 	—		 	28,616		 	—		
Restricted cash	886,974		 	886,974		 	886,974		 	—		 	—		
Restricted cash – due to customers	100,089		 	100,089		 	100,089		 	—		 	—		
Restricted investments	8,297		 	8,297		 	8,297		 	—		 	—		
Accrued interest receivable	380,441		 	380,441		 	—		 	380,441		 	—		
Derivative instruments	15,741		 	15,741		 	—		 	15,741		 	—		
Financial liabilities:	 		 	 		 	 	 	 	 	 	
Bonds and notes payable	28,103,296		 	28,827,603		 	—		 	28,103,296		 	—		
Accrued interest payable	31,632		 	31,632		 	—		 	31,632		 	—		
Due to customers	100,089		 	100,089		 	100,089		 	—		 	—		
Derivative instruments	80,061		 	80,061		 	—		 	80,061		 	—		

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 	As of December 31, 2014	
 	Fair value	 	Carrying value	 	Level 1	 	Level 2	 	Level 3	
Financial assets:	 	 	 	 	 	 	 	 	 	
Student loans receivable	$	28,954,226		 	28,005,195		 	—		 	—		 	28,954,226		
Cash and cash equivalents	130,481		 	130,481		 	130,481		 	—		 	—		
Investments (available-for-sale and trading)	149,123		 	149,123		 	4,123		 	145,000		 	—		
Notes receivable	28,832		 	30,643		 	—		 	28,832		 	—		
Restricted cash	800,164		 	800,164		 	800,164		 	—		 	—		
Restricted cash – due to customers	118,488		 	118,488		 	118,488		 	—		 	—		
Restricted investments	50,276		 	50,276		 	50,276		 	—		 	—		
Accrued interest receivable	351,588		 	351,588		 	—		 	351,588		 	—		
Derivative instruments	64,392		 	64,392		 	—		 	64,392		 	—		
Financial liabilities:	 		 	 		 	 	 	 	 	 	
Bonds and notes payable	27,809,997		 	28,027,350		 	—		 	27,809,997		 	—		
Accrued interest payable	25,904		 	25,904		 	—		 	25,904		 	—		
Due to customers	118,488		 	118,488		 	118,488		 	—		 	—		
Derivative instruments	32,842		 	32,842		 	—		 	32,842		 	—		
 
The methodologies for estimating the fair value of financial assets and liabilities are described in note 21 of the notes to consolidated financial statements included in the 2014 Annual Report.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three and nine months ended September 30, 2015 and 2014 . All dollars are in thousands, except per share amounts, unless otherwise noted.)

The following discussion and analysis provides information that the Company’s management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company.  The discussion should be read in conjunction with the Company’s consolidated financial statements included in the 2014 Annual Report.

Forward-looking and cautionary statements

This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document.  Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “may,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “assume,” “forecast,” “will,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.

The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements.  These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the 2014 Annual Report and elsewhere in this report, and include such risks and uncertainties as:

•	student loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from recently purchased securitized and unsecuritized FFELP and private education loans and initiatives to purchase additional FFELP and private education loans, and risks from changes in levels of student loan prepayment or default rates;	

24

		
•	financing and liquidity risks, including risks of changes in the general interest rate environment and in the securitization and other financing markets for student loans, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;	

•	risks from changes in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets, such as the expected decline over time in FFELP loan interest income and fee-based revenues due to the discontinuation of new FFELP loan originations in 2010 and potential government initiatives or legislative proposals to consolidate existing FFELP loans to the Federal Direct Loan Program or otherwise allow FFELP loans to be refinanced with Federal Direct Loan Program loans, risks related to reduced government payments to guaranty agencies to rehabilitate defaulted FFELP loans and services in support of those activities, including potential adverse effects on the Company's guaranty servicing contracts, risks related to the Company's ability to maintain or increase volumes under the Company's loan servicing contract with the U.S. Department of Education (the "Department"), which accounted for approximately 10 percent of the Company's revenue in 2014 and for which the loan allocation metrics were modified effective September 1, 2014, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of FFELP, Federal Direct Loan Program, and private education loans;	

•	risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors;	

•	uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations; and	

•	risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.	

All forward-looking statements contained in this report are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by securities laws.

OVERVIEW

The Company provides educational products and services in loan servicing, payment processing, education planning, and asset management. These products and services help students and families plan, prepare, and pay for their education and make the administrative and financial processes more efficient for schools and financial organizations. In addition, the Company earns interest income on a portfolio of federally insured student loans.

A reconciliation of the Company's GAAP net income to net income, excluding derivative market value and foreign currency adjustments, is provided below.

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
GAAP net income attributable to Nelnet, Inc.	$	48,955		 	85,219		 	184,629		 	233,999		
Derivative market value and foreign currency adjustments, net of tax	15,364		 	(18,003	)	 	6,634		 	(24,047	)	
Net income, excluding derivative market value and foreign currency adjustments (a)	$	64,319		 	67,216		 	191,263		 	209,952		
 	 	 	 	 	 	 	 	
Earnings per share:	 	 	 	 	 	 	 	
GAAP net income attributable to Nelnet, Inc.	$	1.09		 	1.84		 	4.03		 	5.03		
Derivative market value and foreign currency adjustments, net of tax	0.34		 	(0.39	)	 	0.15		 	(0.51	)	
Net income, excluding derivative market value and foreign currency adjustments (a)	$	1.43		 	1.45		 	4.18		 	4.52		

(a)	The Company provides non-GAAP information that reflects specific items management believes to be important in the evaluation of its financial position and performance. "Derivative market value and foreign currency adjustments" include (i) the unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars. The Company believes these point-in-time estimates of asset and liability values related to these financial instruments that are subject to interest and currency rate fluctuations affect the period-to-period comparability of the results of operations. Accordingly, the Company provides operating results excluding these items for comparability purposes.	

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The Company earns net interest income on its FFELP student loan portfolio in its Asset Generation and Management ("AGM") operating segment. This segment is expected to generate a stable net interest margin and significant amounts of cash as the FFELP portfolio amortizes. As of September 30, 2015 , the Company had a $29.0 billion student loan portfolio that will amortize over the next approximately 25 years. The Company actively seeks to acquire additional FFELP loan portfolios to leverage its servicing scale and expertise to generate incremental earnings and cash flow.

In addition, the Company earns fee-based revenue through the following reportable operating segments:

•	Student Loan and Guaranty Servicing ("LGS") - referred to as Nelnet Diversified Solutions ("NDS")	
		
•	Tuition Payment Processing and Campus Commerce ("TPP&CC") - referred to as Nelnet Business Solutions ("NBS")	

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities. Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured debt transactions.

The information below provides the operating results for each reportable operating segment and Corporate and Other Activities ("Corporate") for the three and nine months ended September 30, 2015 and 2014 (dollars in millions).

(a)	Revenue includes intersegment revenue earned by LGS as a result of servicing loans for AGM.	

(b)	Total revenue includes "net interest income after provision for loan losses" and "total other income" from the Company's segment statements of income, excluding the impact from changes in fair values of derivatives and foreign currency transaction adjustments. Net income excludes changes in fair values of derivatives and foreign currency transaction adjustments, net of tax.	

(c)	Computed as income before income taxes divided by total revenue.	

Excluding derivative market value and foreign currency adjustments, net income decreased for the three months ended September 30, 2015 compared to the same period in 2014 due primarily to a decrease in earnings from the Company's FFELP student loan portfolio, partially offset by increases in earnings from the LGS and TPP&CC operating segments. Net income, excluding derivative market value and foreign currency adjustments, decreased for the nine months ended September 30, 2015 compared to the same period in 2014 due primarily to decreases in earnings from the LGS segment and a decrease in investment advisory fees which are included in Corporate and Other Activities. A further description of these items is provided below.

Student Loan and Guaranty Servicing

•	As of September 30, 2015 , the Company was servicing $175.3 billion in FFELP, private, and government owned student loans, as compared with $158.7 billion of loans as of September 30, 2014 .	

•	Revenue decreased in the nine months ended September 30, 2015 compared to the same period in 2014. Federal budget provisions that became effective July 1, 2014 have reduced payments by the Department to guaranty agencies for assisting student loan borrowers with the rehabilitation of defaulted loans under FFELP, and as a result, rehabilitation revenue has been negatively affected. Rehabilitation collection revenue recognized by the Company was $28.2 million and $35.1 million for the nine months ended September 30, 2015 and 2014, respectively. This decrease in revenue was offset by an increase in revenue from the Department servicing contract, which was $99.3 million for the nine months ended	

26

September 30, 2015 compared to $92.1 million for the same period in 2014. As of September 30, 2015, the Company was servicing $146.7 billion of loans for 5.9 million borrowers under this contract.

•	A significant amount of the Company's guaranty servicing revenue came from a single guaranty servicing client. The contract with this client expired on October 31, 2015. FFELP guaranty servicing and FFELP guaranty collection revenue recognized by the Company from this client for the year ended December 31, 2014 and nine months ended September 30, 2015 was $48.5 million and $32.8 million, respectively.	

•	Before tax operating margin was 16.3% and 23.0% for the nine months ended September 30, 2015 and 2014, respectively. Operating margin decreased in 2015 compared to 2014 as a result of the implementation of federal budget reductions for guaranty agencies revenue. In addition, as the volume of loans serviced under the Department servicing contract continues to grow and loans serviced under the legacy commercial programs continue to run off, the Company expects operating margins to tighten accordingly. The Company also anticipates that margins will tighten as a result of the loss of the FFELP guaranty servicing and FFELP guaranty collection client as discussed above.	

•	Revenue increased in the three months ended September 30, 2015 compared to the same period in 2014 due primarily to an increase in FFELP guaranty collection and government servicing revenue. Rehabilitation collection revenue recognized by the Company was $9.4 million and $4.4 million for the three months ended September 30, 2015 and 2014, respectively, and revenue from the Department servicing contract increased to $33.2 million for the three months ended September 30, 2015 compared to $31.2 million for the same period in 2014. The increase in guaranty collection revenue in the third quarter of 2015 compared to the same period in 2014 was due to the Company having higher than normal sales with guaranty agencies during the second quarter of 2014 in advance of legislative price reductions, which resulted in lower than normal sales during the third quarter of 2014.	

•	Before tax operating margin was 15.0% and 12.1% for the three months ended September 30, 2015 and 2014 , respectively. Operating margin increased as a result of the increase in FFELP guaranty collection revenue for the three months ended September 30, 2015 compared to the same period in 2014 as discussed above.	

Tuition Payment Processing and Campus Commerce

•	Revenue increased in the three and nine months ended September 30, 2015 compared to the same periods in 2014 due to the acquisition of RenWeb on June 3, 2014 and due to increases in the number of managed tuition payment plans, campus commerce customer transaction and payments volume, and new school customers.	

•	Excluding the amortization of intangibles, before tax operating margin was 29.7% and 26.7% for the three months ended September 30, 2015 and 2014 , respectively, and 31.6% and 30.5% for the nine months ended September 30, 2015 and 2014 , respectively. The increase in margin is attributable to increased operating leverage.	

Asset Generation and Management

•	The Company acquired $3.8 billion of student loans during the first nine months of 2015 , of which $1.8 billion were purchased in the third quarter. The average loan portfolio balance was $29.1 billion and $29.3 billion for the three months ended September 30, 2015 and 2014 , respectively, and $28.6 billion and $27.8 billion for the nine months ended September 30, 2015 and 2014 , respectively.	

•	Core student loan spread was 1.45% for the three months ended September 30, 2015 , compared to 1.53% for the same period in 2014. The year over year decrease was the result of an increase in the Company's cost of funds.	

•	Due to historically low interest rates, the Company continues to earn significant fixed rate floor income. During the three months ended September 30, 2015 and 2014 and nine months ended September 30, 2015 and 2014 , the Company earned $48.2 million , $49.2 million , $139.5 million , and $130.7 million , respectively, of fixed rate floor income (net of $5.5 million , $5.4 million , $15.5 million , and $19.3 million of derivative settlements, respectively, used to hedge such loans).	

Corporate and Other Activities

•	The Company recognized net gains from investment activity of $2.4 million and $9.0 million during the nine months ended September 30, 2015 and 2014 , respectively. The majority of gains recognized in 2014 were from sales of student loan asset-backed security investments. The income statement impact related to investment activity was minimal during the three months ended September 30, 2015 and 2014.	

27

		
•	Whitetail Rock Capital Management, LLC ("WRCM"), the Company's SEC-registered investment advisory subsidiary, recognized investment advisory revenue of $0.7 million and $1.8 million for the three months ended September 30, 2015 and 2014 , respectively, and $2.2 million and $14.1 million for the nine months ended September 30, 2015 and 2014 , respectively. Due to improvements in the capital markets, the opportunities to earn performance fees on the sale of student loan asset-backed securities are becoming increasingly limited.	

•	During the nine months ended September 30, 2015, the Company recognized gains of $3.0 million from the repurchase of $14.1 million (par value) of its Junior Subordinated Hybrid Securities unsecured debt and gains of $1.6 million from the repurchase of $31.8 million (par value) of its own asset-backed debt securities. The Company recognized minimal gains on repurchases of its own debt during the three months ended September 30, 2015 and the three and nine months ended September 30, 2014.	

Liquidity and Capital Resources

•	As of September 30, 2015 , the Company had cash and cash equivalents of $114.5 million . In addition, the Company had a portfolio of available-for-sale and trading investments, consisting primarily of student loan asset-backed securities, with a fair value of $113.7 million as of September 30, 2015 .	

•	For the nine months ended September 30, 2015 , the Company generated $307.4 million in net cash provided by operating activities, including $55.6 million from the termination of certain derivative financial instruments.	

•	Forecasted future cash flows from the Company's FFELP student loan portfolio financed in asset-backed securitization transactions are estimated to be approximately $2.46 billion as of September 30, 2015 .	

•	During the nine months ended September 30, 2015 , the Company repurchased a total of 1,530,592 shares of Class A common stock for $66.6 million ($43.54 per share), including 356,584 shares for $15.6 million ($43.79 per share) during the third quarter.	

•	During the nine months ended September 30, 2015 , the Company paid cash dividends of $13.7 million ($0.30 per share), including $4.5 million ($0.10 per share) during the third quarter.	

•	The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP and private education loan acquisitions; strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. Dependent upon the timing and size of the opportunities, the Company's cash and investment balances may increase from their current levels.	

Subsequent Events

•	On October 30, 2015, the Company entered into an amended and restated credit agreement for its $350.0 million line of credit. Under the amended terms, the maturity date of the credit agreement was extended from June 30, 2019 to October 30, 2020. In addition, the following revisions were made to certain covenants:	

•	A provision was added to permit acquisitions of businesses, for consideration of up to $75.0 million per fiscal year, that are not in one of the Company’s existing lines of business.	

•	The cap for other non-specified permitted investments increased to 20 percent of the Company’s consolidated net worth, with the cap excluding all existing investments at the time of the amendment.	

•	The current cap related to the volume of private education loans that the Company may hold was reduced from $900.0 million to a revised level of $500.0 million.   All private education loans that are held within securitization vehicles are excluded from the $500.0 million threshold.	

•	The minimum consolidated net worth threshold changed beginning as of September 30, 2015 to be not less than the sum of (i) $1.35 billion; plus, in each case for periods after September 30, 2015, (ii) 50 percent of consolidated net income;  plus (iii) 100 percent of the increase to consolidated net worth from the issuance of capital stock.	

The facility size of $350.0 million and cost of funds did not change as part of the amendment.  

28

As of September 30, 2015 , the unsecured line of credit had an outstanding balance of $70.0 million and $280.0 million was available for future use.

•	The Company's Board of Directors declared a fourth quarter cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.12 per share. The fourth quarter dividend will be paid on December 15, 2015, to shareholders of record at the close of business on December 1, 2015.	

CONSOLIDATED RESULTS OF OPERATIONS

Analysis of the Company's operating results for the three and nine months ended September 30, 2015 compared to the same periods in 2014 is summarized below.

The Company’s operating results are primarily driven by the performance of its existing portfolio and the revenues generated by its fee-based businesses and the costs to provide their products and services.  The performance of the Company’s portfolio is driven by net interest income (which includes financing costs) and losses related to credit quality of the assets, along with the cost to administer and service the assets and related debt.

The Company operates in distinct operating segments as described previously. For a reconciliation of the segment operating results to the consolidated results of operations, see note 8 of the notes to consolidated financial statements included under Part I, Item 1 of this report. Since the Company monitors and assesses its operations and results based on these segments, the discussion following the consolidated results of operations is presented on a segment basis.

29

	
															
 	Three months	 	Nine months	 	 	
 	ended September 30,	 	ended September 30,	 	 	
 	2015	 	2014	 	2015	 	2014	 	Additional information	
Loan interest	$	187,701		 	187,862		 	535,480		 	520,224		 	Year over year increase was due to an increase in the average student loan portfolio balance and gross fixed rate floor income, partially offset by an increase in consolidation rebate fees.	
Investment interest	1,456		 	1,562		 	5,548		 	5,023		 	Includes income from unrestricted interest-earning deposits and investments and funds in asset-backed securitizations.	
Total interest income	189,157		 	189,424		 	541,028		 	525,247		 	 	
Interest expense	77,164		 	71,937		 	221,344		 	201,176		 	Year over year increase due to an increase in average debt outstanding and an increase in the Company's cost of funds. Quarter over quarter increase is due to an increase in the cost of funds.	
Net interest income	111,993		 	117,487		 	319,684		 	324,071		 	See table below for additional analysis.	
Less provision for loan losses	3,000		 	2,000		 	7,150		 	6,000		 	Represents the periodic expense of maintaining an allowance appropriate to absorb losses inherent in the portfolio of student loans. See AGM operating segment - results of operations.	
Net interest income after provision for loan losses	108,993		 	115,487		 	312,534		 	318,071		 	 	
Other income:	 		 	 		 	 		 	 		 	 	
LGS revenue	61,520		 	52,659		 	183,164		 	183,876		 	See LGS operating segment - results of operations.	
TPP&CC revenue	30,439		 	26,399		 	92,805		 	73,468		 	See TPP&CC operating segment - results of operations.	
NES revenue	19,500		 	22,936		 	54,524		 	65,092		 	See table below for additional analysis.	
Other income	6,523		 	7,650		 	20,945		 	41,096		 	See table below for the components of "other income."	
Gain on sale of loans and debt repurchases	597		 	—		 	4,987		 	57		 	Gains are primarily from the Company repurchasing its own debt.	
Derivative settlements, net	(5,878	)	 	(4,834	)	 	(16,535	)	 	(17,277	)	 	The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income. See table below for additional analysis.	
Derivative market value and foreign currency adjustments, net	(24,780	)	 	29,037		 	(10,699	)	 	38,785		 	Includes (i) the unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.	
Total other income	87,921		 	133,847		 	329,191		 	385,097		 	 	
Operating expenses:	 		 	 		 	 		 	 		 	 	
Salaries and benefits	63,215		 	61,098		 	183,052		 	167,470		 	Increase was due to additional personnel to support increased LGS servicing volume and TPP&CC revenue.	
Cost to provide enrollment services	12,534		 	14,178		 	35,398		 	41,964		 	See table below for additional analysis.	
Loan servicing fees	7,793		 	7,077		 	22,829		 	19,798		 	Increase was due to an increase in third party loan servicing fees incurred by AGM as volume at third parties has grown with recent loan purchases.	
Depreciation and amortization	6,977		 	5,493		 	19,140		 	15,490		 	Increase was due to additional depreciation expense as a result of investment in technology infrastructure and additional expense from the amortization of intangible assets. Intangible amortization expense was $2.4 million and $2.0 million for the three months ended September 30, 2015 and 2014, respectively, and $7.2 million and $4.4 million for the nine months ended September 30, 2015 and 2014, respectively.	
Other	30,419		 	29,599		 	91,575		 	92,882		 	The increase for the three months ended September 30, 2015 compared to the same period in 2014 was due primarily to additional expense to support the increase in FFELP guaranty collection revenue during the quarter. The decrease for the nine months ended September 30, 2015 compared to the same period in 2014 was due to a year-to-date decrease in collection costs directly related to the decrease in FFELP guaranty collection revenue, partially offset by an increase in other costs to support increased LGS servicing volume and TPP&CC revenue.	
Total operating expenses	120,938		 	117,445		 	351,994		 	337,604		 	 	
Income before income taxes	75,976		 	131,889		 	289,731		 	365,564		 	 	
Income tax expense	26,999		 	46,513		 	104,985		 	130,202		 	The effective tax rate was 35.55% and 35.30% in the three months ended September 30, 2015 and 2014, respectively, and 36.25% and 35.75% in the nine months ended September 30, 2015 and 2014, respectively.	
Net income	48,977		 	85,376		 	184,746		 	235,362		 	 	
Net income attributable to noncontrolling interest	22		 	157		 	117		 	1,363		 	 	
Net income attributable to Nelnet, Inc.	$	48,955		 	85,219		 	184,629		 	233,999		 	 	
Additional information:	 	 	 	 	 	 	 	 	 	
Net income attributable to Nelnet, Inc.	$	48,955		 	85,219		 	184,629		 	233,999		 	The Company provides non-GAAP information that reflects specific items management believes to be important in the evaluation of its operating results. The Company believes the point-in-time estimates of asset and liability values related to its derivatives and Euro-denominated bonds that are subject to interest and currency rate fluctuations affect the period-to-period comparability of the results of operations. These items are excluded here for comparability purposes.	
Derivative market value and foreign currency adjustments	24,780		 	(29,037	)	 	10,699		 	(38,785	)	 		
Tax effect	(9,416	)	 	11,034		 	(4,065	)		14,738		 		
Net income attributable to Nelnet, Inc., excluding derivative market value and foreign currency adjustments	$	64,319		 	67,216		 	191,263		 	209,952		 		

30

The following table summarizes the components of "net interest income" and "derivative settlements, net."

															
 	Three months ended September 30,	 	Nine months ended September 30,	 	 	
 	2015	 	2014	 	2015	 	2014	 	Additional information	
Variable student loan interest margin, net of settlements on derivatives	$	58,250		 	63,390		 	163,404		 	176,413		 	Represents the yield the Company receives on its student loan portfolio less the cost of funding these loans. Variable student loan spread is also impacted by the amortization/accretion of loan premiums and discounts, the 1.05% per year consolidation loan rebate fee paid to the Department, and yield adjustments from borrower benefit programs. See AGM operating segment - results of operations.	
Fixed rate floor income, net of settlements on derivatives	48,229		 	49,206		 	139,542		 	130,657		 	The Company has a portfolio of student loans that are earning interest at a fixed borrower rate which exceeds the statutorily defined variable lender rates, generating fixed rate floor income. See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk" for additional information.	
Investment interest	1,456		 	1,562		 	5,548		 	5,023		 	 	
Non-portfolio related derivative settlements	(257	)	 	(259	)	 	(762	)	 	(767	)	 	 	
Corporate debt interest expense	(1,563	)	 	(1,246	)	 	(4,583	)	 	(4,532	)	 	Includes interest expense on the Junior Subordinated Hybrid Securities and unsecured and secured lines of credit.	
Net interest income (net of settlements on derivatives)	$	106,115		 	112,653		 	303,149		 	306,794		 	 	

The following table summarizes the components of "Enrollment services revenue" and "cost to provide enrollment services."

