Exhibit 10.73
ASSURANCE COMMITMENT AGREEMENT
This Assurance Commitment Agreement (the “Agreement”) is made and entered into
as of the 25th day of November, 2008, by and among Jay L. Dunlap, individually,
Angie Muhleisen, individually and Michael S. Dunlap, individually (collectively,
the “Dunlap Family”), Nelnet, Inc., a Nebraska corporation (“Nelnet”), Union
Bank and Trust Company, a Nebraska state banking corporation (“Union Bank”) and
Farmers & Merchants Investment Inc., a Nebraska corporation (the “Holding
Company”).
WHEREAS, Union Bank and Nelnet’s subsidiary, Nelnet Education Loan Funding,
Inc., have entered into that certain Loan Purchase Agreement of even date
herewith (the “Loan Purchase Agreement”), pursuant to which Union Bank intends
to purchase a portfolio of student loans made and guaranteed under the Higher
Education Act of 1965, as amended, with an aggregate outstanding balance of
approximately $750 million (the “Portfolio”);
WHEREAS, Union Bank has obtained an exemption (the “Exemption”) from Section 23A
of the Federal Reserve Act and Regulation W from the Federal Reserve Board
permitting consummation of the Loan Purchase Agreement, in accordance with that
certain letter dated as of November 24, 2008 from Robert deV. Frierson, Deputy
Secretary of the Federal Reserve Board to Daniel F. Kaplan, attorney for Union
Bank, and as part of the process in obtaining such Exemption, the parties hereto
have agreed to make the commitments specified in this Agreement;
WHEREAS, members of the Dunlap Family are the majority shareholders of the
Holding Company, and the Holding Company is the majority shareholder of Union
Bank, and thus each of the Dunlap Family and the Holding Company respectively
has an interest in consummation of the Loan Purchase Agreement;
NOW, THEREFORE, IN CONSIDERATION of the foregoing premises and the mutual
covenants and promises herein contained, the parties hereto agree as follows:

  1.  
Purchase of Low Quality Assets. Nelnet, Holding Company, and members of the
Dunlap Family commit to make either (i) quarterly cash payments to Union Bank
equal to the book value at the end of each calendar quarter, plus write-downs
during that quarter by Union Bank, of any transferred assets that became and
remained low-quality assets (as defined in Regulation W) during that quarter; or
(ii) quarterly purchases from Union Bank of any transferred assets that became
and remained low-quality assets during that quarter at a price equal to the book
value at the end of that quarter plus write-downs during that quarter by Bank of
any such assets. Nelnet, Holding Company, or members of the Dunlap Family will
make the cash payment or will purchase the assets within 30 days after the end
of each calendar quarter. Union Bank will hold an amount of risk-based capital
equal to the book value of any transferred assets that become low-quality assets
so long as Union Bank (or any operating subsidiary) retains ownership or control
of such low-quality assets. For example, under this dollar-for-dollar capital
requirement, the risk-based capital charge for each transferred asset that
becomes a low-quality asset would be 100 percent (equivalent to a 1250 percent
risk weight), rather than the 8 percent requirement that would apply to a
similar defaulted loan asset that is not a part of the transferred asset pool.

 

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  2.  
Holdback. Nelnet, Holding Company, and members of the Dunlap Family commit to
establish and maintain throughout the term of the exemption an escrow account
(the “Holdback”) at Union Bank in an amount equal to that portion of the
aggregate outstanding principal amount of the assets transferred pursuant to the
Loan Purchase Agreement that is not guaranteed under the FFEL Program in
accordance with the Higher Education Act of 1965, as amended. Union Bank will be
entitled to draw money from the escrow account to the extent that the bank
incurs losses as a result of a breach by Nelnet, Holding Company, or a member of
the Dunlap Family in complying with any of the commitments made herein or in
connection with Union Bank’s request for the Exemption. Funds in the Holdback
shall be invested as mutually agreed by Union Bank and Nelnet, and income from
the Holdback shall be distributed to Nelnet on a monthly basis or as otherwise
mutually agreed. Funds (other than income as described in the preceding
sentence) in the Holdback shall be distributed to Nelnet on a quarterly basis as
the Portfolio is paid down or paid off, provided, however, that the Holdback
shall be maintained at a level at all times at least equal to that portion of
the outstanding principal balance of assets in the Portfolio that is not
guaranteed (the 2-3% risk share).

  3.  
Reimbursement Upon Sale of Portfolio. Nelnet, Holding Company, and members of
the Dunlap Family commit to reimburse Union Bank promptly for any losses
incurred by Union Bank on the sale of any transferred assets comprising the
Portfolio, provided that such sale is a bona fide, arms length transaction.