	
																			
 	Inquiry management (marketing) (a)	 	Inquiry management (software)	 	Inquiry generation (b)	 	Digital marketing	 	Content solutions (c)	 	Total	
 	Three months ended September 30, 2015	
Enrollment services revenue	$	12,884		 	903		 	—		 	1,087		 	4,626		 	19,500		
Cost to provide enrollment services	11,350		 	—		 	—		 	85		 	1,099		 	12,534		
Gross profit	$	1,534		 	903		 	—		 	1,002		 	3,527		 	6,966		
Gross profit %	11.9%	 	 	 		 	 	 	 	 	 	
 	Three months ended September 30, 2014	
Enrollment services revenue	$	13,934		 	821		 	1,023		 	1,071		 	6,087		 	22,936		
Cost to provide enrollment services	12,391		 	—		 	755		 	63		 	969		 	14,178		
Gross profit	$	1,543		 	821		 	268		 	1,008		 	5,118		 	8,758		
Gross profit %	11.1%	 	 	 		 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	Nine months ended September 30, 2015	
Enrollment services revenue	$	36,844		 	2,950		 	—		 	3,391		 	11,339		 	54,524		
Cost to provide enrollment services	32,543		 	—		 	—		 	274		 	2,581		 	35,398		
Gross profit	$	4,301		 	2,950		 	—		 	3,117		 	8,758		 	19,126		
Gross profit %	11.7%	 	 	 		 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	Nine months ended September 30, 2014	
Enrollment services revenue	$	39,978		 	2,835		 	6,382		 	3,047		 	12,850		 	65,092		
Cost to provide enrollment services	35,320		 	—		 	4,186		 	198		 	2,260		 	41,964		
Gross profit	$	4,658		 	2,835		 	2,196		 	2,849		 	10,590		 	23,128		
Gross profit %	11.7%	 	 	 		 	 	 	 	 	 	

(a)	Inquiry management (marketing) revenue decreased $ 1.1 million ( 7.5% ) and $3.1 million ( 7.8% ) for the three and nine months ended September 30, 2015 , respectively, compared to the same periods in 2014 as a result of a decrease in spending on marketing efforts by school clients.	

(b)	Effective August 29, 2014, the Company stopped providing inquiry generation services.	

(c)	Content solutions revenue decreased $1.5 million (24.0%) and $1.5 million (11.8%) for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014 due to the recognition of a $1.1 million gain on the sale of an investment during the third quarter of 2014.	

31

The following table summarizes the components of "other income."

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Borrower late fee income	$	3,605		 	3,676		 	11,357		 	10,920		
Investment advisory fees (a)	677		 	1,842		 	2,167		 	14,106		
Realized and unrealized gains/(losses) on investments, net	5		 	(267	)	 	2,374		 	9,024		
Other	2,236		 	2,399		 	5,047		 	7,046		
Other income	$	6,523		 	7,650		 	20,945		 	41,096		

(a)	Under certain investment management agreements, WRCM earns annual fees of up to 25 basis points on the outstanding balance of investments and up to 50 percent of the gains from the sale of securities for which it provides advisory services. Due to improvements in the capital markets, the opportunities to earn performance fees on the sale of student loan asset-backed securities are becoming increasingly limited. As of September 30, 2015 , WRCM was managing an investment portfolio of $983.8 million for third-party entities.	

STUDENT LOAN AND GUARANTY SERVICING OPERATING SEGMENT – RESULTS OF OPERATIONS

Student Loan Servicing Volumes (dollars in millions)

	
																															
Company owned	 	$22,650	 	$21,237	 	$21,397	 	$21,192	 	$21,110	 	$20,511	 	$19,742	 	$19,369	 	$18,934	 	$18,593	
% of total	 	29.8%	 	21.8%	 	15.5%	 	14.3%	 	14.1%	 	12.9%	 	12.2%	 	11.5%	 	11.1%	 	10.6%	
Number of servicing borrowers:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Government servicing:	 	3,036,534		 	3,892,929		 	5,305,498		 	5,438,933		 	5,465,395		 	5,824,743		 	5,915,449		 	5,882,446		 	5,817,078		 	5,886,266		
FFELP servicing:	 	1,799,484		 	1,626,146		 	1,462,122		 	1,426,435		 	1,390,541		 	1,404,619		 	1,397,295		 	1,358,551		 	1,353,785		 	1,339,307		
Private servicing:	 	164,554		 	173,948		 	195,580		 	191,606		 	186,863		 	200,095		 	202,529		 	205,926		 	209,854		 	230,403		
Total:	 	5,000,572		 	5,693,023		 	6,963,200		 	7,056,974		 	7,042,799		 	7,429,457		 	7,515,273		 	7,446,923		 	7,380,717		 	7,455,976		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of remote hosted borrowers:	 	9,566,296		 	6,912,204		 	1,915,203		 	1,796,287		 	1,735,594		 	1,677,547		 	1,611,654		 	1,592,813		 	1,559,573		 	1,710,577		

32

Summary and Comparison of Operating Results

															
 	Three months ended September 30,	 	Nine months ended September 30,	 	Additional information	
 	2015	 	2014	 	2015	 	2014	 	 	
Net interest income	$	14		 	5		 	34		 	25		 		
Loan and guaranty servicing revenue	61,900		 	52,659		 	183,544		 	183,876		 	See table below for additional analysis.	
Intersegment servicing revenue	12,027		 	13,432		 	37,121		 	41,453		 	Represents revenue earned by the LGS operating segment as a result of servicing loans for the AGM operating segment. Decrease was due to portfolio run-off.	
Total other income	73,927		 	66,091		 	220,665		 	225,329		 		
Salaries and benefits	34,525		 	33,627		 	99,813		 	93,107		 	Increase due to additional personnel to support the increase in volume under the Department servicing contract, the increase in volume of loans entering repayment status, and the increase in private loan servicing volume.	
Depreciation and amortization	484		 	441		 	1,457		 	1,298		 		
Other expenses	14,602		 	12,643		 	44,578		 	45,269		 	Increase for the three months ended September 30, 2015 compared to the same period in 2014 was due to additional expenses to support the increase in guaranty collection revenue and to support increased servicing volume. The decrease for the nine months ended September 30, 2015 compared to the same period in 2014 was due to a decrease in guaranty collection costs directly related to the year over year decrease in guaranty collection revenue, partially offset by increases to support the increased servicing volume. See table below for additional information regarding changes in guaranty collection revenue.	
Intersegment expenses, net	10,886		 	8,843		 	32,152		 	27,362		 	Intersegment expenses represent costs for certain corporate activities that are allocated to each operating segment based on estimated use of such activities and services.	
Total operating expenses	60,497		 	55,554		 	178,000		 	167,036		 		
Income before income taxes and corporate overhead allocation	13,444		 	10,542		 	42,699		 	58,318		 		
Corporate overhead allocation	(2,351	)	 	(2,567	)	 	(6,798	)	 	(6,487	)	 		
Income before income taxes	11,093		 	7,975		 	35,901		 	51,831		 		
Income tax expense	(4,215	)	 	(3,030	)	 	(13,643	)	 	(19,695	)	 		
Net income	6,878		 	4,945		 	22,258		 	32,136		 		
  Net loss attributable to noncontrolling interest	5		 	—		 	5		 	—		 	 	
Net income attributable to Nelnet, Inc.	$	6,883		 	4,945		 	22,263		 	32,136		 	 	
Before tax operating margin	15.0	%	 	12.1	%	 	16.3	%	 	23.0	%	 	Operating margin decreased for the nine months ended September 30, 2015 compared to the same period in 2014 as a result of the implementation of previously announced federal budget reductions for guaranty agencies revenue. In addition, as the volume of loans serviced under the Department servicing contract continues to grow and loans serviced under the legacy commercial programs continue to run off, the Company expects operating margins to decrease accordingly. The Company also anticipates that margins will decrease as a result of the loss of the FFELP guaranty servicing and FFELP guaranty collection client as discussed below. The increase in margin for the three months ended September 30, 2015 compared to the same period in 2014 is due primarily to the increase in guaranty collection revenue during the third quarter of 2015 compared to the same period in 2014 as discussed below.	

33

The following table summarizes the components of "Loan and guaranty servicing revenue."

															
 	Three months ended September 30,	 	Nine months ended September 30,	 	Additional information	
 	2015	 	2014	 	2015	 	2014	 	 	
Government servicing	$	33,229		 	31,196		 	99,269		 	92,071		 	Increase due to an increase in the number of borrowers serviced under the Department servicing contract.	
FFELP servicing	3,572		 	3,301		 	10,600		 	9,833		 	Increase due to an increase in third-party servicing volume as a result of conversions to the Company's servicing platform during the first nine months of 2015. Over time, FFELP servicing revenue will decrease as third-party customers' FFELP portfolios run off.	
Private servicing	3,323		 	2,708		 	9,105		 	7,754		 	Increase due to an increase in private loan servicing volume.	
FFELP guaranty servicing	2,663		 	2,745		 	7,561		 	8,804		 	Decrease will continue as FFELP portfolios run off and guaranty volume decreases. See additional information regarding guaranty servicing and guaranty collection revenue in the paragraph following this table.	
FFELP guaranty collection	13,006		 	7,109		 	39,751		 	45,429		 	The Company earns revenue from rehabilitating defaulted FFELP loans on behalf of guaranty agencies. Over time, this FFELP-related revenue source will decrease as FFELP portfolios continue to run off. Also, federal budget provisions that became effective July 1, 2014 have reduced payments by the Department to guaranty agencies for assisting student loan borrowers with the rehabilitation of defaulted loans under FFELP. Rehabilitation collection revenue was $9.4 million and $4.4 million for the three months ended September 30, 2015 and 2014, respectively, and $28.2 million and $35.1 million for the nine months ended September 30, 2015 and 2014, respectively. The increase in revenue for the three months ended September 30, 2015 compared to the same period in 2014 was due to the Company having higher than normal sales with guaranty agencies during the second quarter of 2014 in advance of legislative price reductions, which resulted in lower than normal sales during the third quarter of 2014. This revenue was otherwise negatively impacted subsequent to July 1, 2014 as a result of the federal budget provisions described above. The Company anticipates this revenue will continue to be negatively impacted as a result of these federal budget provisions. See additional information regarding guaranty servicing and guaranty collection revenue in the paragraph following this table.	
Software services	4,995		 	4,750		 	14,501		 	17,494		 	During the first quarter of 2014, the Company settled a billing dispute related to a prior period and recognized revenue of $2.2 million. The increase in revenue quarter over quarter was due to an increase in the number of borrowers from remote hosted customers; however, year over year revenue decreased due to a lower number of borrowers from remote hosted customers on average during the nine months ended September 30, 2015 compared to the same period in 2014.	
 Other	1,112		 	850		 	2,757		 	2,491		 	 	
Loan and guaranty servicing revenue	$	61,900		 	52,659		 	183,544		 	183,876		 	 	

FFELP Guaranty Servicing and FFELP Guaranty Collection Revenue

A significant amount of the Company's guaranty servicing revenue came from a single guaranty servicing client. During the second quarter of 2015, the client notified the Company of their intent to not renew this contract upon its expiration. The contract with this client expired on October 31, 2015. FFELP guaranty servicing and FFELP guaranty collection revenue recognized by the Company from this client for the year ended December 31, 2014 and nine months ended September 30, 2015 was $48.5 million and $32.8 million, respectively. The Company incurred collection costs that were directly related to guaranty collection revenue earned on this contract.

34

TUITION PAYMENT PROCESSING AND CAMPUS COMMERCE OPERATING SEGMENT – RESULTS OF OPERATIONS

This segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year. Tuition management revenue is recognized over the course of the academic term, but the peak operational activities take place in summer and early fall. Higher amounts of revenue are typically recognized during the first quarter due to fees related to grant and aid applications as well as online applications and enrollment services of RenWeb.  The Company’s operating expenses do not follow the seasonality of the revenues. This is primarily due to generally fixed year-round personnel costs and seasonal marketing costs. Based on the timing of revenue recognition and when expenses are incurred, revenue and pre-tax operating margin are higher in the first quarter as compared to the remainder of the year.

On June 3, 2014, the Company purchased RenWeb. The results of operations of RenWeb are reported in the Company's consolidated financial statements from the date of acquisition. RenWeb's revenue included in the Company's consolidated financial statements for the nine months ended September 30, 2015 and 2014 was $15.7 million and $5.3 million, respectively.

Summary and Comparison of Operating Results

															
 	Three months ended September 30,	 	Nine months ended September 30,	 	Additional information	
 	2015	 	2014	 	2015	 	2014	 	 	
Net interest income	$	—		 	2		 	3		 	5		 	 	
Tuition payment processing, school information, and campus commerce revenue	30,439		 	26,399		 	92,805		 	73,468		 	In addition to the acquisition of RenWeb referred to above, the remaining increase was due to an increase in the number of managed tuition payment plans, campus commerce customer transaction and payments volume, and new school customers.	
Salaries and benefits	13,983		 	13,288		 	40,887		 	34,427		 	Increase due primarily to the acquisition of RenWeb referred to above and investments in new products and services.	
Depreciation and amortization	2,202		 	2,396		 	6,592		 	5,669		 	Increase in the nine months ended September 30, 2015 compared to the same period in 2014 was due to the additional amortization of intangibles from the acquisition of RenWeb referred to above. Amortization of intangible assets was $6.5 million and $4.4 million for the nine months ended September 30, 2015 and 2014, respectively.	
Other expenses	3,579		 	3,312		 	11,493		 	8,915		 	Increase due primarily to the acquisition of RenWeb referred to above and investments in new products and services.	
Intersegment expenses, net	2,872		 	1,481		 	8,271		 	4,305		 	Intersegment expenses represent costs for certain corporate activities that are allocated to each operating segment based on estimated use of such activities and services.	
Total operating expenses	22,636		 	20,477		 	67,243		 	53,316		 	 	
Income before income taxes and corporate overhead allocation	7,803		 	5,924		 	25,565		 	20,157		 	 	
Corporate overhead allocation	(941	)	 	(856	)	 	(2,721	)	 	(2,163	)	 	 	
Income before income taxes	6,862		 	5,068		 	22,844		 	17,994		 	 	
Income tax expense	(2,606	)	 	(1,926	)	 	(8,680	)	 	(6,837	)	 	 	
Net income	$	4,256		 	3,142		 	14,164		 	11,157		 	 	
Before tax operating margin	22.5	%	 	19.2	%	 	24.6	%	 	24.5	%	 	Excluding the amortization of intangibles, before tax operating margin was 29.7% and 26.7% for the three months ended September 30, 2015 and 2014, respectively, and 31.6% and 30.5% for the nine months ended September 30, 2015 and 2014, respectively. The increase in margin is primarily due to operating leverage.	

35

ASSET GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS

Student Loan Portfolio

As of September 30, 2015 , the Company had a $29.0 billion student loan portfolio that will amortize over the next approximately 25 years. For a summary of the Company’s student loan portfolio as of September 30, 2015 and December 31, 2014 , see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
 
Loan Activity

The following table sets forth the activity of loans:

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Beginning balance	$	28,313,850		 	29,579,785		 	28,223,908		 	26,121,306		
Loan acquisitions	1,771,841		 	367,816		 	3,835,983		 	5,555,714		
Repayments, claims, capitalized interest, and other	(581,321	)	 	(730,654	)	 	(1,900,237	)	 	(2,104,724	)	
Consolidation loans lost to external parties	(316,167	)	 	(287,723	)	 	(967,455	)	 	(643,066	)	
Loans sold	—		 	(2	)	 	(3,996	)	 	(8	)	
Ending balance	$	29,188,203		 	28,929,222		 	29,188,203		 	28,929,222		
 
Allowance for Loan Losses and Loan Delinquencies

The Company maintains an allowance appropriate to absorb losses, net of recoveries, inherent in the portfolio of student loans, which results in periodic expense provisions for loan losses. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs.  

For a summary of the activity in the allowance for loan losses for the three and nine months ended September 30, 2015 and 2014 , and a summary of the Company's student loan delinquency amounts as of September 30, 2015 , December 31, 2014 , and September 30, 2014 , see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

The Company's provision for loan losses and charge-offs of federally insured loans has decreased during the first nine months of 2015 as compared to the same period in 2014. The Company’s primary driver for loan growth has been acquiring student loan portfolios.  The Company records loans acquired net of any credit exposure through a credit discount, separate from the allowance for loan losses. This credit discount is non-accretable to interest income.   The Company continues to evaluate credit losses associated with purchased loans based on current information and changes in expectations to determine the need for any additional allowance for loan losses.   The recent purchases of large loan portfolios have resulted in an increase in the non-accretable discount balance, but no additional allowance for loan losses associated with these recent loan portfolios has been necessary.   In addition, as the Company’s overall federally insured student loan portfolio continues to season with the length of time that loans are in active repayment, credit performance continues to improve.

The Company's provision for loan losses for private education loans has increased during the first nine months of 2015 compared to 2014 due to the increase in the private education loan balance.

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Student Loan Spread Analysis

The following table analyzes the student loan spread on the Company’s portfolio of student loans, which represents the spread between the yield earned on student loan assets and the costs of the liabilities and derivative instruments used to fund the assets.

																
 	Three months ended	 	Nine months ended	
 	September 30,
2015	 	June 30,
2015	 	September 30,
2014	 	September 30,
2015	 	September 30,
2014	
Variable student loan yield, gross	2.59	 %	 	2.57	 %	 	2.58	 %	 	2.56	 %	 	2.55	 %	
Consolidation rebate fees	(0.82	)	 	(0.83	)	 	(0.83	)	 	(0.83	)	 	(0.82	)	
Discount accretion, net of premium and deferred origination costs amortization	0.06		 	0.04		 	0.05		 	0.05		 	0.05		
Variable student loan yield, net	1.83		 	1.78		 	1.80		 	1.78		 	1.78		
Student loan cost of funds - interest expense	(1.04	)	 	(1.01	)	 	(0.95	)	 	(1.01	)	 	(0.94	)	
Student loan cost of funds - derivative settlements	—		 	—		 	0.01		 	—		 	0.01		
Variable student loan spread	0.79		 	0.77		 	0.86		 	0.77		 	0.85		
Fixed rate floor income, net of settlements on derivatives	0.66		 	0.64		 	0.67		 	0.66		 	0.63		
Core student loan spread	1.45	 %		1.41	 %		1.53	 %	 	1.43	 %	 	1.48	 %	
 	 	 	 	 	 	 	 	 	 	
Average balance of student loans	$	29,109,130		 	28,297,312		 	29,328,743		 	28,565,287		 	27,802,474		
Average balance of debt outstanding	29,067,202		 	28,331,870		 	29,485,652		 	28,621,681		 	27,860,552		

A trend analysis of the Company's core and variable student loan spreads is summarized below.

		
(a)	The interest earned on a large portion of the Company's FFELP student loan assets is indexed to the one-month LIBOR rate.  The Company funds the majority of its assets with three-month LIBOR indexed floating rate securities.  The relationship between the indices in which the Company earns interest on its loans and funds such loans has a significant impact on student loan spread.  This table (the right axis) shows the difference between the Company's liability base rate and the one-month LIBOR rate by quarter.	

Variable student loan spread decreased during the three and nine months ended September 30, 2015 as compared to the same periods in 2014 as a result of an increase in the Company's cost of funds.

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The primary difference between variable student loan spread and core student loan spread is fixed rate floor income.  A summary of fixed rate floor income and its contribution to core student loan spread follows:

																
 	Three months ended	 	Nine months ended	
 	September 30, 2015	 	June 30, 2015	 	September 30, 2014	 	September 30, 2015	 	September 30, 2014	
Fixed rate floor income, gross	$	53,685		 	50,088		 	54,627		 	155,032		 	150,002		
Derivative settlements (a)	(5,456	)	 	(5,019	)	 	(5,421	)	 	(15,490	)	 	(19,345	)	
Fixed rate floor income, net	$	48,229		 	45,069		 	49,206		 	139,542		 	130,657		
Fixed rate floor income contribution to spread, net	0.66	%	 	0.64	%	 	0.67	%	 	0.66	%	 	0.63	%	

		
(a)	Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.	

The high levels of fixed rate floor income earned during 2015 and 2014 are due to historically low interest rates.  If interest rates remain low, the Company anticipates continuing to earn significant fixed rate floor income in future periods.  See Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” which provides additional detail on the Company’s portfolio earning fixed rate floor income and the derivatives used by the Company to hedge these loans.

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Summary and Comparison of Operating Results

															
 	Three months ended September 30,	 	Nine months ended September 30,	 	Additional information	
 	2015	 	2014	 	2015	 	2014	 	 	
Net interest income after provision for loan losses	$	109,157		 	114,912		 	311,728		 	316,065		 	See table below for additional analysis.	
Other income	3,312		 	4,294		 	11,838		 	12,954		 	The primary component of other income is borrower late fees, which were $3.6 million and $3.7 million for the three months ended September 30, 2015 and 2014, respectively, and $11.4 million and $10.9 million for the nine months ended September 30, 2015 and 2014, respectively.	
Gain on sale of loans and debt repurchases	608		 	—		 	2,000		 	57		 	Gains were primarily from the Company repurchasing its own asset-backed debt securities.	
Derivative market value and foreign currency adjustments, net	(24,357	)	 	29,430		 	(11,363	)	 	41,755		 	Includes (i) the unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.	
Derivative settlements, net	(5,623	)	 	(4,575	)	 	(15,775	)	 	(16,510	)	 	The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income as reflected in the table below.	
Total other income	(26,060	)	 	29,149		 	(13,300	)	 	38,256		 	 	
Salaries and benefits	558		 	565		 	1,623		 	1,744		 	 	
Loan servicing fees	7,793		 	7,077		 	22,829		 	19,798		 	Third party servicing fees have increased due to recent purchases of a significant amount of loans serviced at third parties.	
Other expenses	1,421		 	1,559		 	3,828		 	4,829		 	 	
Intersegment expenses, net	12,578		 	13,611		 	38,016		 	41,950		 	Amounts include fees paid to the LGS operating segment for the servicing of the Company’s student loan portfolio. Decrease due to run off of the portfolio serviced by LGS.	
Total operating expenses	22,350		 	22,812		 	66,296		 	68,321		 	 	
Income before income taxes and corporate overhead allocation	60,747		 	121,249		 	232,132		 	286,000		 	 	
Corporate overhead allocation	(1,176	)	 	(1,026	)	 	(3,401	)	 	(3,604	)	 	 	
Income before income taxes	59,571		 	120,223		 	228,731		 	282,396		 	 	
Income tax expense	(22,639	)	 	(45,684	)	 	(86,919	)	 	(107,309	)	 	 	
Net income	$	36,932		 	74,539		 	141,812		 	175,087		 	 	
 	 	 	 	 	 	 	 	 	 	
Additional information:	 	 	 	 	 	 	 	 	 	
Net income	$	36,932		 	74,539		 	141,812		 	175,087		 	The Company provides non-GAAP information that reflects specific items management believes to be important in the evaluation of its operating results. The Company believes the point-in-time estimates of asset and liability values related to its derivatives and Euro-denominated bonds that are subject to interest and currency rate fluctuations affect the period-to-period comparability of the results of operations. These items are excluded here for comparability purposes.	
Derivative market value and foreign currency adjustments, net	24,357		 	(29,430	)	 	11,363		 	(41,755	)	 		
Tax effect	(9,256	)	 	11,183		 	(4,318	)	 	15,867		 		
Net income, excluding derivative market value and foreign currency adjustments	$	52,033		 	56,292		 	148,857		 	149,199		 		

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The following table summarizes the components of "net interest income after provision for loan losses" and "derivative settlements, net."

															
 	Three months ended September 30,	 	Nine months ended September 30,	 	Additional information	
 	2015	 	2014	 	2015	 	2014	 	 	
Variable interest income, net of settlements on derivatives	$	189,652		 	191,717		 	546,998		 	532,260		 	Quarter over quarter decrease was due to a slight decrease in the average student loan portfolio. Year over year increase due primarily to an increase in the average student loan portfolio.	
Consolidation rebate fees	(60,044	)	 	(61,293	)	 	(177,342	)	 	(170,487	)	 	Quarter over quarter decrease due to a decrease in the average consolidation loan portfolio for the three months ended September 30, 2015 compared to the same period in 2014. Run-off of the consolidation loan portfolio was partially offset by a significant consolidation loan purchase in August 2015. Year over year increase due to an increase in the average consolidation loan balance as a result of significant consolidation loan purchases in April 2014 and August 2015.	
Discount accretion, net of premium and deferred origination costs amortization	4,243		 	3,657		 	10,509		 	11,284		 	Quarter over quarter increase due to a significant loan purchase at a discount during August 2015. Year over year decrease due to the Company's recent purchases of loans at a net premium.	
Interest on bonds and notes payable	(75,601	)	 	(70,691	)	 	(216,761	)	 	(196,644	)	 	Quarter over quarter increase due primarily to an increase in the Company's cost of funds for the three months ended September 30, 2015 compared to the same period in 2014, partially offset by a decrease in the average debt outstanding. Year over year increase due to an increase in cost of funds and an increase in the average debt outstanding.	
Variable student loan interest margin, net of settlements on derivatives	58,250		 	63,390		 	163,404		 	176,413		 	 	
Fixed rate floor income, net of settlements on derivatives	48,229		 	49,206		 	139,542		 	130,657		 	The high levels of fixed rate floor income earned are due to historically low interest rates. Fixed rate floor income decreased quarter over quarter due to run-off of loans earning fixed rate floor income, partially offset by the Company's loan purchase in August 2015 which contained loans earning fixed rate floor income. Fixed rate floor income has increased year over year due to purchases of loans earning fixed rate floor income and a decrease in settlements related to derivative instruments used to hedge student loans earning fixed rate floor income.	
Investment interest	494		 	87		 	1,417		 	290		 	 	
Intercompany interest	(439	)	 	(346	)	 	(1,260	)	 	(1,805	)	 	 	
Provision for loan losses - federally insured	(2,000	)	 	(2,000	)	 	(6,000	)	 	(7,000	)	 	See "Allowance for Loan Losses and Loan Delinquencies" included previously under "Asset Generation and Management Operating Segment - Results of Operations."	
(Provision for) recovery of loan losses - private education loans	(1,000	)	 	—		 	(1,150	)	 	1,000		 		
Net interest income after provision for loan losses (net of settlements on derivatives)	$	103,534		 	110,337		 	295,953		 	299,555		 	 	

LIQUIDITY AND CAPITAL RESOURCES

The Company’s fee generating businesses are non-capital intensive and all produce positive operating cash flows. As such, a minimal amount of debt and equity capital is allocated to the fee-based segments and any liquidity or capital needs are satisfied using cash flow from operations. Therefore, the Liquidity and Capital Resources discussion is concentrated on the Company’s liquidity and capital needs to meet existing debt obligations in the Asset Generation and Management operating segment.

Sources of Liquidity

The Company has historically generated positive cash flow from operations.  For the nine months ended September 30, 2015 and the year ended December 31, 2014, the Company's net cash provided by operating activities was $307.4 million and $357.4 million, respectively.

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As of September 30, 2015 , the Company had cash and cash equivalents of $ 114.5 million . The Company also had a portfolio of available-for-sale and trading investments, consisting primarily of student loan asset-backed securities, with a fair value of $113.7 million as of September 30, 2015 .

In addition, the Company has a $350.0 million unsecured line of credit that matures on October 30, 2020. As of September 30, 2015 , $70.0 million was outstanding on the unsecured line of credit and $280.0 million was available for future use.

As part of the Company’s issuance of asset-backed securitizations, the Company has purchased certain of the subordinated note tranches. In addition, the Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.  For accounting purposes, these notes are effectively retired and are not included on the Company’s consolidated balance sheet.  However, these securities are legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate.  Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. As of September 30, 2015 , the Company holds $89.4 million (par value) of its own asset-backed securities that are not included in the consolidated financial statements.

The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP and private education loan acquisitions; strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. Dependent upon the timing and size of the opportunities, the Company's cash and investment balances may increase from their current levels.

Cash Flows

During the nine months ended September 30, 2015 , the Company generated $307.4 million from operating activities, compared to $263.1 million for the same period in 2014. The increase in cash provided by operating activities reflects changes in the adjustments to net income for non-cash depreciation and amortization, non-cash fair value adjustments for derivatives, proceeds from terminating certain derivative instrument contracts, and an increase in other liabilities during the nine months ended September 30, 2015 . These factors were partially offset by the decrease in net income, deferred income taxes, and an increase in accounts receivable. Accrued interest on loans purchased is included in cash flows from operating activities in the respective period of the purchase.  Net purchased accrued interest was $70.6 million and $48.8 million for the nine months ended September 30, 2015 and 2014, respectively.

The primary items included in the statement of cash flows for investing activities are the purchase and repayment of student loans. The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable used to fund student loans. Cash provided by investing activities for the nine months ended September 30, 2015 was $0.8 billion and cash used in investing activities for the nine months ended September 30, 2014 was $0.6 billion . Cash used in financing activities was $1.2 billion for the nine months ended September 30, 2015 . Cash provided by financing activities for the nine months ended September 30, 2014 was $0.3 billion . Investing and financing activities are further addressed in the discussion that follows.

Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Student Loan Assets and Related Collateral

The following table shows the Company's debt obligations outstanding that are secured by student loan assets and related collateral.

	
						
 	As of September 30, 2015	
 	Carrying
amount	 	Final maturity	
Bonds and notes issued in asset-backed securitizations	$	27,508,150		 	8/26/19 - 8/26/52	
FFELP warehouse facilities	1,391,877		 	12/17/17 - 7/9/18	
Private education loan warehouse facility	170,081		 	12/26/16	
Other borrowings	75,000		 	10/31/16	
 	$	29,145,108		 	 	

41

Bonds and Notes Issued in Asset-backed Securitizations

The majority of the Company’s portfolio of student loans is funded in asset-backed securitizations that are structured to substantially match the maturity of the funded assets, thereby minimizing liquidity risk. In addition, due to (i) the difference between the yield the Company receives on the loans and cost of financing within these transactions, and (ii) the servicing and administration fees the Company earns from these transactions, the Company has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.

As of September 30, 2015 , based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its portfolio to be approximately $2.46 billion as detailed below.  The $2.46 billion includes approximately $720.5 million (as of September 30, 2015 ) of overcollateralization included in the asset-backed securitizations.  These excess net asset positions are reflected variously in the following balances in the consolidated balance sheet:  "student loans receivable," "restricted cash and investments," and "accrued interest receivable."

The forecasted cash flow presented below includes all loans funded in asset-backed securitizations as of September 30, 2015 .  As of September 30, 2015 , the Company had $27.5 billion of loans included in asset-backed securitizations, which represented 95.0 percent of its total FFELP student loan portfolio. The forecasted cash flow does not include cash flows that the Company expects to receive related to loans funded in its warehouse facilities as of September 30, 2015 or loans acquired subsequent to September 30, 2015 .

FFELP Asset-backed Securitization Cash Flow Forecast
$2.46 billion
(dollars below in millions)

The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast.  These assumptions are further discussed below.

Prepayments :  The primary variable in establishing a life of loan estimate is the level and timing of prepayments. Prepayment rates equal the amount of loans that prepay annually as a percentage of the beginning of period balance, net of scheduled principal payments.  A number of factors can affect estimated prepayment rates, including the level of consolidation activity and default rates.  Should any of these factors change, management may revise its assumptions, which in turn would impact the projected future cash flow. The Company’s cash flow forecast above assumes prepayment rates that are generally consistent with those utilized in the Company’s recent asset-backed securitization transactions. If management used a prepayment rate assumption two times greater than what was used to forecast the cash flow, the cash flow forecast would be reduced by approximately $260 million to $320 million .

42

Interest rates :  The Company funds a large portion of its student loans with three-month LIBOR indexed floating rate securities.  Meanwhile, the interest earned on the Company’s student loan assets is indexed primarily to a one-month LIBOR rate.  The different interest rate characteristics of the Company’s loan assets and liabilities funding these assets result in basis risk.  The Company’s cash flow forecast assumes three-month LIBOR will exceed one-month LIBOR by 12 basis points for the life of the portfolio, which approximates the historical relationship between these indices.  If the forecast is computed assuming a spread of 24 basis points between three-month and one-month LIBOR for the life of the portfolio, the cash flow forecast would be reduced by approximately $120 million to $160 million .

The Company uses the current forward interest rate yield curve to forecast cash flows.  A change in the forward interest rate curve would impact the future cash flows generated from the portfolio.  An increase in future interest rates will reduce the amount of fixed rate floor income the Company is currently receiving.  The Company attempts to mitigate the impact of a rise in short-term rates by hedging interest rate risks. As of September 30, 2015 , the net fair value of the Company’s interest rate derivatives used to hedge loans earning fixed rate floor income was a net liability of $16.1 million . See Item 3, "Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk."

FFELP Warehouse Facilities

The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements. As of September 30, 2015 , the Company had three FFELP warehouse facilities with an aggregate maximum financing amount available of $2.1 billion , of which $1.4 billion was outstanding, and $0.7 billion was available for future use. Of the three facilities, one facility provides for formula-based advance rates, depending on FFELP loan type, up to a maximum of the principal and interest of loans financed. The advance rate for collateral may increase or decrease based on market conditions. The other two FFELP warehouse facilities have static advance rates that require initial equity for loan funding, but do not require increased equity based on market movements. As of September 30, 2015 , the Company had $73.1 million advanced as equity support on its FFELP warehouse facilities. For further discussion of the Company's FFELP warehouse facilities outstanding at September 30, 2015 , see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Upon termination or expiration of the warehouse facilities, the Company would expect to access the securitization market, obtain replacement warehouse facilities, use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.

Private Education Loan Warehouse Facility
On June 26, 2015, the Company entered into a $275.0 million private education loan warehouse facility. As of September 30, 2015, there was $170.1 million outstanding on the facility and $104.9 million was available for future use. The facility has a static advance rate that requires initial equity for loan funding, but does not require increased equity based on market movements. The maximum advance rate on the entire facility is 88 percent and minimum advance rates, depending on loan characteristics and program type, range from 64 percent to 99 percent. As of September 30, 2015, $23.7 million was advanced on the facility as equity support. The facility is supported by liquidity provisions, which have a defined expiration date of June 24, 2016. In the event the Company is unable to renew the liquidity provisions by such date, the facility would become a term facility at a stepped-up cost, with no additional student loans being eligible for financing, and the Company would be required to refinance the existing loans in the facility by the facility's final maturity date of December 26, 2016.
Upon termination or expiration of the warehouse facility, the Company would expect to access the securitization market, obtain a replacement facility, use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.
Other Borrowings
The Company has a $75.0 million line of credit, which is collateralized by asset-backed security investments, that expires October 31, 2016. The line of credit has covenants and cross default provisions similar to those under the Company's unsecured line of credit. As of September 30, 2015, $75.0 million was outstanding on this line of credit. Upon termination or expiration of this line of credit, the Company would obtain a replacement facility, use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.
Other Uses of Liquidity

Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made through the Federal Direct Loan Program.  As a result, the Company no longer originates new FFELP loans, but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist.

43

The Company plans to fund future FFELP student loan acquisitions using current cash and investments; using its Union Bank participation agreement (as described below); using its FFELP warehouse facilities (as described above); and continuing to access the asset-backed securitization market.

In addition, the Company has entered into certain agreements in which it is committed to purchase private education loans.

During the first quarter of 2015, the Company entered into an agreement with CommonBond, Inc. ("CommonBond"), a student lending company that provides private education loans to graduate students, under which the Company committed to purchase private education loans for a period of 18 months, with the total purchase obligation limited to $150.0 million. On August 17, 2015, the Company amended the agreement with CommonBond to increase the maximum purchase obligation to $200.0 million. As of September 30, 2015 , the Company had purchased $127.8 million in private education loans from CommonBond pursuant to this agreement.

On December 22, 2014, the Company entered into an agreement with Union Bank, in which the Company provides marketing, origination, and loan servicing services to Union Bank related to private education loans. The Company is committed to purchase, or arrange for a designee to purchase, all volume originated by Union Bank under this agreement. During the third quarter of 2015, the Company purchased $0.4 million (par value) of private education loans from Union Bank, pursuant to this agreement. As of September 30, 2015, the balance of private education loans held by Union Bank pursuant to this agreement was $8.5 million.
The Company has used operating cash, its unsecured line of credit, and its private education loan warehouse facility to initially fund its private education loan purchases from CommonBond and Union Bank.  The private education loan warehouse facility is intended to act as bridge financing to a term asset-backed securitization. The Company will continue to use operating cash, its unsecured line of credit, and/or its private education loan warehouse facility to fund additional private education loan purchases. If the Company is not successful in maintaining existing or establishing new financing facilities for private education loans, the Company's liquidity could be adversely affected and the Company's opportunities to purchase additional such loans could be limited.

Union Bank Participation Agreement

The Company maintains an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in federally insured student loans. As of September 30, 2015 , $549.1 million of federally insured loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days notice. This agreement provides beneficiaries of Union Bank’s grantor trusts with access to investments in interests in federally insured student loans, while providing liquidity to the Company.  The Company can participate federally insured student loans to Union Bank to the extent of availability under the grantor trusts, up to $750 million or an amount in excess of $750 million if mutually agreed to by both parties.  Loans participated under this agreement have been accounted for by the Company as loan sales.  Accordingly, the participation interests sold are not included in the Company’s consolidated balance sheets.

Asset-backed Securitization Transactions

During the first nine months of 2015, the Company, through its subsidiaries, completed three asset-backed FFELP securitizations for $1.7 billion.  After those securitizations were completed, Fitch Ratings and Moody’s Investors Service announced that they have placed numerous tranches of FFELP securitizations by various issuers, including certain tranches of prior FFELP securitizations issued by subsidiaries of the Company, on review for potential downgrade due to principal payments and prepayments on the underlying student loans coming in slower than initial expectations, and the resulting risk that certain principal maturities on those FFELP securitizations may not be met by the final maturity dates, which could result in an event of default under the underlying securitization agreements.  Such rating actions have caused the spreads on FFELP securitizations to widen and have reduced the liquidity in the secondary market for such FFELP securitizations.  The rating agencies may also modify their assumptions and methodologies used for rating future student loan securitizations.   Depending on future rating agency actions and market conditions, the Company anticipates continuing to access the asset-backed securitization market for both FFELP and private education loans.  Such asset-backed securitization transactions would be used to refinance student loans included in its warehouse facilities, student loans purchased from third parties, and/or student loans in its existing asset-backed securitizations.

44

Liquidity Impact Related to Hedging Activities

The Company utilizes derivative instruments to manage interest rate sensitivity. By using derivative instruments, the Company is exposed to market risk which could impact its liquidity. Based on the derivative portfolio outstanding as of September 30, 2015 , the Company does not currently anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to meet potential collateral deposits with its counterparties. However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio or if the Company enters into additional derivatives for which the fair value becomes negative, the Company could be required to deposit additional collateral with its derivative instrument counterparties and/or a third-party clearinghouse. The collateral deposits, if significant, could negatively impact the Company's liquidity and capital resources. As of September 30, 2015 , the fair value of the Company's derivatives which were subject to collateral exposure with counterparties and/or a clearinghouse and had a negative fair value (a liability in the Company's balance sheet), was $24.4 million . As of September 30, 2015 , the Company had $37.3 million of collateral deposited with counterparties or a clearinghouse related to this derivative portfolio.

Other Debt Facilities

The Company has issued Hybrid Securities that have a final maturity of September 15, 2061. The Hybrid Securities are unsecured obligations of the Company. As of September 30, 2015 , $57.6 million of Hybrid Securities were outstanding.

As previously discussed, the Company has a $350.0 million unsecured line of credit. On October 30, 2015, the Company entered into an amended and restated credit agreement for its line of credit.   Under the amended terms, the maturity date of the credit agreement was extended from June 30, 2019 to October 30, 2020.  In addition, the following revisions were made to certain covenants:

•	A provision was added to permit acquisitions of businesses, for consideration of up to $75.0 million per fiscal year, that are not in one of the Company’s existing lines of business.	

•	The cap for other non-specified permitted investments increased to 20 percent of the Company’s consolidated net worth, with the cap excluding all existing investments at the time of the amendment.	

•	The current cap related to the volume of private education loans that the Company may hold was reduced from $900.0 million to a revised level of $500.0 million.   All private education loans that are held within securitization vehicles are excluded from the $500.0 million threshold.	

•	The minimum consolidated net worth threshold changed beginning as of September 30, 2015 to be not less than the sum of (i) $1.35 billion; plus, in each case for periods after September 30, 2015, (ii) 50 percent of consolidated net income;  plus (iii) 100 percent of the increase to consolidated net worth from the issuance of capital stock.	

The facility size of $350.0 million and cost of funds did not change as part of the amendment. 

As of September 30, 2015 , the unsecured line of credit had an outstanding balance of $70.0 million and $280.0 million was available for future use.

Debt Repurchases

Due to the Company's positive liquidity position and opportunities in the capital markets, the Company has repurchased its own debt over the last several years, and may continue to do so in the future. See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for information on debt repurchased by the Company during the three and nine months ended September 30, 2015 and 2014 .

Stock Repurchases

The Board of Directors has authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 24, 2018. Under the program, shares may be repurchased from time to time depending on various factors, including share prices and other potential uses of liquidity. Shares repurchased by the Company during the nine months ended September 30, 2015 are shown below. For additional information on stock repurchases during the third quarter of 2015, see "Stock Repurchases" under Part II, Item 2 of this report.

45

	
										
 	Total shares repurchased	 	Purchase price (in thousands)	 	Average price of shares repurchased (per share)	
 		 		 		
Quarter ended March 31, 2015	175,798		 	$	7,939		 	45.16		
Quarter ended June 30, 2015	998,210		 	43,089		 	43.17		
Quarter ended September 30, 2015	356,584		 	15,615		 	43.79		
  Total	1,530,592		 	$	66,643		 	43.54		

As of September 30, 2015 , 4,150,186 shares remain authorized for repurchase under this stock repurchase program.

Dividends

On September 15, 2015, the Company paid a third quarter 2015 cash dividend on the Company's Class A and Class B common stock of $0.10 per share. In addition, the Company's Board of Directors has declared a fourth quarter 2015 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.12 per share. The fourth quarter cash dividend will be paid on December 15, 2015, to shareholders of record at the close of business on December 1, 2015.

The Company currently plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors.  In addition, the payment of dividends is subject to the terms of the Company’s outstanding Hybrid Securities, which generally provide that if the Company defers interest payments on those securities it cannot pay dividends on its capital stock.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued accounting guidance regarding the recognition of revenue from contracts with customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue recognition guidance once it becomes effective on January 1, 2018. Early application is permitted beginning January 1, 2017, and the standard allows the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impact this standard will have on its ongoing financial reporting, and has not yet selected a method of transition.

In February 2015, the FASB issued accounting guidance regarding consolidation analysis, which amends current guidance and changes the way reporting entities evaluate whether (i) the entity should consolidate limited partnerships and similar entities, (ii) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (iii) variable interests in a VIE held by related parties of the reporting entity require the reporting entity to consolidate the VIE. This guidance is effective for the Company beginning January 1, 2016; however, early adoption is permitted. This pronouncement will not have a material impact on the Company's financial position or results of operations.

In April 2015, the FASB issued accounting guidance regarding the presentation of debt issuance costs, which are currently recognized as a separate asset on the Company's balance sheet. The new guidance requires that entities present debt issuance costs related to a debt liability as a direct deduction from that liability on the balance sheet. This guidance will be effective for the Company beginning January 1, 2016. Early adoption of the new standard is permitted for financial statements that have not yet been issued, and adoption should be applied retrospectively. As of September 30, 2015, the Company had $69.6 million of debt issuance costs that is included in "other assets" on the consolidated balance sheet. This pronouncement will not have a material impact on the Company's financial position or results of operations.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(All dollars are in thousands, except share amounts, unless otherwise noted)

Interest Rate Risk

The Company’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact the Company due to shifts in market interest rates.

The following table sets forth the Company’s loan assets and debt instruments by interest rate characteristics:

														
 	As of September 30, 2015	 	As of December 31, 2014	
 	Dollars	 	Percent	 	Dollars	 	Percent	
Fixed-rate loan assets	$	13,229,576		 	45.3	%	 	$	12,700,494		 	45.0	%	
Variable-rate loan assets	15,958,627		 	54.7		 	15,523,414		 	55.0		
Total	$	29,188,203		 	100.0	%	 	$	28,223,908		 	100.0	%	
 	 	 	 	 	 	 	 	
Fixed-rate debt instruments	$	—		 	—	%	 	$	—		 	—	%	
Variable-rate debt instruments	29,272,690		 	100.0		 	28,420,422		 	100.0		
Total	$	29,272,690		 	100.0	%	 	$	28,420,422		 	100.0	%	

FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the Special Allowance Payments ("SAP") formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its student loan portfolio with variable rate debt. In low and/or certain declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, these student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.

Depending on the type of loan and when it was originated, the borrower rate is either fixed to term or is reset to an annual rate each July 1. As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate floor income. All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department.

No variable-rate floor income was earned by the Company during 2014 and 2015. A summary of fixed rate floor income earned by the Company follows.

													
 	Three months ended September 30,	 	Nine months ended September 30,	
 	2015	 	2014	 	2015	 	2014	
Fixed rate floor income, gross	$	53,685		 	54,627		 	155,032		 	150,002		
Derivative settlements (a)	(5,456	)	 	(5,421	)	 	(15,490	)	 	(19,345	)	
Fixed rate floor income, net	$	48,229		 	49,206		 	139,542		 	130,657		

(a)	Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.	

The high levels of fixed rate floor income earned during 2015 and 2014 are due to historically low interest rates.  If interest rates remain low, the Company anticipates continuing to earn significant fixed rate floor income in future periods.