  4.  
Waiver of Servicing Fees. Nelnet commits to waive servicing fees charged to
Union Bank in connection with the Portfolio to the extent that Union Bank’s
spread on the Portfolio falls below 50 basis points (0.50%) per annum, until all
of the servicing fees have been waived. If a complete waiver of servicing fees
by Nelnet leaves Union Bank with a negative spread on the Portfolio, Nelnet,
Holding Company, and members of the Dunlap Family commit to make monthly cash
contributions to Union Bank to enable it to earn a positive spread on the
Portfolio. Union Bank shall compute the spread on a monthly basis and, if it
determines that such spread has fallen below 50 basis points per annum, Union
Bank shall accordingly reduce the servicing fees on a pro tanto basis. The
spread shall be computed as the difference between (i)the weighted average yield
on the Portfolio, less (ii) the weighted average cost of liabilities Union Bank
utilizes to fund the Portfolio, all on an annualized basis. Nelnet shall have
the right to reasonably review the books and records of Union Bank with respect
to the spread and supporting calculation work sheets.

  5.  
Capital Maintenance by Holding Company. Holding Company commits to maintain
regulatory capital ratios equal to or greater than the pro forma regulatory
capital ratios set forth Exhibit A, attached hereto. Specifically, Holding
Company commits to maintain a tier 1 leverage ratio of at least 8.23 percent; a
tier 1 risk-based ratio of at least 10.81 percent; and a total risk-based ratio
of at least 11.22 percent.

  6.  
Capital Maintenance by Union Bank. Union Bank commits to maintain a tier 1
leverage ratio of at least 5 percent, a tier 1 risk-based ratio of at least
6 percent, and a total risk-based ratio of at least 11 percent.

 

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  7.  
Representations and Warranties. Each of Nelnet, Union Bank and the Holding
Company represents and warrants as follows:

(a) It has, and its officers acting on its behalf have, full legal authority to
engage in the transactions contemplated by this Agreement; the execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated and compliance with the terms, conditions and provisions of this
Agreement do not and will not conflict with or result in a breach of any of the
terms, conditions or provisions of the charter, articles or bylaws of it or any
agreement or instrument to which it is a party or by which it is bound or
constitute a default thereunder, or conflict with any law, rule or regulation to
which it is subject; it is not a party to or bound by any agreement or
instrument or subject to any charter or other corporate restriction or judgment,
order, wit, injunction, decree of law, rule or regulation which may materially
and adversely affect the ability of such party to perform its obligations under
this Agreement and this Agreement constitutes the valid and binding obligation
of such party enforceable against it in accordance with its terms, subject to
(i) applicable bankruptcy, insolvency, moratorium, or other similar laws
affecting the rights of creditors and (ii) general principles of equity, whether
such enforceability is considered in a proceeding in equity or at law, and does
not result in or require the creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of its properties, and no
consent, approval or authorization of any government or governmental body is
required in connection with the consummation of the transactions herein
contemplated.
(b) It is duly organized, validly existing and in good standing under the laws
of the State of Nebraska and has the power and authority to own its assets and
carry on its business as now being conducted.

  8.  
Assignment. No party to this Agreement may assign all or any portion of this
Agreement without the prior written consent of all other parties hereto.

  9.  
Amendment. This Agreement may be amended only in writing and if signed by all
parties hereto.

  10.  
Severability. If any provision of this Agreement shall be held, deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
situation, such circumstances shall not have the effect of rendering any other
provisions herein contained invalid, inoperative or unenforceable.

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IN WITNESS WHEREOF, each of the parties hereto have caused this Assurance
Commitment Agreement to be signed on its behalf by its respective duly
authorized officer as of the date first set forth above.

                              UNION BANK AND TRUST COMPANY       NELNET, INC.  
 
 
                            By:   /s/ Angie Muhleisen       By:   /s/ Terry J.
Heimes                          
 
  Title:   President and Chief Executive Officer           Title:   Chief
Financial Officer    

              FARMERS & MERCHANTS INVESTMENT INC.    
 
            By:   /s/ Jay L. Dunlap              
 
  Title:   Chairman of the Board    
 
                /s/ Jay L. Dunlap                   Jay L. Dunlap, Individually
   
 
                /s/ Angie Muhleisen                   Angie Muhleisen,
Individually    
 
                /s/ Michael S. Dunlap                   Michael S. Dunlap,
Individually    

 

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