Absent the use of derivative instruments, a rise in interest rates may reduce the amount of floor income received and this may have an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas. In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.

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The following graph depicts fixed rate floor income for a borrower with a fixed rate of 6.75% and a SAP rate of 2.64%:

The following table shows the Company’s federally insured student loan assets that were earning fixed rate floor income as of September 30, 2015 .

									
 	 	Borrower/	 	Estimated	 	 	
Fixed	 	lender	 	variable	 	 	
interest	 	weighted	 	conversion	 	Loan	
rate range	 	average yield	 	rate (a)	 	balance	
< 3.0%	 	2.88%	 	0.24%	 	$	1,731,271		
3.0 - 3.49%	 	3.20%	 	0.56%	 	2,380,015		
3.5 - 3.99%	 	3.65%	 	1.01%	 	2,379,962		
4.0 - 4.49%	 	4.20%	 	1.56%	 	1,791,547		
4.5 - 4.99%	 	4.72%	 	2.08%	 	1,088,807		
5.0 - 5.49%	 	5.22%	 	2.58%	 	679,179		
5.5 - 5.99%	 	5.67%	 	3.03%	 	475,295		
6.0 - 6.49%	 	6.19%	 	3.55%	 	552,044		
6.5 - 6.99%	 	6.70%	 	4.06%	 	543,383		
7.0 - 7.49%	 	7.17%	 	4.53%	 	188,862		
7.5 - 7.99%	 	7.71%	 	5.07%	 	320,001		
8.0 - 8.99%	 	8.18%	 	5.54%	 	745,756		
> 9.0%	 	9.04%	 	6.40%	 	256,357		
 	 	 	 	 	 	$	13,132,479		

(a)	The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of September 30, 2015 , the weighted average estimated variable conversion rate was 1.89% and the short-term interest rate was 20 basis points.	

The following table summarizes the outstanding derivative instruments as of September 30, 2015 used by the Company to economically hedge loans earning fixed rate floor income.

								
Maturity	 	Notional amount	 	Weighted average fixed rate paid by the Company (a)	
	 		 		
2016	 	$	1,000,000		 	0.76	%	
2017	 	2,100,000		 	0.84		
2018	 	1,350,000		 	1.11		
2025	 	100,000		 	2.32		
 	 	$	4,550,000		 	0.93	%	

(a)	For all interest rate derivatives, the Company receives discrete three-month LIBOR.	

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The Company is also exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of the Company’s assets do not match the interest rate characteristics of the funding for those assets. The following table presents the Company’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of September 30, 2015 :

										
Index	 	Frequency of variable resets	 	Assets	 	Debt outstanding that funded student loan assets	
1 month LIBOR (a)	 	Daily	 	$	26,648,016		 	—		
3 month H15 financial commercial paper	 	Daily	 	1,460,640		 	—		
3 month Treasury bill	 	Daily	 	846,723		 	—		
3 month LIBOR (a) (b)	 	Quarterly	 	—		 	16,612,131		
1 month LIBOR	 	Monthly	 	—		 	10,130,135		
Auction-rate (c)	 	Varies	 	—		 	1,161,515		
Asset-backed commercial paper (d)	 	Varies	 	—		 	996,246		
Other (e)	 	 	 	19,648		 	75,000		
 	 	 	 	$	28,975,027		 	28,975,027		

(a)	The Company has certain basis swaps outstanding in which the Company receives three-month LIBOR and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps"). The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets. The following table summarizes these derivatives as of September 30, 2015 :	

	
							
Maturity	 	Notional amount	 	
2016	 	 	$	5,500,000		 	
2022	 	 	450,000		 	
2023	 	 	1,050,000		 	
2026	 	 	200,000		 	
 	 	 	$	7,200,000		(1)	

(1)	The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2015 was one-month LIBOR plus 9.0 basis points.	

(b)	The Company has Euro-denominated notes that reprice on the EURIBOR index. The Company has entered into a derivative instrument (cross-currency interest rate swap) that converts the EURIBOR index to three-month LIBOR. As a result, these notes are reflected in the three-month LIBOR category in the above table. See “Foreign Currency Exchange Risk.”	

(c)	The interest rates on certain of the Company's asset-backed securities are set and periodically reset via a "dutch auction" (“Auction Rate Securities”). As of September 30, 2015 , the Company was sponsor for $1.2 billion of Auction Rate Securities. Since February 2008, problems in the auction rate securities market as a whole have led to failures of the auctions pursuant to which the Company's Auction Rate Securities' interest rates are set. As a result, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents.	

(d)	The interest rates on certain of the Company's warehouse facilities are indexed to asset-backed commercial paper rates.	

(e)	Assets include restricted cash and investments and other assets.  Debt outstanding includes other debt obligations secured by student loan assets and related collateral.	

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Sensitivity Analysis

The following tables summarize the effect on the Company’s earnings, based upon a sensitivity analysis performed by the Company assuming hypothetical increases in interest rates of 100 basis points and 300 basis points while funding spreads remain constant. In addition, a sensitivity analysis was performed assuming the funding index increases 10 basis points and 30 basis points while holding the asset index constant, if the funding index is different than the asset index. The sensitivity analysis was performed on the Company’s variable rate assets (including loans earning fixed rate floor income) and liabilities. The analysis includes the effects of the Company’s interest rate and basis swaps in existence during these periods.

																												
 	Interest rates	 	Asset and funding index mismatches	
 	Change from increase of 100 basis points	 	Change from increase of 300 basis points	 	Increase of 10 basis points	 	Increase of 30 basis points	
 		 				 		
 	Dollars	 	Percent	 	Dollars	 	Percent	 	Dollars	 	Percent	 	Dollars	 	Percent	
 	Three months ended September 30, 2015	
Effect on earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Decrease in pre-tax net income before impact of derivative settlements	$	(22,118	)	 	(23.0	)%	 	$	(41,518	)	 	(43.3	)%	 	$	(4,393	)	 	(4.5	)%	 	$	(13,180	)	 	(13.7	)%	
Impact of derivative settlements	9,299		 	9.6		 	27,896		 	29.1		 	1,564		 	1.6		 	4,692		 	4.9		
Increase (decrease) in net income before taxes	$	(12,819	)	 	(13.4	)%	 	$	(13,622	)	 	(14.2	)%	 	$	(2,829	)	 	(2.9	)%	 	$	(8,488	)	 	(8.8	)%	
Increase (decrease) in basic and diluted earnings per share	$	(0.18	)	 	 	 	$	(0.19	)	 	 	 	$	(0.04	)	 	 	 	$	(0.12	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three months ended September 30, 2014	
Effect on earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 		 	 		
Decrease in pre-tax net income before impact of derivative settlements	$	(22,349	)	 	(16.9	)%	 	$	(40,712	)	 	(30.9	)%	 	$	(4,448	)	 	(3.4	)%	 	$	(13,345	)	 	(10.1	)%	
Impact of derivative settlements	8,669		 	6.5		 	26,009		 	19.8		 	1,928		 	1.5		 	5,785		 	4.4		
Increase (decrease) in net income before taxes	$	(13,680	)	 	(10.4	)%	 	$	(14,703	)	 	(11.1	)%	 	$	(2,520	)	 	(1.9	)%	 	$	(7,560	)	 	(5.7	)%	
Increase (decrease) in basic and diluted earnings per share	$	(0.18	)	 	 	 	$	(0.20	)	 	 	 	$	(0.03	)	 	 	 	$	(0.10	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Nine months ended September 30, 2015	
Effect on earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 		 	 		
Decrease in pre-tax net income before impact of derivative settlements	$	(61,850	)	 	(21.3	)%	 	$	(111,123	)	 	(38.4	)%	 	$	(12,706	)	 	(4.4	)%	 	$	(38,118	)	 	(13.2	)%	
Impact of derivative settlements	25,846		 	8.9		 	77,536		 	26.8		 	4,345		 	1.5		 	13,035		 	4.5		
Increase (decrease) in net income before taxes	$	(36,004	)	 	(12.4	)%	 	$	(33,587	)	 	(11.6	)%	 	$	(8,361	)	 	(2.9	)%	 	$	(25,083	)	 	(8.7	)%	
Increase (decrease) in basic and diluted earnings per share	$	(0.49	)	 	 	 	$	(0.45	)	 	 	 	$	(0.12	)	 	 	 	$	(0.35	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Nine months ended September 30, 2014	
Effect on earnings:	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		
Decrease in pre-tax net income before impact of derivative settlements	$	(59,536	)	 	(16.3	)%	 	$	(104,486	)	 	(28.6	)%	 	$	(12,904	)	 	(3.5	)%	 	$	(38,714	)	 	(10.6	)%	
Impact of derivative settlements	32,453		 	8.9		 	97,360		 	26.7		 	5,721		 	1.5		 	17,166		 	4.7		
Increase (decrease) in net income before taxes	$	(27,083	)	 	(7.4	)%		$	(7,126	)	 	(1.9	)%	 	$	(7,183	)	 	(2.0	)%	 	$	(21,548	)	 	(5.9	)%	
Increase (decrease) in basic and diluted earnings per share	$	(0.36	)	 	 	 	$	(0.10	)	 	 	 	$	(0.09	)	 	 	 	$	(0.29	)	 	 	

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Foreign Currency Exchange Risk

The Company has issued €352.7 million Euro Notes with interest rates based on a spread to the EURIBOR index. As a result, the Company is exposed to the market risk related to fluctuations in foreign currency exchange rates between the U.S. dollar and Euro. The Company has entered into a cross-currency interest rate swap in connection with the issuance of the Euro Notes. See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information, including a summary of the terms of this derivative instrument agreement and the related financial statement impact.

Financial Statement Impact – Derivatives and Foreign Currency Transaction Adjustments

For a table summarizing the effect of derivative instruments in the consolidated statements of income, including the components of "derivative market value and foreign currency adjustments and derivative settlements, net" included in the consolidated statements of income, see note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under supervision and with the participation of certain members of the Company’s management, including the chief executive and chief financial officers, the Company completed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in SEC Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the Company’s principal executive and principal financial officers concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to the Company's management, including the chief executive and chief financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As previously reported in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, the legal proceeding captioned Grant Keating v. Peterson's Nelnet, LLC et al was dismissed during the quarter ended September 30, 2015.

ITEM 1A.  RISK FACTORS

Except as disclosed in Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, there have been no material changes from the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 in response to Item 1A of Part I of such Form 10-K.

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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock Repurchases

The following table summarizes the repurchases of Class A common stock during the third quarter of 2015 by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934. Certain share repurchases included in the table below were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.

														
Period	 	Total number of shares purchased (a)	 	Average price paid per share	 	Total number of shares purchased as part of publicly announced plans or programs (b)	 	Maximum number of shares that may yet be purchased under the plans or programs (b)	
July 1 - July 31, 2015	 	354,574		 	$	43.83		 	354,164		 	4,150,186		
August 1 - August 31, 2015	 	—		 	—		 	—		 	4,150,186		
September 1 - September 30, 2015	 	2,010		 	36.59		 	—		 	4,150,186		
Total	 	356,584		 	$	43.79		 	354,164		 	 		

(a)	The total number of shares includes: (i) shares repurchased pursuant to the stock repurchase program discussed in footnote (b) below; and (ii) shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares. Shares of Class A common stock tendered by employees to satisfy tax withholding obligations included 410 shares, 0 shares, and 2,010 shares in July , August , and September 2015, respectively. Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company’s shares on the date of vesting.	

(b)	On May 7, 2015, the Company announced that its Board of Directors had authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 24, 2018.	

Working capital and dividend restrictions/limitations

The Company’s credit facilities, including its revolving line of credit which is available through October 30, 2020, impose restrictions with respect to the Company’s minimum consolidated net worth, the ratio of the Company’s adjusted EBITDA to corporate debt interest, the amount of recourse indebtedness, and the amount of private education loans held by the Company. In addition, trust indentures and other financing agreements governing debt issued by the Company's education lending subsidiaries may have general limitations on the amounts of funds that can be transferred to the Company by its subsidiaries through cash dividends.

The supplemental indenture for the Company’s Hybrid Securities issued in September 2006 provides that so long as any Hybrid Securities remain outstanding, if the Company gives notice of its election to defer interest payments but the related deferral period has not yet commenced or a deferral period is continuing, then the Company will not, and will not permit any of its subsidiaries to:

•	declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment regarding, any of the Company’s capital stock.	

•	except as required in connection with the repayment of principal, and except for any partial payments of deferred interest that may be made through the alternative payment mechanism described in the Hybrid Securities indenture, make any payment of principal of, or interest or premium, if any, on, or repay, repurchase, or redeem any of the Company’s debt securities that rank pari passu with or junior to the Hybrid Securities.	

•	make any guarantee payments regarding any guarantee by the Company of the subordinated debt securities of any of the Company’s subsidiaries if the guarantee ranks pari passu with or junior in interest to the Hybrid Securities.	

In addition, if any deferral period lasts longer than one year, the limitation on the Company’s ability to redeem or repurchase any of its securities that rank pari passu with or junior in interest to the Hybrid Securities will continue until the first anniversary of the date on which all deferred interest has been paid or canceled.

52

If the Company is involved in a business combination where immediately after its consummation more than 50% of the surviving entity’s voting stock is owned by the shareholders of the other party to the business combination, then the immediately preceding sentence will not apply to any deferral period that is terminated on the next interest payment date following the date of consummation of the business combination.

However, at any time, including during a deferral period, the Company will be permitted to:

•	pay dividends or distributions in additional shares of the Company’s capital stock.	

•	declare or pay a dividend in connection with the implementation of a shareholders’ rights plan, or issue stock under such a plan, or redeem or repurchase any rights distributed pursuant to such a plan.	

•	purchase common stock for issuance pursuant to any employee benefit plans.	

ITEM 5. OTHER INFORMATION

The Company has elected to include the following information with respect to an event that occurred on October 30, 2015 in this Quarterly Report on Form 10-Q in lieu of reporting it in a separately filed Current Report on Form 8-K. This information would otherwise have been reported in a Form 8-K under the headings “Item 1.01 Entry into a Material Definitive Agreement.” and “Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.”

On October 30, 2015, the Company entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with respect to the previously reported Credit Agreement dated as of February 17, 2012, as previously amended, for the Company’s $350.0 million unsecured line of credit with U.S. Bank National Association, as agent for the lenders, and the lender parties thereto. The original Credit Agreement and certain amendments thereto were previously reported under Items 1.01 and 2.03 of Current Reports on Form 8-K filed by the Company on February 24, 2012, April 2, 2013, and July 7, 2014.

Under the terms of the Amended Credit Agreement, the maturity date of the credit agreement was extended from June 30, 2019 to October 30, 2020. In addition, the following revisions were made to certain covenants:

•	A provision was added to permit acquisitions of businesses, for consideration of up to $75.0 million per fiscal year, that are not in one of the Company’s existing lines of business.	

•	The cap for other non-specified permitted investments increased to 20 percent of the Company’s consolidated net worth, with the cap excluding all existing investments at the time of the amendment.	

•	The current cap related to the volume of private education loans that the Company may hold was reduced from $900.0 million to a revised level of $500.0 million.   All private education loans that are held within securitization vehicles are excluded from the $500.0 million threshold.	

•	The minimum consolidated net worth threshold changed beginning as of September 30, 2015 to be not less than the sum of (i) $1.35 billion; plus, in each case for periods after September 30, 2015, (ii) 50 percent of consolidated net income;  plus (iii) 100 percent of the increase to consolidated net worth from the issuance of capital stock.	

The facility size of $350.0 million and cost of funds did not change as part of the amendment.  

As of September 30, 2015 , the unsecured line of credit had an outstanding balance of $70.0 million and $280.0 million was available for future use.

The description above is a summary of the amended terms for the line of credit under the Amended Credit Agreement and is qualified in its entirety by the complete text of the Amended Credit Agreement, a copy of which is filed with this report as Exhibit 10.1, and is incorporated by reference herein.

53

ITEM 6.  EXHIBITS

	
		
10.1*	Amended and Restated Credit Agreement dated as of October 30, 2015, among Nelnet, Inc., U.S. Bank National Association, as Administrative Agent, Lead Arranger and Book Runner, Wells Fargo Bank, National Association, as Syndication Agent, and Citibank, N.A. and Royal Bank of Canada, as Co-Documentation Agents, and various lender parties thereto.	
 	 	
10.2*	Amended and Restated Guaranty dated as of October 30, 2015 by each of the subsidiaries of Nelnet, Inc. signatories thereto, in favor of U.S. Bank National Association, as Administrative Agent.	
 	 	
31.1*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer Jeffrey R. Noordhoek.	
 	 	
31.2*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer James D. Kruger.	
 	 	
32**	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
101.INS*	XBRL Instance Document	
 	 	
101.SCH*	XBRL Taxonomy Extension Schema Document	
 	 	
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	
 	 	
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	
 	 	
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document	
 	 	
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	
 	 	
*    Filed herewith	
** Furnished herewith	

54

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	
					
 	 	NELNET, INC.	 	
 	 	 	 	 	
Date:	November 5, 2015	By:	/s/ JEFFREY R. NOORDHOEK	 	
 	 	Name:	Jeffrey R. Noordhoek	 	
 	 	Title:	Chief Executive Officer
Principal Executive Officer	 	

	
					
 	 	By:	/s/ JAMES D. KRUGER	 	
Date:	November 5, 2015	Name:	James D. Kruger	 	
 	 	Title: 	Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer	 	

55

Execution Version ACTIVE 210468486v.8 Deal CUSIP 64031YAC8 Revolving Loan CUSIP 64031YAD6 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF OCTOBER 30, 2015 AMONG NELNET, INC. THE LENDERS PARTY HERETO, U.S. BANK NATIONAL ASSOCIATION AS ADMINISTRATIVE AGENT, WELLS FARGO BANK, NATIONAL ASSOCIATION AS SYNDICATION AGENT, AND CITIBANK, N.A. AND ROYAL BANK OF CANADA AS CO-DOCUMENTATION AGENTS, AND U.S. BANK NATIONAL ASSOCIATION AS LEAD ARRANGER AND BOOK RUNNER

 

i TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01 Defined Terms ............................................................................................1 SECTION 1.02 Classification of Loans and Borrowings .................................................... 17 SECTION 1.03 Terms Generally ....................................................................................... 17 SECTION 1.04 Accounting Terms; GAAP ........................................................................ 18 ARTICLE II THE CREDITS SECTION 2.01 Commitments; Revolving Loans and Borrowings ..................................... 18 SECTION 2.02 Swing Line Loans ..................................................................................... 19 SECTION 2.03 Requests for Borrowings ........................................................................... 20 SECTION 2.04 Funding of Borrowings ............................................................................. 21 SECTION 2.05 Interest Elections ...................................................................................... 21 SECTION 2.06 Termination and Reduction of Commitments ............................................ 23 SECTION 2.07 Repayment of Loans; Evidence of Debt .................................................... 23 SECTION 2.08 Prepayment of Loans ................................................................................ 24 SECTION 2.09 Fees .......................................................................................................... 24 SECTION 2.10 Interest...................................................................................................... 25 SECTION 2.11 Alternate Rate of Interest .......................................................................... 25 SECTION 2.12 Increased Costs ......................................................................................... 26 SECTION 2.13 Break Funding Payments .......................................................................... 26 SECTION 2.14 Taxes ........................................................................................................ 27 SECTION 2.15 Payments Generally; Pro Rata Treatment; Sharing of Set-Offs .................. 29 SECTION 2.16 Mitigation Obligations; Replacement of Lenders ...................................... 30 SECTION 2.17 Increased Commitments; Additional Lenders ............................................ 31 SECTION 2.18 Defaulting Lenders ................................................................................... 32 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01 Organization; Powers ................................................................................ 33 SECTION 3.02 Authorization; Enforceability .................................................................... 33 SECTION 3.03 Governmental Approvals; No Conflicts .................................................... 33 SECTION 3.04 Financial Condition; No Material Adverse Change ................................... 34 SECTION 3.05 Properties ................................................................................................. 34 SECTION 3.06 Litigation and Environmental Matters ....................................................... 34 SECTION 3.07 Compliance With Laws and Agreements .................................................. 35 SECTION 3.08 Investment and Holding Company Status .................................................. 35 SECTION 3.09 Taxes ........................................................................................................ 35

 

ii SECTION 3.10 ERISA ...................................................................................................... 35 SECTION 3.11 Disclosure ................................................................................................. 35 SECTION 3.12 Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws ........................... 35 ARTICLE IV CONDITIONS SECTION 4.01 Effective Date ........................................................................................... 36 SECTION 4.02 Each Borrowing ........................................................................................ 37 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01 Financial Statements; Ratings Change and Other Information ................... 37 SECTION 5.02 Notices of Material Events ........................................................................ 39 SECTION 5.03 Existence; Conduct of Business ................................................................ 39 SECTION 5.04 Payment of Obligations............................................................................. 39 SECTION 5.05 Maintenance of Properties; Insurance........................................................ 39 SECTION 5.06 Books and Records; Inspection Rights ...................................................... 39 SECTION 5.07 Compliance With Laws............................................................................. 40 SECTION 5.08 Use of Proceeds ........................................................................................ 40 SECTION 5.09 Guarantors ................................................................................................ 40 SECTION 5.10 Dividends ................................................................................................. 40 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01 Recourse Indebtedness .............................................................................. 40 SECTION 6.02 Liens......................................................................................................... 41 SECTION 6.03 Fundamental Changes ............................................................................... 42 SECTION 6.04 Sale of Assets ........................................................................................... 42 SECTION 6.05 Minimum Consolidated Net Worth ........................................................... 42 SECTION 6.06 Investments .............................................................................................. 43 SECTION 6.07 Acquisitions .............................................................................................. 43 SECTION 6.08 Restricted Payments.................................................................................. 43 SECTION 6.09 Recourse Leverage Ratio .......................................................................... 44 SECTION 6.10 Non-FFELP Loans .................................................................................... 44 ARTICLE VII EVENTS OF DEFAULT ARTICLE VIII THE ADMINISTRATIVE AGENT ARTICLE IX MISCELLANEOUS SECTION 9.01 Notices ..................................................................................................... 48

 

iii SECTION 9.02 Waivers; Amendments .............................................................................. 49 SECTION 9.03 Expenses; Indemnity; Damage Waiver ...................................................... 49 SECTION 9.04 Successors and Assigns............................................................................. 51 SECTION 9.05 Survival .................................................................................................... 53 SECTION 9.06 Counterparts; Integration; Effectiveness.................................................... 54 SECTION 9.07 Severability .............................................................................................. 54 SECTION 9.08 Right of Setoff .......................................................................................... 54 SECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process ..................... 54 SECTION 9.10 WAIVER OF JURY TRIAL ..................................................................... 55 SECTION 9.11 Headings................................................................................................... 55 SECTION 9.12 Confidentiality .......................................................................................... 55 SECTION 9.13 USA Patriot Act ........................................................................................ 56 SECTION 9.14 Amendment and Restatement .................................................................... 56 SCHEDULES: Commitment Schedule Pricing Schedule Schedule 1.01 – Guarantors Schedule 3.06 – Disclosed Matters Schedule 6.01 – Existing Indebtedness Schedule 6.02 – Existing Liens Schedule 6.06 – Existing Investments EXHIBITS: Exhibit A – Form of Assignment and Assumption Exhibit B – Form of Opinion of Borrower’s Counsel Exhibit C – Form of Compliance Certificate Exhibit D – Form of Note Exhibit E – List of Closing Documents

 

1 This AMENDED AND RESTATED CREDIT AGREEMENT (the “Agreement”) dated as of October 30, 2015, is among NELNET, INC. (the “Borrower”), the LENDERS party hereto (the “Lenders”), U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative Agent”), WELLS FARGO BANK, NATIONAL ASSOCIATION, as Syndication Agent and CITIBANK, N.A. and ROYAL BANK OF CANADA, as Co-Documentation Agents and U.S. BANK NATIONAL ASSOCIATION, as Lead Arranger and Book Runner. The parties hereto agree as follows: PRELIMINARY STATEMENT WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to that certain Credit Agreement dated as of February 17, 2012 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”); and WHEREAS, the Borrower, the Lenders and the Administrative Agent have agreed to amend and restate the Existing Credit Agreement in its entirety. NOW, THEREFORE, in consideration of the mutual covenants herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto acknowledge that the Existing Credit Agreement is hereby amended and restated in its entirety as of the date hereof as follows: ARTICLE I DEFINITIONS SECTION 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below: “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. “ABR Margin” has the meaning set forth in the Pricing Schedule. “Acquisition” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.

 

2 “Adjusted EBITDA” means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income and without duplication, (i) Corporate Debt Interest, (ii) expense for taxes paid in cash or accrued, (iii) depreciation, (iv) amortization (including loan premiums/discounts and deferred origination costs), (v) extraordinary non-cash expenses, charges or losses incurred other than in the ordinary course of business (including the write-off of goodwill), (vi) non-cash expenses related to stock based compensation, (vii) the unrealized derivatives market value adjustment for such period (if negative), and (viii) the unrealized foreign currency transaction adjustment related to the remeasurement of foreign currency denominated debt for such period (if negative), minus, to the extent included in Consolidated Net Income, (1) extraordinary income or gains realized other than in the ordinary course of business, (2) income tax credits and refunds (to the extent not netted from tax expense), (3) any cash payments made during such period in respect of items described in clauses (v) or (vi) above subsequent to the fiscal quarter in which the relevant non-cash expenses, charges or losses were incurred, (4) the amount of variable-rate floor income during such period, (5) the unrealized derivatives market value adjustment for such period (if positive) and (6) the unrealized foreign currency translation adjustment related to the remeasurement of foreign currency denominated debt for such period (if positive). “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. “Administrative Agent” means U.S. Bank National Association, in its capacity as administrative agent for the Lenders hereunder. “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent. “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “Agreement” means this Credit Agreement, including the Schedules and Exhibits thereto, as the same may be amended from time to time after the date hereof. “Alternate Base Rate” means, for any day, a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day, plus 1% per annum). Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. “Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

 

3 “Approved Fund” has the meaning assigned to such term in Section 9.04. “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. “Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. “Board” means the Board of Governors of the Federal Reserve System of the United States of America. “Borrower” means Nelnet, Inc., a Nebraska corporation. “Borrower’s Line of Business” means any business conducted by the Borrower or any of its Subsidiaries on the date of execution of this Agreement, and any business reasonably related or incidental thereto, including but not limited to, businesses reasonably related to education services, student loans, payment processing, loan servicing, guarantee servicing, investment management, and software development, as well as any business approved by the Required Lenders. “Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03. “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. “Cash Equivalent Investments” means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s, (iii) demand deposit accounts maintained in the ordinary course of business, (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $500,000,000, and (v) investments in the Short Term Federal Investment Trust for which Union Bank and Trust Company serves as trustee and invests in assets such as FFELP Loans; provided in each case that the same provides

 

4 for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest. “Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than the Existing Control Persons, of Equity Interests representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, but only if at the time the Existing Control Persons do not beneficially own Equity Interests representing a majority in voting power of all issued and outstanding Equity Interests of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group (other than the Existing Control Persons). “Change in Law” means the occurrence, on or after the date of this Agreement (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rule, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided however, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted, issued or implemented. “Code” means the Internal Revenue Code of 1986, as amended from time to time. “Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment is set forth on the Commitment Schedule, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The aggregate amount of the Lenders’ Commitments at the Effective Date is $350,000,000. “Commitment Schedule” means the Commitment Schedule attached hereto. “Consolidated Net Income” means, for any fiscal period, the net income of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis for such period, PLUS to the extent deducted in determining such net income, the derivatives market value adjustment for

 

5 such period (if negative) and MINUS to the extent added in determining such net income, the derivatives market value adjustment for such period (if positive). “Consolidated Net Worth” means at any date the consolidated stockholders’ equity of the Borrower and its Consolidated Subsidiaries. “Consolidated Subsidiary” means at any date any entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto. “Corporate Debt Interest” means, for any period, the interest expense of the Borrower or any Subsidiary for such period on any Recourse Indebtedness (exclusive of interest expense in respect of Junior Subordinated Hybrid Securities). “Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of (i) such Lender’s Loans at such time and (ii) any Swing Line Loans to the extent that such Lender has or is deemed hereunder to have purchased a participation therein. “Daily Eurodollar Base Rate” means, with respect to a Swing Line Loan, the greater of (a) zero percent (0.0%) and (b) the applicable interest settlement rate for deposits in Dollars administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for one month appearing on Reuters Screen LIBOR01 (or on any successor or substitute page on such screen) as of 11:00 a.m. (London time) on a Business Day, provided that, if Reuters Screen LIBOR01 (or any successor or substitute page) is not available to the Administrative Agent for any reason, the applicable Daily Eurodollar Base Rate for one month shall instead be the applicable interest settlement rate for deposits in Dollars administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for one month as reported by any other generally recognized financial information service selected by the Administrative Agent as of 11:00 a.m. (London time) on a Business Day, provided that, if no such interest settlement rate administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) is available to the Administrative Agent, the applicable Daily Eurodollar Base Rate for one month shall instead be the rate determined by the Administrative Agent to be the rate at which U.S. Bank or one of its Affiliate banks offers to place deposits in Dollars with first-class banks in the interbank market at approximately 11:00 a.m. (London time) on a Business Day in the approximate amount of U.S. Bank’s relevant Swing Line Loan and having a maturity equal to one month. For purposes of determining any interest rate hereunder or under any other Loan Document which is based on the Daily Eurodollar Base Rate, such interest rate shall change as and when the Daily Eurodollar Base Rate shall change.

 

6 “Daily Eurodollar Loan” means a Swing Line Loan which, except as otherwise provided in Section 2.09(c), bears interest at the Daily Eurodollar Rate. “Daily Eurodollar Rate” means, with respect to a Swing Line Loan, the sum of (a) the quotient of (i) the Daily Eurodollar Base Rate, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (b) the Eurodollar Margin. “Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. “Defaulting Lender” means any Lender, as determined by the Administrative Agent, that has (a) failed to (i) fund any portion of its Loans or participations in Swing Line Loans within two (2) Business Days of the date such portion is required in the determination of the Administrative Agent to be funded by it hereunder (unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied or waived, or (ii) pay to the Administrative Agent, the Swing Line Lender or any other Lender any other amount required to be paid to it hereunder within two (2) Business Days of the date when due, (b) notified the Borrower, the Administrative Agent, the Swing Line Lender or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing) or public statement cannot be satisfied), (c) failed, within two (2) Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Swing Line Loans, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s receipt of such confirmation, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within two (2) Business Days of the date when due, unless the subject of a good faith dispute, or (e) (i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian, appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided, that a Lender shall not become a Defaulting Lender solely as the result of (x) the acquisition or maintenance of an ownership interest in such Lender or a Person controlling such Lender or (y) the exercise of control over a Lender or a Person

 

7 controlling such Lender, in each case, by a Governmental Authority or an instrumentality thereof. Any determination by the Administrative Agent that a Lender is a Defaulting Lender, in accordance with the preceding sentence, will be conclusive and binding absent demonstrable error, and such Lender will be deemed to be a Defaulting Lender upon notification of such determination by the Administrative Agent to the Borrower, the Swing Line Lender and the Lenders. “Disclosed Matters” means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06. “Dollars” or “$” refers to lawful money of the United States of America. “Domestic Subsidiary” means a Subsidiary of the Borrower incorporated or organized under the laws of the United States of America, any state thereof or the District of Columbia. “Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. “Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time. “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the

 

8 30 day notice period is waived); (b) the existence with respect to any Plan of the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. “Eurodollar Margin” has the meaning set forth in the Pricing Schedule. “Event of Default” has the meaning assigned to such term in Article 7. “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.16, any withholding tax that is imposed on amounts payable to such Foreign Lender resulting from any law in effect on the date such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.14(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.14 and (d) any U.S. federal withholding Taxes imposed under FATCA. “Existing Control Persons” means Michael S. Dunlap, Stephen F. Butterfield, the members of their immediate families (parents, siblings, children and spouses) and any trust created for the benefit of any of the foregoing. “FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official

 

9 interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code. “Federal Funds Effective Rate” means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. “Fee Rate” has the meaning set forth in the Pricing Schedule. “FFELP Loans” means (i) student loans originated under the Federal Family Education Loan Program of the U.S. Department of Education and (ii) Health Education Assistance Loans (HEAL Loans) originated under 42 U.S.C. Section 292 et seq. “Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. “GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time and applied on a consistent basis. “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. “Guarantee” of or by any Person (the “Guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “Primary Obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

 

10 “Guarantor” means each of the Material Subsidiaries that is a Domestic Subsidiary, and its successors and assigns. Schedule 1.01 lists the Guarantors as of the Effective Date. “Guaranty” means that certain Amended and Restated Guaranty dated as of October 30, 2015, executed by the Guarantor in favor of the Administrative Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect from time to time. “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. “Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. “Indemnified Taxes” means Taxes imposed on or with respect to any payment made by or on account of any obligation of the Borrower, other than Excluded Taxes and Other Taxes. “Intercompany Indebtedness” means Indebtedness of any Subsidiary to the Borrower or any other Subsidiary. “Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05. “Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

 

11 “Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. “Investment” of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities (including warrants or options to purchase securities) owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. “Junior Subordinated Hybrid Securities” means the junior subordinated hybrid securities of the Borrower issued on September 27, 2006. “Lenders” means the Persons listed on the Commitment Schedule and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the greater of (a) zero percent (0.0%) and (b) the applicable interest settlement rate for deposits in Dollars administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) appearing on Reuters Screen LIBOR01 (or on any successor or substitute page on such screen) as of 11:00 a.m. (London time) on the day two Business Days before the beginning of such Interest Period, and having a maturity equal to such Interest Period, provided that, if the applicable Reuters Screen (or any successor or substitute page) is not available to the Administrative Agent for any reason, the applicable LIBO Rate for the relevant Interest Period shall instead be the applicable interest settlement rate for deposits in Dollars administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) as reported by any other generally recognized financial information service selected by the Administrative Agent as of 11:00 a.m. (London time) on the day two Business Days before the beginning of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such interest settlement rate administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) is available to the Administrative Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which

 

12 U.S. Bank or one of its Affiliate banks offers to place deposits in Dollars with first-class banks in the interbank market at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, in the approximate amount of the relevant Eurodollar Borrowing and having a maturity equal to such Interest Period. “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities (unless such option, call or similar right is granted in connection with a merger, acquisition, divestiture or similar transaction). “Loan Documents” means this Agreement, the Guaranty, any notes executed by the Borrower in connection with this Agreement and any other document or agreement, now or in the future, executed by the Borrower or a Guarantor in connection with this Agreement. “Loans” means the Revolving Loans or Swing Line Loans made by the Lenders to the Borrower pursuant to this Agreement. “Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. “Material Indebtedness” means Indebtedness (other than the Loans), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $25,000,000. For purposes of determining Material Indebtedness, the “Principal Amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time. “Material Subsidiary” means (a) a Subsidiary with consolidated stockholders’ equity in excess of $25,000,000, (b) Nelnet Enrollment Solutions, LLC and (c) any Subsidiary listed as a separately disclosed operating segment in the Borrower’s most recent annual report on Form 10- K as filed with the Securities and Exchange Commission or in any subsequently filed annual report. “Maturity Date” means October 30, 2020. “Moody’s” means Moody’s Investors Service, Inc. “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. “Non-FFELP Loans” means any loans other than FFELP Loans.

 

13 “OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto. “Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. “Participant” has the meaning set forth in Section 9.04. “PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to time, and any successor statute. “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. “Permitted Acquisition” means any Acquisition made by the Borrower or any of its Subsidiaries, provided that, (a) as of the date of the consummation of such Acquisition, no Default or Event of Default shall have occurred and be continuing or would result from such Acquisition, (b) such Acquisition is consummated on a non-hostile basis pursuant to a negotiated acquisition agreement that has been (if required by the governing documents of the seller or entity to be acquired) approved by the board of directors or other applicable governing body of the seller or entity to be acquired, and no material challenge to such Acquisition (excluding the exercise of appraisal rights) shall be pending or, to the Borrower’s knowledge, threatened by any shareholder or director of the seller or entity to be acquired, (c) either (i) the business to be acquired in such Acquisition is in the same line of business as the Borrower’s Line of Business or a line of business incidental thereto or (ii) if the business to be acquired is not in the Borrower’s Line of Business or a line of business incidental thereto, the consideration paid for such Acquisition or Acquisitions, consummated in any fiscal year of the Borrower will not in the aggregate exceed $75,000,000, (d) as of the date of the consummation of such Acquisition, all material approvals required in connection therewith shall have been obtained, and (e) with respect to an Acquisition requiring an aggregate expenditure of cash by the Borrower in excess of $25,000,000, the Borrower shall have furnished to the Administrative Agent a certificate demonstrating in reasonable detail pro forma compliance with the financial covenants contained in Section 6.05 and Section 6.09 for the four (4) fiscal quarter period most recently ended prior to the date of such Acquisition, in each case, calculated as if such Acquisition, including the consideration therefor, had been consummated on the first day of such period, and immediately following consummation of the Acquisition, the Borrower has unencumbered cash plus unencumbered Cash Equivalent Investments plus unused availability under this Agreement which aggregate is not less than $25,000,000. “Permitted Encumbrances” means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04;

 

14 (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article 7; (f) Liens granted by any Subsidiary in connection with a Qualified Receivables Transaction; and (g) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; provided that the term “Permitted Encumbrances” shall not include any Lien securing Recourse Indebtedness. “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “Employer” as defined in Section 3(5) of ERISA. “Pricing Schedule” means the Pricing Schedule attached hereto. “Prime Rate” means for any day the rate of interest per annum publicly announced from time to time by U.S. Bank National Association as its prime rate for such day; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. “Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. “Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Borrower or any Subsidiary pursuant to which the Borrower or any Subsidiary may sell, convey or otherwise transfer to a Subsidiary or other special-purpose entity, any student loans, and rights related thereto without recourse to the transferor except for customary exceptions acceptable to the Administrative Agent.

 

15 “Receivables Transaction Attributed Indebtedness” means the amount of obligations outstanding under the legal documents entered into as part of any Qualified Receivables Transaction on any date of determination that would be characterized as principal if such Qualified Receivables Transaction were structured as a secured lending transaction rather than as a purchase. “Recourse Indebtedness” of the Borrower means all Indebtedness of the Borrower and of its Subsidiaries excluding (i) Indebtedness with respect to which recourse is contractually limited to specified Property which secures payment of such Indebtedness, (ii) Indebtedness in connection with the Junior Subordinated Hybrid Securities and (iii) Receivables Transaction Attributed Indebtedness. “Register” has the meaning set forth in Section 9.04. “Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates. “Required Lenders” means, at any time, Lenders having Credit Exposures and unused Commitments representing more than 50% of the sum of the total Credit Exposures and unused Commitments at such time. “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any equity interest in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such equity interests in the Borrower or any Subsidiary thereof or any option, warrant or other right to acquire any such equity interest in the Borrower or any Subsidiary thereof; provided, however, that such Restricted Payment definition shall exclude any dividends, distributions or payments made in connection with a fundamental change of a Subsidiary as otherwise permitted in Section 6.03(a) hereof. “Revolving Loan” means, with respect to a Lender, such Lender’s loan made pursuant to its commitment to lend set forth in Section 2.01 (or any conversion or continuation thereof). “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. “Sanctioned Country” means, at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions. “Sanctioned Person” means, at any time, (a) any Person or group listed in any Sanctions- related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agent, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

 

16 “Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasure of the United Kingdom. “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. “Subsidiary” means, with respect to any Person (the “Parent”) at any date, any corporation, limited liability company, partnership, trust, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held. “Substantial Portion” means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 20% of the consolidated assets of the Borrower and its Subsidiaries taken as whole or, if less, Property which is responsible for more than 15% of the Adjusted EBITDA for the most recently completed four fiscal quarters. “Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement. “Swing Line Borrowing Notice” is defined in Section 2.02(ii). “Swing Line Exposure” has the meaning set forth in Section 2.18. “Swing Line Lender” means U.S. Bank National Association or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement.

 

17 “Swing Line Loan” means a Loan made available to the Borrower by the Swing Line Lender pursuant to Section 2.02. “Swing Line Sublimit” means the maximum principal amount of Swing Line Loans the Swing Line Lender may have outstanding to the Borrower at any one time, which, as of this date, is $40,000,000. “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. “Transactions” means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans and the use of the proceeds thereof. “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. “Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary of which 100% of the beneficial ownership interests shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization of which 100% of the beneficial ownership interests shall at the time be so owned or controlled. “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02 Classification of Loans and Borrowings. For purposes of this Agreement, Loans and Borrowings may be classified and referred to by Type (e.g., a “Eurodollar Loan” or a “ABR Borrowing”). SECTION 1.03 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same

 

18 meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any debt or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein and (ii) without giving effect to any treatment of debt in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such debt in a reduced or bifurcated manner as described therein, and such debt shall at all times be valued at the full stated principal amount thereof. ARTICLE II THE CREDITS SECTION 2.01 Commitments; Revolving Loans and Borrowings. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender’s Credit Exposure exceeding such Lender’s Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Revolving Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. (b) Subject to Section 2.11, each Borrowing of Revolving Loans shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option

 

19 shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurodollar Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.02 Swing Line Loans. (i) Amount of Swing Line Loans. Upon the satisfaction of the conditions precedent set forth in Section 4.02 and, if such Swing Line Loan is to be made on the date of the initial Advance hereunder, the satisfaction of the conditions precedent set forth in Section 4.01 as well, from and including the date of this Agreement and prior to the Maturity Date, the Swing Line Lender may, at its option, on the terms and conditions set forth in this Agreement, make Swing Line Loans in Dollars to the Borrower from time to time in an aggregate principal amount not to exceed the Swing Line Sublimit, provided that the aggregate outstanding Credit Exposure shall not at any time exceed the aggregate Commitment and no individual Lender’s Credit Exposure shall at any time exceed its Commitment, and provided further that at no time shall the sum of (i) the Swing Line Lender’s pro rata share of the Swing Line Loans, plus (ii) the outstanding Revolving Loans made by the Swing Line Lender pursuant to Section 2.01, exceed the Swing Line Lender’s Commitment at such time. Subject to the terms of this Agreement (including, without limitation the discretion of the Swing Line Lender), the Borrower may borrow, repay and reborrow Swing Line Loans at any time prior to the Maturity Date. (ii) Borrowing Notice. In order to borrow a Swing Line Loan, the Borrower shall deliver to the Administrative Agent and the Swing Line Lender an irrevocable notice (a “Swing Line Borrowing Notice”) not later than 12:00 noon New York City time on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day), and (ii) the aggregate amount of the requested Swing Line Loan which shall be an amount not less than $100,000. (iii) Making of Swing Line Loans; Participations. Not later than 2:00 p.m. New York City time on the date of the applicable Borrowing, the Swing Line Lender shall make available the Swing Line Loan, in funds immediately available, to the Administrative Agent at its address specified pursuant to Article XIII. The Administrative Agent will promptly make the funds so received from the Swing Line Lender available to the Borrower at the Administrative Agent’s aforesaid address. Each time that a Swing Line Loan is made by the Swing Line Lender pursuant to this Section 2.02(iii), the Swing Line Lender shall be deemed, without further action

 

20 by any party hereto, to have unconditionally and irrevocably sold to each Lender and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Swing Line Lender a participation in such Swing Line Loan in proportion to its pro rata share of the aggregate Commitments. (iv) Repayment of Swing Line Loans. Each Swing Line Loan shall be paid in full by the Borrower on the date selected by the Administrative Agent. In addition, the Swing Line Lender may at any time in its sole discretion with respect to any outstanding Swing Line Loan, require each Lender to fund the participation acquired by such Lender pursuant to Section 2.02(iii) or require each Lender (including the Swing Line Lender) to make a Revolving Loan in the amount of such Lender’s pro rata share of such Swing Line Loan (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swing Line Loan. Not later than 12:00 noon New York City time on the date of any notice received pursuant to this Section 2.02(iv), each Lender shall make available its required Revolving Loan, in funds immediately available to the Administrative Agent at its address specified pursuant to Article XIII. Revolving Loans made pursuant to this Section 2.02(iv) shall initially be ABR Loans and thereafter may be continued as ABR Loans or converted into Eurodollar Loans in the manner provided in Section 2.05 and subject to the other conditions and limitations set forth in this Article II. Unless a Lender shall have notified the Swing Line Lender, prior to the Swing Line Lender’s making any Swing Line Loan, that any applicable condition precedent set forth in Section 4.01 or 4.02 had not then been satisfied, such Lender’s obligation to make Revolving Loans pursuant to this Section 2.02(iv) to repay Swing Line Loans or to fund the participation acquired pursuant to Section 2.02(iii) shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Borrower, the Administrative Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance of a Default or Event of Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.02(iv), interest shall accrue thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received and the Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Administrative Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. On the Maturity Date, the Borrower shall repay in full the outstanding principal balance of the Swing Line Loans. SECTION 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, two Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with this Section 2.03:

 

21 (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and (v) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing. SECTION 2.04 Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, the applicable Lender (and if such Lender fails to do so, then the Borrower) agrees to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. SECTION 2.05 Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the

 

22 Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.03: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”. If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued for an additional Interest Period of one month. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a

 

23 Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.06 Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $5,000,000 and not less than $25,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.08, the sum of the Credit Exposures would exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.07 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

 

24 (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.08 Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section. (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, two Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.06, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.01. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10. SECTION 2.09 Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Fee Rate on the average daily unused amount of the Commitment of such Lender during the period from and including the Effective Date to, but excluding the date on which such Commitment terminates. Swing Line Loans shall not count as usage of the Commitments for the purpose of calculating the commitment fee hereunder. Accrued fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof. All fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of commitment fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

 

25 SECTION 2.10 Interest. (a) The Revolving Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the ABR Margin. (b) The Revolving Loans comprising each Eurodollar Borrowing shall bear interest, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Eurodollar Margin. (c) Each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is made to but excluding the date it is paid, at a rate per annum equal to, at the Borrower’s option, the Alternate Base Rate plus the ABR Margin for such day or the Daily Eurodollar Rate. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) All interest hereunder shall be computed on the basis of a year of 360 days, and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.11 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing, adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period, or the Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

26 SECTION 2.12 Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit, assessment, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); (ii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Loans made by such Lender other than a Tax, as to which the provisions of Section 2.14 apply; or (iii) subject the Administrative Agent, any Lender, any other recipient of any payments to be made by or on account of any obligation of the Borrower hereunder to any Taxes on its loans, loan principal, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto (other than (A) Indemnified Taxes, (B) Excluded Taxes or (C) Other Taxes); and the result of any of the foregoing shall be to increase the cost to such Person of making or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Person hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Person such additional amount or amounts as will compensate such Person for such additional costs incurred or reduction suffered. (b) If any Change in Law regarding capital requirements or liquidity requirements has or would have the effect of reducing the rate of return on any Lender’s capital or on the capital of any Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender, or the Loans made by, or participations in Swing Line Loans held by, such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy or liquidity position), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof). SECTION 2.13 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered

 

27 pursuant hereto (regardless of whether such notice may be revoked under Section 2.08(b) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.16, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for Dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.14 Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent and each Lender within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority

 

28 evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. (f) If the Administrative Agent or a Lender receives a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.14, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.14 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person. (g) Each Lender shall severally indemnify the Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes or Other Taxes, only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes or Other Taxes and without limiting the obligation of the Borrowers to do so) attributable to such Lender that are paid or payable by the Administrative Agent in connection with this Agreement and any reasonable expenses arising therefrom or with respect thereto, whether or not such amounts were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 2.14(g) shall be paid within 10 days after the Administrative Agent delivers to the applicable Lender a certificate stating the amount so paid or payable by the Administrative Agent. Such certificate shall be conclusive of the amount so paid or payable absent demonstrable error. (h) If a payment made to a Lender under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Borrowers or the Administrative Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with its

 

29 obligations under FATCA, to determine that such Lender has or has not complied with such Lender’s obligations under FATCA and, as necessary, to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.14(h), “FATCA” shall include any amendments made to FATCA after the date of this Agreement. SECTION 2.15 Payments Generally; Pro Rata Treatment; Sharing of Set-Offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or of amounts payable under Sections 2.12, 2.13, 2.14 or otherwise) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds, without set off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices as designated by the Administrative Agent, except that payments pursuant to Sections 2.12, 2.13, 2.14 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans (which for purposes of this clause (c) shall be deemed to include participations in Swing Line Loans) resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements

 

30 may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or 2.15(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.16 Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. (b) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment

 

31 will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.17 Increased Commitments; Additional Lenders. (a) From time to time subsequent to the Effective Date provided no Default exists, the Borrower may, upon at least 30 days’ notice to the Administrative Agent (which shall promptly provide a copy of such notice to the Lenders), propose to increase the aggregate amount of the Commitments to an aggregate amount not to exceed $400,000,000 (the amount of any such increase, the “Increased Commitments”). Each Lender party to this Agreement at such time shall have the right (but no obligation), for a period of 15 days following receipt of such notice, to elect by notice to the Borrower and the Administrative Agent to increase its Commitment by a principal amount which bears the same ratio to the Increased Commitments as its then Commitment bears to the aggregate Commitments then existing. (b) If any Lender party to this Agreement shall not elect to increase its Commitment pursuant to subsection (a) of this Section, the Borrower may, within 10 days of the Lender’s response, designate one or more of the existing Lenders or other financial institutions acceptable to the Administrative Agent and the Borrower (which consent of the Administrative Agent shall not be unreasonably withheld) which at the time agree to (i) in the case of any such Person that is an existing Lender, increase its Commitment and (ii) in the case of any other such Person (an “Additional Lender”), become a party to this Agreement as a Lender. The sum of the increases in the Commitments of the existing Lenders pursuant to this subsection (b) plus the Commitments of the Additional Lenders shall not in the aggregate exceed the unsubscribed amount of the Increased Commitments. (c) An increase in the aggregate amount of the Commitments pursuant to this Section 2.17 shall become effective upon the receipt by the Administrative Agent of an agreement in form and substance satisfactory to the Administrative Agent signed by the Borrower by each Additional Lender and by each other Lender whose Commitment is to be increased, setting forth the new Commitments of such Lenders and setting forth the agreement of each Additional Lender to become a party to this Agreement as a Lender and to be bound by all the terms and provisions hereof, together with such evidence of appropriate corporate authorization on the part of the Borrower with respect to the Increased Commitments and such opinions of counsel for the Borrower with respect to the Increased Commitments as the Administrative Agent may reasonably request. (d) Upon any increase in the aggregate amount of the Commitments pursuant to this Section 2.17 that is not pro rata among all Lenders, (x) within five Domestic Business Days, in the case of any ABR Borrowing then outstanding, and (y) at the end of the then current Interest Period with respect thereto, in the case of any Eurodollar Borrowing then outstanding, the Borrower shall prepay such Borrowing in its entirety and, to the extent the Borrower elects to do so and subject to the conditions specified in Article 4 the Borrower shall reborrow Loans from the Lenders in proportion to their respective Commitments after giving effect to such increase, until such time as all outstanding Loans are held by the Lenders in such proportion.

 

32 SECTION 2.18 Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender: (i) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.09; (ii) the Commitment and Credit Exposure of such Defaulting Lender shall not be included in determining whether all Lenders or the Required Lenders have taken or may take any action hereunder; (iii) if any Swing Line Loans shall be outstanding at the time a Lender becomes a Defaulting Lender then: (A) all or any part of the unfunded participations in and commitments with respect to such Swing Line Loans shall be reallocated among the non-Defaulting Lenders in accordance with their respective pro rata Credit Exposures but only to the extent (x) the sum of all non-Defaulting Lenders’ Credit Exposure plus such Defaulting Lenders’ Loans and participations in and commitments with respect to Loans does not exceed the total of all non-Defaulting Lender’s Commitments and no individual Lender’s Credit Exposure exceeds its Commitment and (y) the conditions set forth in Article IV are satisfied at such time. (B) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Administrative Agent, prepay the outstanding Swing Line Loans that were not reallocated; (iv) any amount payable to such Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise and including any amount that would otherwise be payable to such Defaulting Lender pursuant to Section 2.15 but excluding Section 2.16) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Administrative Agent in a segregated account and, subject to any applicable requirements of law, be applied at such time or times as may be determined by the Administrative Agent (i) first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second, to the payment of any amounts owing by such Defaulting Lender to the Swing Line Lender hereunder, (iii) third, to the funding of any Loan or the funding of any participating interest in any Swing Line Loan or in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent, (iv) fourth, if so determined by the Administrative Agent and the Borrower, held in such account as cash collateral for future funding obligations of the Defaulting Lender under this Agreement, (v) fifth, to the payment of any amounts owing to the Borrower or the Lenders as a result of any judgment of a court of competent jurisdiction obtained by the Borrower or any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement, and (vi) sixth, if so determined by the Administrative Agent, distributed to the Lenders other than the Defaulting Lender until the ratio of the Credit Exposure of such Lenders to the aggregate outstanding Credit Exposure equals such ratio immediately prior to the

 

33 Defaulting Lender’s failure to fund any portion of any Loans or participations in Swing Line Loans and (vii) seventh, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided, that if such payment is a prepayment of the principal amount of any Loans, such payment shall be applied solely to prepay the Loans of, all Lenders that are not Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans, or owed to, any Defaulting Lender. In the event that the Administrative Agent, the Borrower and the Swing Line Lender each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swing Line Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold the Loans in accordance with its pro rata share. For purposes of this Section 2.18, “Swing Line Exposure” shall mean, with respect to any Defaulting Lender at any time, such Defaulting Lender’s pro rata share of the aggregate principal amount of all Swing Line Loans outstanding at such time. Nothing contained in the foregoing shall be deemed to constitute a waiver by the Borrower of any of its rights or remedies (whether in equity or at law) against any Lender which fails to fund any of its Loans hereunder at the time or in the amount required to be funded under the terms of this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: SECTION 3.01 Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02 Authorization; Enforceability. The Transactions are within the Borrower’s corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement and any promissory note of the Borrower hereunder have been, or will be, in the case of any such promissory note executed and delivered hereafter, duly executed and delivered by the Borrower and constitute, or will constitute, in the case of any such promissory note executed and delivered hereafter, a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03 Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any

 

34 Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 3.04 Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the fiscal year ended December 31, 2010, reported on by KPMG LLP, independent public accountants. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such date and for such period in accordance with GAAP. (b) Since December 31, 2010, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Material Subsidiaries, taken as a whole. SECTION 3.05 Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, may not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06 Litigation and Environmental Matters. (a) There are no investigations, actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Material Subsidiaries or their Property (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, may reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions. (b) Except with respect to any matters that, individually or in the aggregate, may not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

 

35 SECTION 3.07 Compliance With Laws and Agreements. Each of the Borrower and its Material Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except (i) to the extent, if any, that the Borrower and its Material Subsidiaries may not be in such compliance in connection with the Disclosed Matters or (ii) where the failure to do so, individually or in the aggregate, may not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08 Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940. SECTION 3.09 Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so may not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, may reasonably be expected to result in a Material Adverse Effect. SECTION 3.11 Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Material Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 3.12 Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws. (a) The Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of the Borrower its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respect directors, officers or employees, is a Sanctioned Person. No Loan, use of the proceeds of any Loan or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions. (b) Neither the making of the Loans hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended, or any of the

 

36 foreign assets control regulations of the United States Treasure Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower and its Subsidiaries are in compliance in all material respects with the PATRIOT Act. ARTICLE IV CONDITIONS SECTION 4.01 Effective Date. This Agreement shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement and the Guaranty signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement and the Guaranty) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of The Perry Law Firm, counsel for the Borrower and the Guarantors, substantially in the form of Exhibit B, and covering such other matters relating to the Borrower and the Guarantors, this Agreement or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower and the Guarantors, the authorization of the Transactions and any other legal matters relating to the Borrower and the Guarantors, this Agreement and the Guaranty or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent and each Lender shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, with respect to the Administrative Agent, to the extent invoiced, reimbursement or payment of all out of pocket expenses required to be reimbursed or paid by the Borrower hereunder. (f) The Administrative Agent shall have received any Notes requested by a Lender payable to the order of each such requesting Lender. (g) There shall not have occurred a material adverse change (x) in the business, Property, liabilities (actual and contingent), operations or condition (financial or otherwise), or results of operations of the Borrower and its Material Subsidiaries taken as a whole, since

 

37 December 31, 2014 or (y) in the facts and information regarding such entities as represented by such entities to date. (h) The Administrative Agent shall have received unaudited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal quarter ended June 30, 2015 and audited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal years ended December 31, 2010 through December 2014. SECTION 4.02 Each Borrowing. The obligation of each Lender to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) The representations and warranties of the Borrower set forth in this Agreement (with the exception, in the case of a Borrowing subsequent to the Effective Date, of the representations and warranties in Section 3.04(b) and Section 3.06) shall be true and correct on and as of the date of such Borrowing. (b) At the time of and immediately after giving effect to such Borrowing no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE V AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 5.01 Financial Statements; Ratings Change and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all

 

38 material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, (i) the balance sheet of the Borrower as of the date of such financial statements and the related statements of operations, stockholders’ equity and cash flows for the fiscal year or portion thereof then ended, setting forth in each case in comparative form the corresponding figures from the previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial condition and results of operations of the Borrower on a stand alone basis in accordance with GAAP consistently applied, subject to the absence of footnotes and (in the case of such financial statements delivered concurrently with those under clause (b) above) to year-end audit adjustments and (ii) a certificate of a Financial Officer of the Borrower in substantially the form of Exhibit C (x) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (y) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.01, 6.05, 6.06, 6.09 and 6.10 and (z) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; (e) promptly after Moody’s or S&P shall have announced a change in the Borrower’s credit rating or the rating of any Qualified Receivables Transaction, written notice of such rating change; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. Financial statements and other documents required to be delivered pursuant to this Section 5.01 may be delivered electronically and if so delivered, shall be deemed to have been delivered (i) to the extent such documents are included in materials otherwise filed with the Securities and Exchange Commission, when such filing is available to the Lenders on the EDGAR website or (ii) in any case, on the date on which such documents are posted on the Borrower’s behalf on an Internet website to which each Lender and the Administrative Agent has access and the Borrower notifies the Administrative Agent and the Lenders of such posting. If the Borrower provides the financial statements and other documents required to be delivered pursuant to this Section 5.01 electronically pursuant to the preceding sentence, the Borrower will provide printed versions of such financial statements and other documents to any Lender upon such Lender’s request.

 

39 SECTION 5.02 Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, may reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, may reasonably be expected to result in a Material Adverse Effect; and (d) any other development that results in, or may reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03 Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04 Payment of Obligations. The Borrower will, and will cause each of its Material Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Material Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest may not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05 Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06 Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and

 

40 records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07 Compliance With Laws. The Borrower will, and will cause each of its Material Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except (i) to the extent, if any, that the Borrower and its Material Subsidiaries may not be in such compliance in connection with the Disclosed Matters or (ii) where the failure to do so, individually or in the aggregate, may not reasonably be expected to result in a Material Adverse Effect. The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions. SECTION 5.08 Use of Proceeds. The proceeds of the Loans will be used for general corporate purposes, including without limitation acquisitions and any payments required to be made in connection with the Disclosed Matters. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The Borrower will not request any Loan, and the Borrower shall not use, and the Borrower shall ensure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions. SECTION 5.09 Guarantors. If the Borrower organizes a new Domestic Subsidiary, for any purpose other than entering into a Qualified Receivables Transaction, the Borrower will, within thirty (30) days after the date on which such Subsidiary was organized, cause such Subsidiary to execute, by joinder, the Guaranty. SECTION 5.10 Dividends. The Borrower will cause its Subsidiaries to pay to the Borrower the maximum amount of dividends allowed to be payable by such Subsidiaries in accordance with applicable organizational documents, applicable agreements and applicable law. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01 Recourse Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any (i) Recourse Indebtedness or (ii) obligations in connection with repurchase agreements, except: (a) the Loans; (b) [reserved]

 

41 (c) (i) other Recourse Indebtedness and (ii) obligations in connection with repurchase agreements (exclusive of the Loans, Recourse Indebtedness and repurchase agreement obligations permitted elsewhere in this Section 6.01), in each case, which are not secured by Liens granted by the Borrower or one or more of its Subsidiaries; provided that the aggregate principal or face amount of all such other Recourse Indebtedness and obligations in connection with repurchase agreements described in this clause (c) does not exceed $250,000,000 at any time outstanding; (d) (i) other Recourse Indebtedness and (ii) obligations in connection with repurchase agreements (exclusive of the Loans, Recourse Indebtedness and repurchase agreement obligations permitted elsewhere in this Section 6.01), in each case, which are secured by Liens granted by the Borrower, one or more of its Subsidiaries or any combination thereof; provided that the aggregate principal or face amount of all such other Recourse Indebtedness and obligations in connection with repurchase agreements described in this clause (d) does not exceed $100,000,000 at any time outstanding; and (e) other Recourse Indebtedness (exclusive of the Loans, Recourse Indebtedness and repurchase agreement obligations permitted elsewhere in this Section 6.01) in connection with sales of private student loans previously treated as asset sales with respect to which the Borrower or any of its Subsidiaries has an obligation to purchase any such private student loans that become delinquent; provided the aggregate outstanding balance of such private student loans sold pursuant to such terms does not exceed $53,100,000 as of the Effective Date, with such maximum amount reducing automatically when and as such private student loans are repaid or repurchased by the Borrower or one of its Subsidiaries by an amount equal to the amount of such repayment or purchase. SECTION 6.02 Liens. The Borrower will not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower provided that (i) such Lien is not created in contemplation of or in connection with such acquisition, (ii) such Lien shall not apply to any other property or assets of the Borrower and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

 

42 (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower provided that (i) such security interests and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (ii) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary; (e) Liens granted by the Borrower or one or more of its Subsidiaries to secure the Indebtedness described in Section 6.01(e); and (f) Liens granted by the Borrower or one or more of its Subsidiaries to secure the Indebtedness described in Section 6.01(d) in an aggregate principal or face amount not at any time exceeding $100,000,000; provided that no such Lien shall apply to any property of the Borrower other than the specific assets being financed. SECTION 6.03 Fundamental Changes. (a) The Borrower will not, nor will it permit any Material Subsidiary to, merge or consolidate with or into any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary, and a Subsidiary other than a Material Subsidiary may be liquidated or dissolved. (b) The Borrower will not, and will not permit any of its Material Subsidiaries to, engage to any material extent in any business other than the Borrower’s Line of Business, except to the extent permitted pursuant to clause (c) of the definition of “Permitted Acquisition”. SECTION 6.04 Sale of Assets. The Borrower will not, nor will it permit any Material Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (a) sales of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business; (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are applied with reasonable promptness to the purchase price of such replacement equipment; (c) leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the twelve- month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries; (d) sales of assets in connection with a Qualified Receivables Transaction; and (e) sales, leases or other dispositions of its Property, approved by the Required Lenders. SECTION 6.05 Minimum Consolidated Net Worth. Consolidated Net Worth shall be (a) as of September 30, 2015, no less than $1,350,000,000 and (b) as of December 31, 2015

 

43 and each fiscal quarter ending thereafter, no less than the sum of (i) $1,350,000,000 plus (ii) an amount equal to 50% of Consolidated Net Income for (x) the fiscal quarter ending December 31, 2015 and (y) each subsequent fiscal quarter of the Borrower, in each case, for which such Consolidated Net Income is positive (but with no deduction on account of negative Consolidated Net Income for any such fiscal period) plus (iii) 100% of the amount of any increase in Consolidated Net Worth attributable to the issuance of capital stock of the Borrower subsequent to September 30, 2015. SECTION 6.06 Investments. The Borrower will not, nor will it permit any Material Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, except: (a) Cash Equivalent Investments; (b) existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 6.06; (c) Investments constituting Permitted Acquisitions; (d) travel advances to management personnel and employees in the ordinary course of business; (e) Investments comprised of capital contributions (whether in the form of cash, a note, or other assets and including, without limitation, in exchange for equity interests) to a Subsidiary or other special-purpose entity, in each case, created solely to engage in a Qualified Receivables Transaction or otherwise resulting from transfers of assets permitted by Section 6.04 to such a special-purpose entity; (f) Investments in asset-backed securities or municipal securities collateralized by FFELP Loans or Non-FFELP Loans; (g) student loans or beneficial, participation or other interests therein; (h) non-securitized residual interests in FFELP Loans, Non-FFELP Loans or, in each case, securities collateralized thereby; and (i) other Investments, provided that the aggregate amount of such other Investments does not exceed 20% of the Borrower’s Consolidated Net Worth at any time outstanding. SECTION 6.07 Acquisitions. The Borrower will not, nor will it permit any Subsidiary, to make any Acquisition other than a Permitted Acquisition. SECTION 6.08 Restricted Payments. The Borrower will not, nor will it permit any Subsidiary to, make any Restricted Payment, except that any Subsidiary may declare and pay dividends or make distributions to the Borrower or to any Subsidiary, and the Borrower may declare and pay dividends on its capital stock provided that immediately prior to the payment of

 

44 any such dividend, no Default or Event of Default shall exist before or after giving effect to such dividends or be created as a result thereof and immediately following payment of such dividend, the Borrower will have unencumbered cash plus unencumbered Cash Equivalent Investments plus unused availability under this Agreement with aggregate not less than $25,000,000. SECTION 6.09 Recourse Leverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (i) Recourse Indebtedness to (ii) Adjusted EBITDA for the then most-recently ended four (4) fiscal quarters to be greater than 2.5 to 1.0 SECTION 6.10 Non-FFELP Loans. The Borrower will not permit, at any time, the sum of (i) the aggregate amount of Non-FFELP Loans owned by the Borrower and its Consolidated Subsidiaries plus (ii) the aggregate amount of the Borrower’s initial equity interests in each Subsidiary and each other special-purpose entity, in each case, created solely to engage in Qualified Receivables Transactions with respect to Non-FFELP Loans, to exceed $500,000,000 (excluding, for the avoidance of doubt, the aggregate amount of Non-FFELP Loans owned by a Subsidiary or other special-purpose entity, in each case, pursuant to a Qualified Receivables Transaction). ARTICLE VII EVENTS OF DEFAULT If any of the following events (“Events of Default”) shall occur: (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower in or in connection with this Agreement or any amendment or modification hereof or waiver hereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect when made or deemed made, unless the incorrectness of such representation or warranty is not reasonably expected to result in a Material Adverse Effect; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Sections 5.02(a), 5.03 (with respect to the Borrower’s existence) or in Article 6; provided that in the case of Section 6.01 or 6.05, such failure shall continue unremedied for a period of 30 days after an executive officer of the Borrower first becomes aware of such failure;

 

45 (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender); (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that (i) results in any Material Indebtedness becoming due prior to its scheduled maturity or (ii) is continuing (after any applicable grace period or cure period has expired) so as to enable or permit the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that (x) this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness and (y) a Swap Agreement shall be considered to become due prior to its schedule maturity only if it becomes so due upon termination resulting from the Borrower’s or a Subsidiary’s default thereunder; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action to authorize, or indicating its consent to, approval of, or acquiescence in any of the foregoing; (j) the Borrower or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $25,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days

 

46 during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, may reasonably be expected to result in a Material Adverse Effect; (m) the Borrower or any Subsidiary shall become ineligible to service both federally- insured student loans and Direct Student Loans; or (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII THE ADMINISTRATIVE AGENT Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any

 

47 discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article 5 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring

 

48 Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. Neither the Syndication Agent nor either of the Co-Documentation Agents shall have any duties, responsibilities or liabilities in such capacities. ARTICLE IX MISCELLANEOUS SECTION 9.01 Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (i) if to the Borrower, to it at 121 South 13th Street, Suite 201, Lincoln, NE 68508, Attention of James D. Kruger, Telephone No. (402) 458-2304/Telecopy No. (402) 458- 2294; (ii) if to the Administrative Agent, to U.S. Bank National Association, 800 Nicollet Mall, BC-MN-H03R, Minneapolis, MN 55402, Attention: Teresa Mager, Telephone No.: (612) 303-3683/Telecopy No.: (612) 303-3851; (iii) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to service of process pursuant to Section 9.09 or otherwise under applicable law, or to notices pursuant to Article 2 unless otherwise agreed by

 

49 the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. (c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02 Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. SECTION 9.03 Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out of pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for

 

50 herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from (x) the Indemnitee’s bad faith breach of its express contractual obligations under this Agreement or (y) the gross negligence or willful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, incidental, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor.

 

51 SECTION 9.04 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (a) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of: (A) the Borrower, (provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof); provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; and (B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund. (ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing; (B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

 

52 (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and (D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. For the purposes of this Section 9.04(b), the term “Approved Fund” has the following meaning: “Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be party hereto as a Lender with respect to the interest assigned and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement in addition to any rights and obligations theretofore held by it as a Lender hereunder (if any), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that fails to comply with this Section 9.04 shall be null and void. (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No

 

53 assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (b) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (b)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15(c) as though it were a Lender. (ii) A Participant shall not be entitled to receive any greater payment under Section 2.12 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender. (c) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 9.05 Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is

 

54 outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12, 2.13, 2.14 and 9.03 and Article 8 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process. This Agreement shall be construed in accordance with and governed by the law of the State of New York. (a) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action

 

55 or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to it and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or

 

56 Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. The provisions of this Section 9.12 are without prejudice to any other confidentiality undertakings the Administrative Agent or any Lender may enter into with the Borrower as to any particular information. SECTION 9.13 USA Patriot Act. The Borrower shall, and shall cause each Subsidiary to, provide such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order to assist the Administrative Agent and the Lenders in maintaining compliance with the PATRIOT Act. SECTION 9.14 Amendment and Restatement. The Borrower, the Lenders and the Administrative Agent agree that upon (i) the execution and delivery of this Agreement by each of the parties hereto and (ii) satisfaction (or waiver by the aforementioned parties) of the conditions precedent set forth in Section 4.01, the terms and conditions of the Existing Credit Agreement shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Agreement. This Agreement is not intended to and shall not constitute a novation of the Existing Credit Agreement or the indebtedness created thereunder. Each of the Lenders party hereto that is also a “Lender” under and as defined in the Existing Credit Agreement hereby waives the requirement for at least three (3) Business Days’ written notice set forth in Section 2.06 of the Existing Credit Agreement to permanently reduce the entire Aggregate Commitment thereunder.

 

 

 

 

 

 

 

 

COMMITMENT SCHEDULE Lender Commitment U.S. Bank National Association $100,000,000 Wells Fargo Bank, National Association $75,000,000 Citibank, N.A. $75,000,000 Royal Bank of Canada $50,000,000 First National Bank of Omaha $25,000,000 Bank of Montreal $25,000,000 TOTAL $350,000,000

 

65 PRICING SCHEDULE Each of “FEE RATE”, “EURODOLLAR MARGIN” and “ABR MARGIN” means, for any date, the rate set forth below in the row opposite such term and in the column corresponding to the “Status” on such date: STATUS LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V Fee Rate 0.15% 0.20% 0.25% 0.30%. 0.35% EuroDollar Margin 1.00% 1.25% 1.50% 1.75% 2.00% ABR Margin 0.00% 0.25% 0.50% 0.75% 1.00% For purposes of this Schedule, the following terms have the following meanings, subject to the concluding paragraph of this Schedule: “LEVEL I STATUS” exists at any date if, at such date, the Borrower’s credit rating is BBB+ or higher by S&P or Baa1 or higher by Moody’s. “LEVEL II STATUS” exists at any date if, at such date, (i) the Borrower’s credit rating is BBB or higher by S&P or Baa2 or higher by Moody’s and (ii) Level I Status does not exist. “LEVEL III STATUS” exists at any date if, at such date, (i) the Borrower’s credit rating is BBB- or higher by S&P or Baa3 or higher by Moody’s and (ii) neither Level I Status nor Level II Status exists. “LEVEL IV STATUS” exists at any date if, at such date, (i) to Borrower’s credit rating is BB+ or higher by S&P or Ba1or higher by Moody’s and (ii) none of Level I Status, Level II Status and Level III Status exists. “LEVEL V STATUS” exists at any date if, at such date, no other Status exists. “STATUS” refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, or Level V Status exists at any date. The Eurodollar Margin, the ABR Margin and the Fee Rate shall be determined in accordance with the foregoing table based on the Borrower’s Status as of the last Business Day of the immediately preceding month. Adjustments, if any, to the Eurodollar Margin, the ABR Margin or the Fee Rate shall be effective from and after the first day of the first fiscal month immediately following such date until the first day of the first fiscal month immediately following the next such date.

 

The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. In the case of split ratings from S&P’s and Moody’s, the rating to be used to determine which Status applies is the higher of the two; provided that if the split is more than one notch, a rating one notch below the higher rating of the two shall be used.

 

Schedule 1.01 GUARANTORS National Education Loan Network, Inc. Nelnet Business Solutions, Inc. Nelnet Diversified Solutions, LLC Nelnet Enrollment Solutions, LLC

 

Schedule 3.06 DISCLOSED MATTERS Any liabilities or matters described in the Borrower’s Form 10K and/or Form 10Q with the United States Securities and Exchange Commission for the period ended December 31, 2014 and June 30, 2015 respectively, and any findings, orders, judgments or settlements resulting therefrom or related thereto.

 

Schedule 6.01 EXISTING INDEBTEDNESS None.

 

Schedule 6.02 EXISTING LIENS None.

 

Schedule 6.06 EXISTING INVESTMENTS [Attached].

 

Nelnet Other Investments September 30, 2015 Equity securities - Trading 9,852$ Equity securities - Available for Sale 2,325$ Debt securities - Available for Sale 321$ Cost-method investments: (1) Agile Forum (HUDL) 41,191$ (2) Other all < $5.0M individually 14,186$ Total cost-method $ 55,377 Equity-method investments: (3) Real Estate with Ameritas (all < $5.0M) 11,920$ (4) Affordable Housing Tax Credits 6,290$ Other all < $5.0M individually 6,785$ Total equity-method $ 24,995 Notes Receivable: (5) Panhandle Plains (secured by residual interest) 17,309$ (6) Other all < $5.0M individually 13,655$ Total notes receivable $ 30,964 Tax Liens and CD's: (7) Tax liens 10,939$ Total other 10,939$ "Other Investments" per Debt Compliance Cert 134,773$ (1) Nelnet's investments in Agile Forum/HUDL over the past several years. (2) Nelnet has made more than fifteen venture capital/angel investments with a minority ownership. (3) Nelnet has partnered with Ameritas and has made several equity investments in real estate properties. (4) Nelnet has invested in affordable housing tax credits over the past 10-15 years. (5) Nelnet sold our LoanStar trust estate to Panhandle Plains in exchange for a note receivable secured by cash flow from another trust estate owned by Panhandle Plains. (6) Majority of other notes receive relate to the Ameritas real estate transactions where Nelnet invests equity (see above) and provides a note receivable to fund the property improvements. (7) Nelnet has invested in property tax liens primarily in the states of Ohio and South Carolina.

 

A-1 EXHIBIT A ASSIGNMENT AND ASSUMPTION This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [INSERT NAME OF ASSIGNOR] (the “Assignor”) and [INSERT NAME OF ASSIGNEE] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Amended and Restated Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. 1. Assignor: ______________________________ 2. Assignee: ______________________________ [and is an Affiliate/Approved Fund of [IDENTIFY LENDER](1)] 3. Borrower(s): Nelnet, Inc. (“NELNET”) ––––––––––– (1) Select as applicable.

 

A-2 4. Administrative Agent: U.S. Bank National Association as the administrative agent under the Credit Agreement 5. Credit Agreement: The Amended and Restated Credit Agreement dated as of October [_], 2015 among Nelnet, the Lenders parties thereto, U.S. Bank National Association, as Administrative Agent as amended and in effect from time to time 6. Assigned Interest: Facility Assigned(2) Aggregate Amount of Commitment/Loans for all Lenders Amount of Commitment/Loans Assigned Percentage Assigned of Commitment/ Loans(3) $ $ % $ $ % $ $ % Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] ____________ (2) Fill in the appropriate terminology for the Types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g., “Eurodollar” or “ABR”) (3) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

 

A-3 The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] By: Title: ASSIGNEE [NAME OF ASSIGNEE] By: Title: Consented to and Accepted: U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent By: Title:

 

A-4 ANNEX 1 AMENDED AND RESTATED CREDIT AGREEMENT dated as of October [_], 2015 among NELNET, INC., the LENDERS party thereto, U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent, STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document. 1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

 

A-5 2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date. 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

 

B-1 EXHIBIT B OPINION OF COUNSEL FOR THE BORROWER October [_], 2015 To the Lenders and the Administrative Agent Referred to Below c/o U.S. Bank National Association, as Administrative Agent Ladies and Gentlemen: We have acted as counsel for Nelnet, Inc., a Nebraska corporation (the “Borrower”), in connection with the Amended and Restated Credit Agreement dated as of October [_], 2015 (the “Credit Agreement”), among the Borrower, the banks and other financial institutions identified therein as Lenders, and U.S. Bank National Association, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. We have examined originals or copies, certified or otherwise identified to my/our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. In our examination, we have assumed the genuineness of the signatures of Persons signing the Credit Agreement, the authority of such Persons signing on behalf of the parties thereto (other than the Borrower) and the due authorization, execution and delivery of all documents by the parties thereto (other than the Borrower). Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of Nebraska, (b) has all requisite power and authority to carry on its business as now conducted and (c) except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. 2. The Transactions are within the Borrower’s corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. The Credit Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. 3. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the

 

B-2 charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. 4. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to our knowledge, threatened against or affecting the Borrower or any of its Subsidiaries (a) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect (other than the Disclosed Matters) or (b) that involve the Credit Agreement or the Transactions. 5. Neither the Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940. We are members of the bar of the State of Nebraska and the foregoing opinion is limited to the laws of the State of Nebraska and the Federal laws of the United States of America. We note that the Credit Agreement is governed by the laws of the State of New York and, for purposes of the opinion expressed in paragraphs 2 and 3 above, we have assumed that the laws of the State of New York do not differ from the laws of Nebraska in any manner that would render such opinion incorrect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person (other than your successors and assigns as Lenders and Persons that acquire participations in your Loans) without our prior written consent. Very truly yours,

 

C-1 EXHIBIT C FORM OF COMPLIANCE CERTIFICATE U.S. Bank National Association, as Administrative Agent Attention: ________________ Re: Compliance Certificate Ladies and Gentlemen: Reference is made to the Amended and Restated Credit Agreement dated as of October [_], 2015 among Nelnet, Inc., (the “Borrower”) and the Lenders and Agents from time to time parties thereto (such agreement, as amended and in effect from time to time, the “Agreement”); capitalized terms used herein without definition shall have the meanings assigned those terms in the Agreement. This Certificate is furnished to the Administrative Agent for the benefit of the Lenders pursuant to Section 5.01 of the Agreement. The undersigned, ______________________, hereby certifies to the Administrative Agent for the benefit of the Lenders as follows: 1. Authority. I am the duly elected, qualified and acting __________ of the Borrower. 2. Fiscal Period. This certificate is for the fiscal period ended ___________ __, 201_ (the “Certification Date”). 3. Financial Statements. The accompanying consolidated statements of operations, stockholders’ equity and cash flows of the Borrower and its Consolidated Subsidiaries for the fiscal quarter ended on the Certification Date [and for the then elapsed portion of the fiscal year] and the related consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the Certification Date, together in each case with the corresponding figures in comparative form for the previous fiscal year, present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to year-end audit adjustments and the absence of footnotes. 4. No Default. To my knowledge, no Default has occurred or is continuing as of the date of this certificate.

 

C-2 5. Minimum Consolidated Net Worth (Section 6.05). (a) Consolidated Net Worth at Certification Date $__________ (b) Calculation of Compliance Level (i) Compliance level at preceding Certification Date (from prior Compliance Certificate $__________ (ii) Increase in Consolidated Net Worth attributable to the issuance of capital stock of the Borrower since the preceding Certification Date $__________ [(iii) 50% of Consolidated Net Income for the four fiscal quarter period ended at the Certification Date] [$__________] Compliance Level at Certification Date ((i) plus (ii) [plus (iii)]) $__________ [(c) Calculation of Consolidated Net Income Consolidated net income (from income statement) $__________ [plus] [minus] Derivatives market value adjustment $__________ Consolidated Net Income [$__________] 6. Other Investments (Section 6.06(i)) (a) Consolidated Net Worth at Certification Date $___________ (b) 20% of Consolidated Net Worth at Certification Date $___________ (c) Investments made in reliance on Section 6.06(i) at Certification Date $___________ (d) Line c must be Less Than or Equal to Line b 7. Maximum Recourse Leverage Ratio (Section 6.09). (a) Calculation of Recourse Indebtedness (I) All Indebtedness $__________ (II) Deductions from all Indebtedness (i) Indebtedness contractually nonrecourse $__________ (ii) Junior Subordinated Hybrid Securities $__________

 

C-3 (iii) Receivables Transaction Attributed Indebtedness $__________ (iv) Total deductions $__________ (III) Recourse Indebtedness (I minus II(iv)) $__________ (b) Calculation of Adjusted EBITDA (I) Consolidated Net Income $__________ (II) Additions to the extent deducted in determining Consolidated Net Income: (i) Corporate Debt Interest $__________ (ii) Expenses for taxes paid in cash or accrued $__________ (iii) Depreciation and amortization $__________ (iv) Extraordinary non-cash expenses, charges and losses incurred other than in the ordinary course of business $__________ (v) Non-cash expenses related to stock based compensation $__________ (vi) Unrealized derivatives market value adjustment (if negative) $__________ (vii) Unrealized foreign currency translation adjustment (if negative) $__________ (viii) Total additions $__________ (III) Deductions from Consolidated Net Income to the extent included therein: $__________ (i) Variable-rate floor income $__________ (ii) Extraordinary income or gains $__________ (iii) Income tax credit and refunds (not netted) $__________ (iv) Unrealized derivatives market value adjustment (if positive) $__________

 

C-4 (v) Unrealized foreign currency translation adjustment (if positive) $__________ (vi) Total deductions $__________ (IV) Adjusted EBITDA (I plus II(viii) minus III(vi)) $__________ (c) Calculation of Ratio 8. Non-FFELP Loans (Section 6.10) (i) Aggregate amount of Non-FFELP Loans owned by the Borrower and its Consolidated Subsidiaries plus (ii) the aggregate amount of the Borrower’s equity interests in each Subsidiary and each other special-purpose entity, in each case, created solely to engage in Qualified Receivables Transactions with respect to Non-FFELP Loans (excluding, for the avoidance of doubt, the aggregate amount of Non-FFELP Loans owned by a Subsidiary or other special-purpose entity, in each case, pursuant to a Qualified Receivables Transaction) as of the Certification Date $__________

 

C-5 IN WITNESS WHEREOF, the undersigned has executed this Certificate on the date set forth below. _________________________ Name: Title: Dated: ___________________, 20__

 

D-1 EXHIBIT D NOTE October [_], 2015 Nelnet, Inc, a Nebraska corporation (the “Borrower”), promises to pay to the order of _____________________________ (the “Lender”) the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article II of the Agreement (as hereinafter defined), in immediately available funds at the applicable office of U.S. Bank National Association, as Administrative Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Loans in full on the Maturity Date. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder. This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Amended and Restated Credit Agreement dated as of October [__], 2015 (which, as it may be amended or modified and in effect from time to time, is herein called the “Agreement”), among the Borrower, the lenders party thereto, including the Lender and U.S. Bank National Association, as Administrative Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. In the event of default hereunder, the undersigned agree to pay all costs and expenses of collection, including reasonable attorneys’ fees. The undersigned waive demand, presentment, notice of nonpayment, protest, notice of protest and notice of dishonor. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS. NELNET, INC. By: Print Name: Title:

 

D-2 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF NELNET, INC. DATED OCTOBER [_], 2015 Date Principal Amount of Loan Maturity of Interest Period Principal Amount Paid Unpaid Balance

 

E-1 EXHIBIT E LIST OF CLOSING DOCUMENTS NELNET, INC. CREDIT FACILITY October [_], 2015 LIST OF CLOSING DOCUMENTS1 I. EFFECTIVE DATE CLOSING DOCUMENTS A. LOAN DOCUMENTS 1. Amended and Restated Credit Agreement, dated as of October [_], 2015, among Nelnet, Inc. (the “Borrower”), the Lenders party thereto and U.S. Bank National Association, as administrative agent (in such capacity, the “Administrative Agent”), evidencing a revolving facility in an initial principal amount of up to $350,000,000. SCHEDULES Commitment Schedule Pricing Schedule Schedule 1.01 Guarantors Schedule 3.06 Disclosed Matters Schedule 6.01 Existing Indebtedness Schedule 6.02 Existing Liens Schedule 6.06 Existing Investments 1 Each capitalized term used herein and not defined herein shall have the meaning assigned to such term in the above-defined Credit Agreement. Items appearing in bold italics shall be prepared and/or provided by the Borrower and/or their counsel.

 

E-2 EXHIBITS Exhibit A Form of Assignment and Assumption Agreement Exhibit B Form of Opinion of Counsel for Borrower Exhibit C Form of Compliance Certificate Exhibit D Form of Note Exhibit E List of Closing Documents 2. Notes executed by the Borrower in favor of each of the Lenders, if any, which has requested a note pursuant to the Credit Agreement. 3. Amended and Restated Guaranty executed by the Guarantors in favor of the Administrative Agent. B. CORPORATE DOCUMENTS 4. Certificate of the Secretary or an Assistant Secretary of the Borrower and each Guarantor certifying (i) that there have been no changes in the charter document of the Borrower or such Guarantor, as applicable, as attached thereto and as certified as of a recent date by the Secretary of State of the jurisdiction of its organization, since the date of the certification thereof by such governmental entity, (ii) the By-laws or other organizational document, as attached thereto, of the Borrower or such Guarantor, as applicable, as in effect on the date of such certification, (iii) resolutions of the Board of Directors or other governing body of the Borrower or such Guarantor, as applicable, authorizing the execution, delivery and performance of each Loan Document to which it is a party, (iv) the Good Standing Certificate (or analogous documentation if applicable) for the Borrower or such Guarantor, as applicable, from the Secretary of State of the jurisdiction of its organization and (v) the names and true signatures of the incumbent officers of the Borrower or such Guarantor, as applicable, authorized to sign the Loan Documents to which it is a party, and (in the case of the Borrower) authorized to request an Advance under the Credit Agreement. C. OPINIONS 5. Opinion of the Perry Law Firm, counsel for the Borrower and the Guarantors. D. CLOSING CERTIFICATES AND MISCELLANEOUS 6. Certificate of the chief financial officer of the Borrower certifying the following: on the Effective Date (1) no Default or Event of Default has occurred and is continuing and (2) the representations and warranties contained in Article III are true and correct in all material respects as of such date.

 

EXECUTION VERSION ACTIVE 210385139v.4 AMENDED AND RESTATED GUARANTY THIS AMENDED AND RESTATED GUARANTY (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “Guaranty”) is made as of October 30, 2015 by and among each of the Subsidiaries of Nelnet, Inc. (the “Borrower”) listed on the signature pages hereto (each an “Initial Guarantor”) and those additional Subsidiaries of the Borrower which become parties to this Guaranty by executing a supplement hereto (a “Guaranty Supplement”) in the form attached hereto as Annex I (such additional Subsidiaries, together with the Initial Guarantors, the “Guarantors”), in favor of U.S. Bank National Association, as Administrative Agent (the “Administrative Agent”), for the benefit of the Lenders under the Credit Agreement described below. Unless otherwise defined herein, capitalized terms used herein and not defined herein shall have the meanings ascribed to such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Borrower, the financial institutions from time to time party thereto as lenders (the “Existing Lenders”), and the Administrative Agent have entered into that certain Credit Agreement, dated as of February 17, 2012 (as the same may have been amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”), which Existing Credit Agreement provides, subject to the terms and conditions thereof, for extensions of credit and other financial accommodations to be made by the Existing Lender to or for the benefit of the Borrower; WHEREAS, the Initial Guarantors have previously entered into that certain Guaranty, dated as of February 17, 2012 (as the same may have been amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Guaranty”), in favor of the Existing Lenders and the Administrative Agent with respect to the obligations of the Borrower under the Existing Credit Agreement; WHEREAS, the Existing Credit Agreement is being amended and restated in its entirety pursuant to the Amended and Restated Credit Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Borrower, the financial institutions party thereto (the “Lenders”) and the Administrative Agent, which Credit Agreement provides, subject to the terms and conditions thereof, for extensions of credit and other financial accommodations to be made by the Lenders to or for the benefit of the Borrower; WHEREAS, it is a condition precedent to the extensions of credit by the Lenders under the Credit Agreement that each of the Guarantors (constituting all of the Subsidiaries of the Borrower required to execute this Guaranty pursuant to Section 4.01 of the Credit Agreement) execute and deliver this Guaranty, whereby each of the Guarantors, without limitation and with full recourse, shall guarantee the payment when due of all indebtedness and obligations of the Borrower under and pursuant to the Credit Agreement (the “Obligations”), including, without limitation, all principal, interest, and other amounts that shall be at any time payable by the Borrower under the Credit Agreement or the other Loan Documents; and

 

2 WHEREAS, in consideration of the direct and indirect financial and other support and benefits that the Borrower has provided, and such direct and indirect financial and other support and benefits as the Borrower may in the future provide, to the Guarantors, and in consideration of the increased ability of each Guarantor that is a Subsidiary of the Borrower to receive funds through contributions to capital, and for each Guarantor to receive funds through intercompany advances or otherwise, from funds provided to the Borrower pursuant to the Credit Agreement and the flexibility provided by the Credit Agreement for each Guarantor to do so which significantly facilitates the business operations of the Borrower and each Guarantor and in order to induce the Lenders and the Administrative Agent to enter into the Credit Agreement, and to make the Loans and the other financial accommodations to the Borrower described in the Credit Agreement, each of the Guarantors is willing to guarantee the Obligations under the Credit Agreement and the other Loan Documents; NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Existing Guaranty is amended and restated in its entirety as follows: SECTION 1. Representations, Warranties and Covenants. Each of the Guarantors represents and warrants to each Lender and the Administrative Agent as of the date of this Guaranty, giving effect to the consummation of the transactions contemplated by the Loan Documents on the Effective Date that: (a) It (i) is a corporation, partnership or limited liability company duly incorporated or organized, as the case may be, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, (ii) is duly qualified to do business as a foreign entity and is in good standing (to the extent such concept is applicable) under the laws of each jurisdiction where the business conducted by it makes such qualification necessary, and (iii) has all requisite corporate, partnership or limited liability company power and authority, as the case may be, to own, operate and encumber its property and to conduct its business in each jurisdiction in which its business is conducted or proposed to be conducted, except to the extent that the failure to have such authority could not reasonably be expected to result in a Material Adverse Effect. (b) It has the requisite corporate, limited liability company or partnership, as applicable, power and authority and legal right to execute and deliver this Guaranty and to perform its obligations hereunder. The execution and delivery by it of this Guaranty and the performance of its obligations hereunder have been duly authorized by proper corporate, limited liability company or partnership proceedings, including any required shareholder, member or partner approval, and this Guaranty constitutes a legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor, in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally. (c) Neither the execution and delivery by it of this Guaranty, nor the consummation by it of the transactions herein contemplated, nor compliance by it with the terms and provisions hereof, will (i) conflict with the charter or other organizational documents of such Guarantor, (ii) conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a

 

3 default under any law, rule, regulation, order, writ, judgment, injunction, decree or award (including, without limitation, any environmental property transfer laws or regulations) applicable to such Guarantor or any provisions of any indenture, instrument or agreement to which the Borrower or any of the Borrower’s Subsidiaries is party or is subject or by which it or its property is bound or affected, or require termination of any such indenture, instrument or agreement, (iii) result in the creation or imposition of any Lien whatsoever upon any of the property or assets of such Guarantor, other than Liens permitted or created by the Loan Documents, or (iv) require any approval of such Guarantor’s board of directors, shareholders, members, partners or unitholders except such as have been obtained. The execution, delivery and performance by such Guarantor of each of the Loan Documents to which such Guarantor is a party do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by any Governmental Authority, except filings, consents or notices which have been made. In addition to the foregoing, each of the Guarantors covenants that, so long as any Lender has any Commitment outstanding under the Credit Agreement or any amount payable under the Credit Agreement or any other Obligations shall remain unpaid, it will, and, if necessary, will cause the Borrower to, fully comply with those covenants and agreements of the Borrower applicable to such Guarantor set forth in the Credit Agreement. SECTION 2. The Guaranty. Each of the Guarantors hereby irrevocably and unconditionally guarantees, jointly and severally with the other Guarantors, the full and punctual payment and performance when due (whether at stated maturity, upon acceleration or otherwise) of the Obligations, including, without limitation, (i) the principal of and interest on each Loan made to the Borrower pursuant to the Credit Agreement, (ii) all other amounts payable by the Borrower under the Credit Agreement and the other Loan Documents, and (iii) the punctual and faithful performance, keeping, observance, and fulfillment by the Borrower of all of the agreements, conditions, covenants, and obligations of the Borrower contained in the Loan Documents (all of the foregoing being referred to collectively as the “Guaranteed Obligations”). Upon the failure by the Borrower, or any of its Affiliates, as applicable, to pay punctually any such amount or perform such obligation, subject to any applicable grace or notice and cure period, each of the Guarantors agrees that it shall forthwith on demand pay such amount or perform such obligation at the place and in the manner specified in the Credit Agreement or the relevant other Loan Document, as the case may be. Each of the Guarantors hereby agrees that this Guaranty is an absolute, irrevocable and unconditional guaranty of payment and is not a guaranty of collection. Notwithstanding any other provision of this Guaranty, the amount guaranteed by each Guarantor hereunder shall be limited to the extent, if any, required so that its obligations hereunder shall not be subject to avoidance under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. In determining the limitations, if any, on the amount of any Guarantor’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation, indemnification or contribution which such Guarantor may have under this Guaranty, any other agreement or applicable law shall be taken into account.

 

4 SECTION 3. Guaranty Unconditional. The obligations of each of the Guarantors hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, indulgence, compromise, waiver or release of or with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or with respect to any obligation of any other guarantor of any of the Guaranteed Obligations, whether (in any such case) by operation of law or otherwise, or any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or with respect to any obligation of any other guarantor of any of the Guaranteed Obligations; (ii) any modification or amendment of or supplement to the Credit Agreement, or any other Loan Document, including, without limitation, any such amendment which may increase the amount of, or the interest rates applicable to, any of the Guaranteed Obligations guaranteed hereby; (iii) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any collateral securing the Guaranteed Obligations or any part thereof, any other guaranties with respect to the Guaranteed Obligations or any part thereof, or any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof, or any nonperfection or invalidity of any direct or indirect security for the Guaranteed Obligations; (iv) any change in the corporate, partnership, limited liability company or other existence, structure or ownership of the Borrower or any other guarantor of any of the Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or any other guarantor of the Guaranteed Obligations, or any of their respective assets or any resulting release or discharge of any obligation of the Borrower or any other guarantor of any of the Guaranteed Obligations; (v) the existence of any claim, setoff or other rights which the Guarantors may have at any time against the Borrower, any other guarantor of any of the Guaranteed Obligations, the Administrative Agent, any Lender or any other Person, whether in connection herewith or in connection with any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to any collateral securing the Guaranteed Obligations or any part thereof, or any other invalidity or unenforceability relating to or against the Borrower or any other guarantor of any of the Guaranteed Obligations, for any reason related to the Credit Agreement, or any other Loan Document, or any provision of applicable law, decree, order or regulation purporting to prohibit the payment by the Borrower or any other

 

5 guarantor of the Guaranteed Obligations, of any of the Guaranteed Obligations or otherwise affecting any term of any of the Guaranteed Obligations; (vii) the failure of the Administrative Agent to take any steps to perfect and maintain any security interest in, or to preserve any rights to, any security or collateral for the Guaranteed Obligations, if any; (viii) the election by, or on behalf of, any one or more of the Lenders, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.) (or any successor statute, the “Bankruptcy Code”), of the application of Section 1111(b)(2) of the Bankruptcy Code; (ix) any borrowing or grant of a security interest by the Borrower, as debtor- in-possession, under Section 364 of the Bankruptcy Code; (x) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of the claims of the Lenders or the Administrative Agent for repayment of all or any part of the Guaranteed Obligations; (xi) the failure of any other guarantor to sign or become party to this Guaranty or any amendment, change, or reaffirmation hereof; or (xii) any other act or omission to act or delay of any kind by the Borrower, any other guarantor of the Guaranteed Obligations, the Administrative Agent, any Lender or any other Person or any other circumstance whatsoever which might, but for the provisions of this Section 3, constitute a legal or equitable discharge of any Guarantor’s obligations hereunder or otherwise reduce, release, prejudice or extinguish its liability under this Guaranty. SECTION 4. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. Each of the Guarantors’ obligations hereunder shall remain in full force and effect until all Guaranteed Obligations shall have been paid in full in cash and the Commitments shall have terminated or expired, at which time, subject to all the foregoing conditions, the guarantees made hereunder shall automatically terminate. If at any time any payment of the principal of or interest on any Loan, Obligation or any other amount payable by the Borrower or any other party under the Credit Agreement, or any other Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, each of the Guarantors’ obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time.

 

6 SECTION 5. General Waivers; Additional Waivers. (a) General Waivers. Each of the Guarantors irrevocably waives acceptance hereof, presentment, demand or action on delinquency, protest and, to the fullest extent permitted by law, any notice not provided for herein or under the other Loan Documents, as well as any requirement that at any time any action be taken by any Person against the Borrower, any other guarantor of the Guaranteed Obligations, or any other Person. (b) Additional Waivers. Notwithstanding anything herein to the contrary, each of the Guarantors hereby absolutely, unconditionally, knowingly, and expressly waives, to the fullest extent permitted by law: (i) any right it may have to revoke this Guaranty as to future indebtedness or notice of acceptance hereof; (ii) (1) notice of acceptance hereof; (2) notice of any Loans or other financial accommodations made or extended under the Loan Documents or the creation or existence of any Guaranteed Obligations; (3) notice of the amount of the Guaranteed Obligations, subject, however, to each Guarantor’s right to make inquiry of the Administrative Agent and the Lenders to ascertain the amount of the Guaranteed Obligations at any reasonable time; (4) notice of any adverse change in the financial condition of the Borrower or of any other fact that might increase such Guarantor’s risk hereunder; (5) notice of presentment for payment, demand, protest, and notice thereof as to any instruments among the Loan Documents; (6) notice of any Default or Event of Default; and (7) all other notices (except if such notice is specifically required to be given to such Guarantor hereunder or under the Loan Documents) and demands to which each Guarantor might otherwise be entitled; (iii) its right, if any, to require the Administrative Agent and the other Lenders to institute suit against, or to exhaust any rights and remedies which the Administrative Agent and the other Lenders has or may have against, the other Guarantors or any third party, provided by the other Guarantors, or any third party; and each Guarantor further waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid in full in cash) of the other Guarantors or by reason of the cessation from any cause whatsoever of the liability of the other Guarantors in respect thereof; (iv) (a) any rights to assert against the Administrative Agent and the other Lenders defense (legal or equitable), set-off, counterclaim, or claim which such Guarantor may now or at any time hereafter have against the other Guarantors or any other party liable to the Administrative Agent and the other Lenders; (b) any defense, set- off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guaranteed Obligations or any security therefor; and (c) any defense such Guarantor has to performance hereunder, and any right such Guarantor has to be exonerated, arising by reason of: (1) the impairment or suspension of the Administrative Agent’s and the other Lenders’ rights or remedies against the other guarantor of the Guaranteed Obligations; (2)

 

7 the alteration by the Administrative Agent and the other Lenders of the Guaranteed Obligations; (3) any discharge of the other Guarantors’ obligations to the Administrative Agent and the other Lenders by operation of law as a result of the Administrative Agent’s and the other Lenders’ intervention or omission; or (4) the acceptance by the Administrative Agent and the other Lenders of anything in partial satisfaction of the Guaranteed Obligations; and (v) any defense arising by reason of or deriving from (a) any claim or defense based upon an election of remedies by the Administrative Agent and the Lenders; or (b) any election by the Administrative Agent and the other Lenders under the Bankruptcy Code, to limit the amount of, or any collateral securing, its claim against the Guarantors. SECTION 6. Subordination of Subrogation; Subordination of Intercompany Indebtedness. (a) Subordination of Subrogation. Until the Guaranteed Obligations have been fully and finally performed and indefeasibly paid in full in cash, the Guarantors (i) shall have no right of subrogation with respect to such Guaranteed Obligations and (ii) waive any right to enforce any remedy which any of the Lenders or the Administrative Agent now have or may hereafter have against the Borrower, any endorser or any guarantor of all or any part of the Guaranteed Obligations or any other Person, and until such time the Guarantors waive any benefit of, and any right to participate in, any security or collateral given to the Lenders and the Administrative Agent to secure the payment or performance of all or any part of the Guaranteed Obligations or any other liability of the Borrower to the Lenders or the Administrative Agent. Should any Guarantor have the right, notwithstanding the foregoing, to exercise its subrogation rights, each Guarantor hereby expressly and irrevocably (A) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that such Guarantor may have to the payment in full in cash of the Guaranteed Obligations until the Guaranteed Obligations are indefeasibly paid in full in cash and (B) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Guaranteed Obligations are indefeasibly paid in full in cash. Each Guarantor acknowledges and agrees that this subordination is intended to benefit the Administrative Agent and the Lenders and shall not limit or otherwise affect such Guarantor’s liability hereunder or the enforceability of this Guaranty, and that the Administrative Agent, the Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 6(a). (b) Subordination of Intercompany Indebtedness. Each Guarantor agrees that any and all claims of such Guarantor against the Borrower or any other Guarantor hereunder (each an “Obligor”) with respect to any “Intercompany Indebtedness” (as hereinafter defined), any endorser, obligor or any other guarantor of all or any part of the Guaranteed Obligations, or against any of its properties shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all Guaranteed Obligations; provided that, as long as no Event of Default has occurred and is continuing, such Guarantor may receive payments of principal and interest from any Obligor with respect to Intercompany Indebtedness. Notwithstanding any right of any Guarantor to ask, demand, sue for, take or receive any payment from any Obligor, all rights, liens and security interests of such Guarantor, whether now or hereafter arising and howsoever existing, in any assets of any other Obligor shall be and are subordinated to the rights

 

8 of the Lenders and the Administrative Agent in those assets. No Guarantor shall have any right to possession of any such asset or to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of the Guaranteed Obligations shall have been fully paid and satisfied (in cash) and all financing arrangements pursuant to any Loan Document have been terminated. If all or any part of the assets of any Obligor, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Obligor is dissolved or if substantially all of the assets of any such Obligor are sold, then, and in any such event (such events being herein referred to as an “Insolvency Event”), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any indebtedness of any Obligor to any Guarantor (“Intercompany Indebtedness”) shall be paid or delivered directly to the Administrative Agent for application on any of the Guaranteed Obligations, due or to become due, until such Guaranteed Obligations shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by the applicable Guarantor upon or with respect to the Intercompany Indebtedness after any Insolvency Event and prior to the satisfaction of all of the Guaranteed Obligations and the termination of all financing arrangements pursuant to any Loan Document among the Borrower and the Lenders, such Guarantor shall receive and hold the same in trust, as trustee, for the benefit of the Lenders and shall forthwith deliver the same to the Administrative Agent, for the benefit of the Lenders, in precisely the form received (except for the endorsement or assignment of the Guarantor where necessary), for application to any of the Guaranteed Obligations, due or not due, and, until so delivered, the same shall be held in trust by the Guarantor as the property of the Lenders. If any such Guarantor fails to make any such endorsement or assignment to the Administrative Agent, the Administrative Agent or any of its officers or employees is irrevocably authorized to make the same. Each Guarantor agrees that until the Guaranteed Obligations have been paid in full (in cash) and satisfied and all financing arrangements pursuant to any Loan Document among the Borrower and the Lenders have been terminated, no Guarantor will assign or transfer to any Person (other than the Administrative Agent) any claim any such Guarantor has or may have against any Obligor. SECTION 7. Contribution with Respect to Guaranteed Obligations. (a) To the extent that any Guarantor shall make a payment under this Guaranty (a “Guarantor Payment”) which, taking into account all other Guarantor Payments then previously or concurrently made by any other Guarantor, exceeds the amount which otherwise would have been paid by or attributable to such Guarantor if each Guarantor had paid the aggregate Guaranteed Obligations satisfied by such Guarantor Payment in the same proportion as such Guarantor’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Guarantors as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Guarantor Payment and the Guaranteed Obligations, and all Commitments have terminated or expired, such Guarantor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

 

9 (b) As of any date of determination, the “Allocable Amount” of any Guarantor shall be equal to the excess of the fair saleable value of the property of such Guarantor over the total liabilities of such Guarantor (including the maximum amount reasonably expected to become due in respect of contingent liabilities, calculated, without duplication, assuming each other Guarantor that is also liable for such contingent liability pays its ratable share thereof), giving effect to all payments made by other Guarantors as of such date in a manner to maximize the amount of such contributions. (c) This Section 7 is intended only to define the relative rights of the Guarantors, and nothing set forth in this Section 7 is intended to or shall impair the obligations of the Guarantors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Guaranty. (d) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Guarantor or Guarantors to which such contribution and indemnification is owing. (e) The rights of the indemnifying Guarantors against other Guarantors under this Section 7 shall be exercisable upon the full and indefeasible payment of the Guaranteed Obligations in cash and the termination or expiry, on terms reasonably acceptable to the Administrative Agent, of the Commitments and the termination of the Credit Agreement. SECTION 8. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Borrower under the Credit Agreement or any other Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the Borrower or any of its Affiliates, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement shall nonetheless be payable by each of the Guarantors hereunder forthwith on demand by the Administrative Agent. SECTION 9. Notices. All notices, requests and other communications to any party hereunder shall be given in the manner prescribed in Section 13.1 of the Credit Agreement with respect to the Administrative Agent at its notice address therein and, with respect to any Guarantor, in the care of the Borrower at the address of the Borrower set forth in the Credit Agreement, or such other address or telecopy number as such party may hereafter specify for such purpose in accordance with the provisions of Section 9.01 of the Credit Agreement. SECTION 10. No Waivers. No failure or delay by the Administrative Agent or any Lenders in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Guaranty, the Credit Agreement, any agreement evidencing Rate Management Transactions and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies provided by law.

 

10 SECTION 11. Successors and Assigns. This Guaranty is for the benefit of the Administrative Agent and the Lenders and their respective successors and permitted assigns, provided, that no Guarantor shall have any right to assign its rights or obligations hereunder without the consent of the Administrative Agent, and any such assignment in violation of this Section 11 shall be null and void; and in the event of an assignment of any amounts payable under the Credit Agreement, in accordance with the respective terms thereof, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty shall be binding upon each of the Guarantors and their respective successors and assigns. SECTION 12. Changes in Writing. Other than in connection with the addition of additional Subsidiaries, which become parties hereto by executing a Guaranty Supplement hereto in the form attached as Annex I, neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by each of the Guarantors and the Administrative Agent. SECTION 13. Governing Law; Jurisdiction. (a) THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. (b) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any other Loan Document, or for recognition or enforcement of any judgment, and each Guarantor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty or any other Loan Document shall affect any right that the Administrative Agent, or any Lender may otherwise have to bring any action or proceeding relating to this Guaranty or any other Loan Document against any Guarantor or its properties in the courts of any jurisdiction. (c) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any other Loan Document in any court referred to in paragraph (b) of this Section. Each Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

11 (d) Each party to this Guaranty irrevocably consents to service of process in the manner provided for notices in Section 9 of this Guaranty, and each of the Guarantors hereby appoints the Borrower as its agent for service of process. Nothing in this Guaranty or any other Loan Document will affect the right of any party to this Guaranty to serve process in any other manner permitted by law. SECTION 14. WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH GUARANTOR (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER GUARANTOR HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER GUARANTOR WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER GUARANTORS HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 15. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Guaranty. In the event an ambiguity or question of intent or interpretation arises, this Guaranty shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Guaranty. SECTION 16. Taxes, Expenses of Enforcement, Etc. (a) Taxes. Each payment by any Guarantor hereunder or under any promissory note shall be made without withholding for any Taxes, unless such withholding is required by any law. If any Guarantor determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such Guarantor may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law. If such Taxes are Indemnified Taxes, then the amount payable by the Guarantor shall be increased as necessary so that, net of such withholding (including such withholding applicable to additional amounts payable under this Section), the applicable Recipient receives the amount it would have received had no such withholding been made. For purposes of this Guaranty, “Recipient” means, as applicable, (a) the Administrative Agent, and (b) any Lender. (ii) In addition, such Guarantor shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (iii) As soon as practicable after any payment of Indemnified Taxes by any Guarantor to a Governmental Authority, such Guarantor shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such

 

12 Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (iv) The Guarantors shall jointly and severally indemnify each Recipient for any Indemnified Taxes that are paid or payable by such Recipient in connection with any Loan Document (including amounts payable under this Section 16(a)) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 16(a) shall be paid within fifteen (15) days after the Recipient delivers to any Guarantor a certificate stating the amount of any Indemnified Taxes so payable by such Recipient. Such certificate shall be conclusive of the amount so payable absent manifest error. Such Recipient shall deliver a copy of such certificate to the Administrative Agent. In the case of any Lender making a claim under this Section 16(a) on behalf of any of its beneficial owners, an indemnity payment under this Section 16(a) shall be due only to the extent that such Lender is able to establish that, with respect to the applicable Indemnified Taxes, such beneficial owners supplied to the applicable Persons such properly completed and executed documentation necessary to claim any applicable exemption from, or reduction of, such Indemnified Taxes. (i) (v) By accepting the benefits hereof, each Lender agrees that it will comply with Section 3.5 of the Credit Agreement. (b) Expenses of Enforcement, Etc. The Guarantors agree to reimburse the Administrative Agent and the other Lenders for any reasonable costs and out-of-pocket expenses (including attorneys’ fees) paid or incurred by the Administrative Agent or any other Lenders in connection with the collection and enforcement of amounts due under the Loan Documents, including without limitation this Guaranty. SECTION 17. Setoff. At any time after all or any part of the Guaranteed Obligations have become due and payable (by acceleration or otherwise), each Lender and the Administrative Agent may, without notice to any Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, set off and apply toward the payment of all or any part of the Guaranteed Obligations any and all deposits (general or special, time or demand, provisional or final and in whatever currency denominated at any time held) and other obligations at any time owing by such Lender or the Administrative Agent or any of their Affiliates to or for the credit or the account of any Guarantor against any of and all the Guaranteed Obligations, irrespective of whether or not such Lender or the Administrative Agent shall have made any demand under this Guaranty and although such obligations may be unmatured. The rights of each Lender or the Administrative Agent under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender or the Administrative Agent may have. SECTION 18. Financial Information. Each Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Borrower, the other Guarantors and any and all endorsers and/or other guarantors of all or any part of the Guaranteed Obligations, and of

 

13 all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations, or any part thereof, that diligent inquiry would reveal, and each Guarantor hereby agrees that none of the Lenders or the Administrative Agent shall have any duty to advise such Guarantor of information known to any of them regarding such condition or any such circumstances. In the event any Lender or the Administrative Agent, in its sole discretion, undertakes at any time or from time to time to provide any such information to a Guarantor, such Lender or the Administrative Agent shall be under no obligation (i) to undertake any investigation not a part of its regular business routine, (ii) to disclose any information which such Lender or the Administrative Agent, pursuant to accepted or reasonable commercial finance or banking practices, wishes to maintain confidential or (iii) to make any other or future disclosures of such information or any other information to such Guarantor. SECTION 19. Severability. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty. SECTION 20. Merger. This Guaranty represents the final agreement of each of the Guarantors with respect to the matters contained herein and may not be contradicted by evidence of prior or contemporaneous agreements, or subsequent oral agreements, between each such Guarantor and any Lender or the Administrative Agent. SECTION 21. Headings. Section headings in this Guaranty are for convenience of reference only and shall not govern the interpretation of any provision of this Guaranty. SECTION 22. Amendment and Restatement. Each of the parties hereto acknowledges and agrees that upon the execution and delivery of this Guaranty by each of the parties hereto, the terms and conditions of the Existing Guaranty shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Guaranty. [SIGNATURE PAGES TO FOLLOW]

 

 

 

ANNEX I TO GUARANTY Reference is hereby made to the Guaranty (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), dated as of [DATE], made by each of the Subsidiaries of [__________] (the “Borrower”) listed on the signature pages thereto (each an “Initial Guarantor”, and together with any additional Subsidiaries which become parties to the Guaranty by executing Guaranty Supplements thereto substantially similar in form and substance hereto, the “Guarantors”), in favor of the Administrative Agent, for the ratable benefit of the Lenders, under the Credit Agreement. Each capitalized term used herein and not defined herein shall have the meaning given to it in the Guaranty. By its execution below, the undersigned, [NAME OF NEW GUARANTOR], a [________________] [corporation] [partnership] [limited liability company] (the “New Guarantor”), agrees to become, and does hereby become, a Guarantor under the Guaranty and agrees to be bound by such Guaranty as if originally a party thereto. By its execution below, the undersigned represents and warrants as to itself that all of the representations and warranties contained in Section 1 of the Guaranty are true and correct in all respects as of the date hereof. IN WITNESS WHEREOF, the New Guarantor has executed and delivered this Annex I counterpart to the Guaranty as of this __________ day of _________, 20___. [NAME OF NEW GUARANTOR] By:____________________________________ Name: Title:

 

Exhibit 31.1
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Jeffrey R. Noordhoek, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nelnet, Inc. (the “Company”);	
		
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
		
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
		
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
		
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
		
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
		
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
		
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	
		
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	
		
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and	
		
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

	
			
Date:	November 5, 2015	/s/ JEFFREY R. NOORDHOEK	
 	 	Jeffrey R. Noordhoek Chief Executive Officer
Principal Executive Officer	

Exhibit 31.2
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, James D. Kruger, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nelnet, Inc. (the “Company”);	
		
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
		
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
		
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
		
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
		
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
		
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
		
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	
		
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	
		
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and	
		
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

	
			
Date:	November 5, 2015	/s/ JAMES D. KRUGER	
 	 	James D. Kruger
Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer	

Exhibit 32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Nelnet, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
		
1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
		
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

 

			
Date:	November 5, 2015	By: /s/ JEFFREY R. NOORDHOEK	
 	 	Name: Jeffrey R. Noordhoek
Title:   Chief Executive Officer
Principal Executive Officer	
 	 	 	
 	 	By: /s/ JAMES D. KRUGER	
 	 	Name: James D. Kruger
Title:  Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer