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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 15, 1996
First Sierra Equipment Lease Trust 1996-2
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(Exact name of registrant as specified in its charter)
New York 33-98822 Application Pending
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Bankers Trust Company 10006
Four Albany Street, ---------------------
10th Floor (Zip Code)
New York, New York
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(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (212) 250-2500
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Contracts
First Sierra Receivables II, Inc., as Depositor (the "Depositor") has
registered issuances of an aggregate of up to $400,000,000 in principal amount
of lease-backed securities, on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Act"), by a Registration
Statement on Form S-3 (Registration File No. 33-98822) (as amended, the
"Registration Statement"). Pursuant to the Registration Statement, the
Depositor, a special purpose corporation acted as the Depositor of the First
Sierra Equipment Lease Trust 1996-2 (the "Trust") formed pursuant to a Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
November 1, 1996, among First Sierra Financial, Inc., as servicer of the
receivables (the "Servicer"), the Depositor and Bankers Trust Company, as
trustee (the "Trustee"). This Current Report on Form 8-K is being filed to
satisfy an undertaking to file copies of certain agreements executed in
connection with the issuance of the Certificates, the forms of which were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing
Agreement attached hereto as Exhibit 4.1, dated as of November 1, 1996 (the
"Pooling and Servicing Agreement"), between the Depositor, the Servicer and the
Trustee. The Certificates consist of four classes, the Class Certificates, the
Class B-1 Certificates, the Class B-2 Certificates and the Trust Certificate.
Only the Class A Certificates were issued pursuant to the Registration
Statement. The Class A Certificates represent the right to receive repayment
of the Initial Class A Certificate Principal Balance ($63,381,510) of the Class
A Certificates and monthly interest at a rate of 6.29% per annum on the unpaid
portion of such principal amount. The rights to receive such payments are
based solely upon the interests represented by the Class A Certificates in the
Trust. The assets of the Trust will consist of certain operating and finance
leases received after the close of business on November 1, 1996 (the "Cut-Off
Date") (such leases, the "Contracts"), the underlying equipment or property
leased thereby (the "Equipment," together with the Contracts, the
"Receivables") and certain other property more fully described in the
Prospectus.
On November 15, 1996 (the "Closing Date"), First Sierra transferred
the Contracts and the related Equipment to the Depositor pursuant to the Sale
and Contribution Agreement, dated as of November 1, 1996 (the "Sale and
Contribution Agreement") attached hereto as Exhibit 10.1, between First Sierra
and the Depositor.
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Principal and interest will be paid to the Class A Certificateholders
monthly on the 10th day (or the next succeeding business day thereafter) of
each month, commencing December 10, 1996 (each, a "Payment Date"), as further
described herein. Interest will accrue on the Class A Certificates from Payment
Date to Payment Date, or with respect to the initial Payment Date, from November
10, 1996. The final payment of principal and interest on the Class A
Certificates is expected to be made on the June 10, 2002 Payment Date (the
"Expected Final Payment Date") but, in any event, shall be made no later than
the November 10, 2004 Payment Date.
The Class A Certificates will be unconditionally and irrevocably
guaranteed as to the payment of scheduled interest and ultimate principal
thereon on each payment date pursuant to the terms of a certificate insurance
policy (the "Certificate Insurance Policy") to be issued by MBIA Corporation
and attached hereto as Exhibit 10.2.
As of the Closing Date, the Contracts possessed the characteristics
described in the Prospectus dated April 18, 1996 and the Prospectus Supplement
dated November 8, 1996, filed pursuant to Rule 424(b) of the Act.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated November 8, 1996 between First
Sierra Financial, Inc., First Sierra Receivables II, Inc. and First Union
Capital Markets.
4.1 Pooling and Servicing Agreement, dated as of November 1, 1996,
among First Sierra Financial, Inc., as servicer, First Sierra Receivables II,
Inc. and Bankers Trust Company, as trustee (the "Trustee").
10.1 Sale and Contribution Agreement, dated as of November 1, 1996,
among First Sierra Financial, Inc. and First Sierra Receivables II, Inc.
10.2 Certificate Insurance Policy of MBIA Insurance Corporation.
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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 hereunto duly authorized.
First Sierra Equipment Lease Trust 1996-2
By: First Sierra Receivables II, Inc., as Depositor
By: /s/ Thomas Depping
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Name: Thomas Depping
Title: President
Dated: November 15, 1996
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EXHIBIT INDEX
1.1 Underwriting Agreement, dated November 8, 1996 between First
Sierra Financial, Inc., First Sierra Receivables II, Inc. and First Union
Capital Markets.
4.1 Pooling and Servicing Agreement, dated as of November 1, 1996,
among First Sierra Financial, Inc., as servicer, First Sierra Receivables II,
Inc. and Bankers Trust Company, as trustee (the "Trustee").
10.1 Sale and Contribution Agreement, dated as of November 1, 1996,
among First Sierra Financial, Inc. and First Sierra Receivables II, Inc.
10.2 Certificate Insurance Policy of MBIA Insurance Corporation.
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EXHIBIT 1.1
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UNDERWRITING AGREEMENT
November 8, 1996
First Sierra Receivables II, Inc. (the "Company") hereby
confirms its agreement to sell certain equipment lease backed certificates as
described herein relating to the First Sierra Equipment Lease Trust 1996-2 (the
"Trust"). The certificates will evidence in the aggregate the entire
beneficial interest in a trust fund (the "Trust Fund") consisting primarily of
a segregated pool (the "Receivable Pool") of operating leases and installment
sales contracts (the "Receivables") and certain related property (collectively,
the "Transferred Property"). The Receivables shall have, as of the close of
business on November 1, 1996 (the "Cut-off Date"), a discounted lease balance
(calculated in accordance with the form of Pooling and Servicing Agreement) of
$72,024,443.60. The certificates are to be issued under a Pooling and
Servicing Agreement, to be dated as of November 1, 1996 (the "Pooling and
Servicing Agreement"), among the Company, First Sierra Financial, Inc., as
servicer (the "Servicer"), and Bankers Trust Company, as trustee (the
"Trustee").
On or prior to the date of issuance of the certificates, the
Company will obtain the certificate guaranty insurance policies (the
"Policies") issued by MBIA Insurance Corporation (the "Insurer") which will
unconditionally and irrevocably guarantee to the Trustee for the benefit of the
holders of the Class A Certificates full and complete payment of all amounts
payable on the Class A Certificates. All capitalized terms used but not
otherwise defined herein have the respective meanings set forth in the form of
Pooling and Servicing Agreement heretofore delivered to First Union Capital
Markets Corp. (the "Underwriter").
1. Certificates. The certificates will be issued in classes
as follows: (i) a senior class consisting of the Class A Certificates (the
"Class A Certificates") to be sold to the Underwriter pursuant to this
Agreement, (ii) two subordinate classes with respect to the Class A
Certificates (collectively, the "Class B Certificates") to be privately placed,
and (iii) one subordinate class with respect to the Class A Certificates and
the Class B Certificates (the "Trust
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Certificate"). The Class A Certificates, the Class B Certificates and
the Trust Certificate are hereinafter referred to as the "Certificates."
2. Representations and Warranties of the Company. The
Company represents and warrants to, and covenants with, the Underwriter that:
A. The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (No. 33-98822)
on Form S-3 for the registration under the Securities Act of 1933, as amended
(the "Act"), of Equipment Lease Backed Notes and Equipment Lease Backed
Certificates (issuable in series), which registration statement, as amended at
the date hereof, has become effective. Such registration statement, as amended
to the date of this Agreement, meets the requirements set forth in rule
415(a)(1)(vii) under the Act and complies in all other material respects with
such Rule. The Company proposes to file with the Commission pursuant to Rule
424(b)(2) under the Act a supplement dated November 8, 1996 to the prospectus
dated April 18, 1996 relating to the Certificates and the method of
distribution thereof and has previously advised the Underwriter of all further
information (financial and other) with respect to the Certificates to be set
forth therein. Such registration statement, including the exhibits thereto, as
amended at the date hereof, is hereinafter called the "Registration Statement";
such prospectus dated April 18, 1996, in the form in which it will be filed
with the Commission pursuant to Rule 424(b)(2) under the Act is hereinafter
called the "Base Prospectus"; such supplement dated November 8, 1996 to the
Base Prospectus, in the form in which it will be filed with the Commission
pursuant to Rule 424(b)(2) of the Act, is hereinafter called the "Prospectus
Supplement"; and the Base Prospectus and the Prospectus Supplement together are
hereinafter called the "Prospectus." Any preliminary form of the Prospectus
Supplement which has heretofore been filed pursuant to Rule 424 is hereinafter
called a "Preliminary Prospectus Supplement." The Company will file with the
Commission within fifteen days of the issuance of the Certificates a report on
Form 8-K setting forth specific information concerning the related Receivables
(the "8-K").
B. As of the date hereof, when the Registration
Statement became effective, when the Prospectus Supplement is first filed
pursuant to Rule 424(b)(2) under the Act, when, prior to the Closing Date (as
defined below), any other amendment to the Registration Statement becomes
effective, and when any supplement to the Prospectus is filed with the
Commission, and at the Closing Date, (i) the Registration Statement, as amended
as of any such time, and the Prospectus, as amended or supplemented as of any
such time, will comply in
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all material respects with the applicable requirements of the Act and the rules
thereunder and (ii) the Registration Statement, as amended as of any such time,
did not and will not contain any untrue statement of a material fact and did not
and will not omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and the Prospectus, as
amended or supplemented as of any such time, did not and will not contain an
untrue statement of a material fact and did not and will not omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto in reliance upon and in conformity with
the information furnished in writing to the Company by or on behalf of the
Underwriter specifically for use in connection with the preparation of the
Registration Statement and the Prospectus; further, provided, that no
representation is made as to documents deemed to be incorporated by reference in
the Prospectus as the result of filing a Form 8-K at the request of the
Underwriter except to the extent such documents reflect information furnished by
the Company to the Underwriter for the purpose of preparing such documents.
C. The Company is duly organized, validly existing and
in good standing under the laws of the State of Delaware, has full power and
authority (corporate and other) to own its properties and conduct its business
as now conducted by it, and as described in the Prospectus, and is duly
qualified to do business in each jurisdiction in which it owns or leases
equipment (to the extent such qualification is required by applicable law) or
in which the conduct of its business requires such qualification except where
the failure to be so qualified does not involve (i) a material risk to, or a
material adverse effect on, the business, properties, financial position,
operations or results of operations of the Company or (ii) any risk whatsoever
as to the enforceability of any Receivable.
D. There are no actions, proceedings or investigations
pending, or, to the knowledge of the Company, threatened, before any court,
governmental agency or body or other tribunal (i) asserting the invalidity of
this Agreement, the Certificates, the Insurance Agreement dated as of November
1, 1996 (the "Insurance Agreement") among MBIA Insurance Corporation (the
"Insurer"), the Company and the Underwriter, the Indemnification Agreement
dated November 8, 1996 (the "Indemnification Agreement") among the Company, the
Insurer and the Underwriter or of the Pooling and Servicing Agreement, (ii)
seeking to prevent the issuance of the Certificates or the consummation of any
of the transactions contemplated by
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this Agreement or the Pooling and Servicing Agreement, (iii) which may,
individually or in the aggregate, materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement, the Certificates or the Pooling and Servicing
Agreement, or (iv) which may affect adversely the federal income tax attributes
of the Certificates as described in the Prospectus.
E. The execution and delivery by the Company of this
Agreement, the Indemnification Agreement, the Insurance Agreement and the
Pooling and Servicing Agreement, the issuance of the Certificates and the
transfer and delivery of the Receivables to the Trustee, by the Company are
within the corporate power of the Company and have been, or will be, prior to
the Closing Date duly authorized by all necessary corporate action on the part
of the Company and the execution and delivery of such instruments, the
consummation of the transactions therein contemplated and compliance with the
provisions thereof will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any statute or any agreement
or instrument to which the Company or any of its affiliates is a party or by
which it or any of them is bound or to which any of the property of the Company
or any of its affiliates is subject, the Company's charter or bylaws, or any
order, rule or regulation of any court, governmental agency or body or other
tribunal having jurisdiction over the Company, any of its affiliates or any of
its or their properties; and no consent, approval, authorization or order of,
or filing with, any court or governmental agency or body or other tribunal is
required for the consummation of the transactions contemplated by this
Agreement or the Prospectus in connection with the issuance and sale of the
Certificates. Neither the Company nor any of its affiliates is a party to,
bound by or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over the Company or any of its affiliates, which materially and
adversely affects, or may in the future materially and adversely affect, (i)
the ability of the Company to perform its obligations under the Pooling and
Servicing Agreement, this Agreement, the Insurance Agreement or the
Indemnification Agreement or (ii) the business, operations, results of
operations, financial position, income, properties or assets of the Company.
F. This Agreement, the Indemnification Agreement and the
Insurance Agreement have been duly executed and delivered by the Company, and
the Pooling and Servicing Agreement will be duly executed and delivered by the
Company, and each constitutes and will constitute the legal, valid and binding
obligation of the Company enforceable in accordance
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with their respective terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, liquidation, receivership, moratorium, reorganization or
other similar laws affecting the enforcement of the rights of creditors, and
(ii) general principles of equity, whether enforcement is sought in a proceeding
at law or in equity.
G. The Certificates will conform in all material
respects to the description thereof to be contained in the Prospectus and will
be duly and validly authorized and, when duly and validly executed,
authenticated, issued and delivered in accordance with the Pooling and
Servicing Agreement and sold to the Underwriter as provided herein, will be
validly issued and outstanding and entitled to the benefits of the Pooling and
Servicing Agreement.
H. At the Closing Date, the Receivables will conform in
all material respects to the description thereof contained in the Prospectus
and the representations and warranties contained in this Agreement will be true
and correct in all material respects. The representations and warranties set
out in the Pooling and Servicing Agreement are hereby made to the Underwriter
as though set out herein, and at the dates specified in the Pooling and
Servicing Agreement, such representations and warranties were or will be true
and correct in all material respects.
I. The Company possesses all material licenses,
certificates, permits or other authorizations issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct the
business now operated by it and as described in the Prospectus and there are no
proceedings, pending or, to the best knowledge of the Company, threatened,
relating to the revocation or modification of any such license, certificate,
permit or other authorization which singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and adversely
affect the business, operations, results of operations, financial position,
income, property or assets of the Company.
J. Any taxes, fees and other governmental charges in
connection with the execution and delivery of this Agreement, the Insurance
Agreement and the Indemnification Agreement and the Pooling and Servicing
Agreement, or the execution and issuance of the Certificates have been or will
be paid at or prior to the Closing Date.
K. There has not been any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or operations of
the Company or its subsidiaries, taken as a whole, from September 30, 1996.
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L. This Agreement and the Pooling and Servicing
Agreement will conform in all material respects to the descriptions thereof
contained in the Prospectus.
M. The Company is not aware of (i) any request by the
Commission for any further amendment of the Registration Statement or the
Prospectus or for any additional information, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose
or (iii) any notification with respect to the suspension of the qualification
of the Certificates for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
N. Each assignment of Receivables required to be
prepared pursuant to the Pooling and Servicing Agreement is based on forms
recently utilized by the Company with respect to leases or equipment in the
appropriate jurisdiction and used in the regular course of the Company's
business. Based on the Company's experience with such matters it is reasonable
to believe that upon execution each such assignment will be in recordable form
and will be sufficient to effect the assignment of the Receivable to which it
relates as provided in the Pooling and Servicing Agreement.
O. The transfer of the Receivables to the Trust at the
Closing Date will be treated by the Company for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to secure
debt.
Any certificate signed by any officer of the Company and
delivered to the Underwriter in connection with the sale of the Certificates
hereunder shall be deemed a representation and warranty as to the matters
covered thereby by the Company to each person to whom the representations and
warranties in this Section 2 are made.
3. Agreements of the Underwriter. The Underwriter agree with
the Company that upon the execution of this Agreement and authorization by the
Underwriter of the release of the Class A Certificates, the Underwriter shall
offer the Class A Certificates for sale upon the terms and conditions set forth
in the Prospectus as amended or supplemented.
4. Purchase, Sale and Delivery of the Certificates. The
Company hereby agrees, subject to the terms and conditions hereof, to sell the
Class A Certificates to the Underwriter, who, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, hereby agree(s) to purchase the entire aggregate
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principal amount of the Class A Certificates. At the time of issuance of the
Certificates, the Receivables will be transferred by the Company to the Trust
pursuant to the Pooling and Servicing Agreement. The Servicer will be
obligated, under the Pooling and Servicing Agreement to service the Receivables
either directly or through sub-servicers.
The Class A Certificates to be purchased by the Underwriter
will be delivered by the Company to the Underwriter (which delivery shall be
made through the facilities of The Depository Trust Company ("DTC")) against
payment of the purchase price therefor, equal to 99.6825% of the aggregate
principal amount of the Class A Certificates, plus interest accrued at the
related Interest Rate on the Class A Certificates from November 10, 1996 to
November 15, 1996, but not including, the settlement date, by a same day
federal funds wire payable to the order of the Company.
Settlement shall take place at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York at 10 a.m., on
November 15, 1996, or at such other time thereafter as the Underwriter and the
Company determine (such time being herein referred to as the "Closing Date").
The Class A Certificates will be prepared in definitive form and in such
authorized denominations as the Underwriter may request, registered in the name
of Cede & Co., as nominee of DTC.
The Company agrees to have the Certificates available for
inspection and review by the Underwriter in New York City not later than 10
a.m. New York City time on the business day prior to the Closing Date.
5. Covenants of the Company. The Company covenants and
agrees with the Underwriter that:
A. The Company will promptly advise the Underwriter and
its counsel (i) when any amendment to the Registration Statement shall have
become effective, (ii) of any request by the Commission for any amendment to the
Registration Statement or the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Class A
Certificates for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Company will not file any amendment to the
Registration Statement or supplement to the Prospectus after the date hereof and
prior to the Closing Date
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for the Certificates unless the Company has furnished the Underwriter and its
counsel copies of such amendment or supplement for their review prior to filing
and will not file any such proposed amendment or supplement to which the
Underwriter reasonably objects, unless such filing is required by law. The
Company will use its best efforts to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement and, if issued, to
obtain as soon as possible the withdrawal thereof.
B. If, at any time during the period in which the
Prospectus is required by law to be delivered, any event occurs as a result of
which the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it shall be necessary to amend or supplement
the Prospectus to comply with the Act or the rules under the Act, the Company
will promptly prepare and file with the Commission, subject to Paragraph A of
this Section 5, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, if such
amendment or supplement is required to be contained in a post-effective
amendment to the Registration Statement, will use its best efforts to cause
such amendment of the Registration Statement to be made effective as soon as
possible.
C. The Company will furnish to the Underwriter, without
charge, executed copies of the Registration Statement (including exhibits
thereto) and, so long as delivery of a Prospectus by the Underwriter or a
dealer may be required by the Act, as many copies of the Prospectus, as amended
or supplemented, and any amendments and supplements thereto as the Underwriter
may reasonably request. The Company will pay the expenses of printing all
offering documents relating to the offering of the Class A Certificates.
D. As soon as practicable, but not later than sixteen
months after the effective date of the Registration Statement, the Company will
cause the Trust to make generally available to Securityholders an earnings
statement of the Trust covering a period of at least 12 months beginning after
the effective date of the Registration Statement which will satisfy the
provisions of Section 11(a) of the Act and, at the option of the Company, will
satisfy the requirements of Rule 158 under the Act.
E. During a period of 20 calendar days from the date as
of which this Agreement is executed, neither the Company nor any affiliate of
the Company will, without the Underwriter' prior written consent (which consent
shall not be unreasonably withheld), enter into any agreement to offer or
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sell lease backed certificates, except pursuant to this Agreement.
F. So long as any of the Class A Certificates are
outstanding, the Company will cause to be delivered to the Underwriter (i) all
documents required to be distributed to Certificateholders and (ii) from time
to time, any other information concerning the Trust filed with any government
or regulatory authority that is otherwise publicly available, as the
Underwriter may reasonably request.
G. The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will
pay all expenses in connection with the transactions contemplated herein,
including but not limited to the expenses of printing (or otherwise
reproducing) all documents relating to the offering, the fees and disbursements
of its counsel and expenses of the Underwriter incurred in connection with (i)
the issuance and delivery of the Certificates, (ii) preparation of all
documents specified in this Agreement, (iii) any fees and expenses of the
Trustee, the Insurer and any other credit support provider (including legal
fees), accounting fees and disbursements and (iv) any fees charged by
investment rating agencies for rating the Class A Certificates.
H. The Company agrees that, so long as any of the Class
A Certificates shall be outstanding, it will deliver or cause to be delivered
to the Underwriter (i) the annual statement as to compliance delivered to the
Trustee pursuant to the Pooling and Servicing Agreement, (ii) the annual
statement of a firm of independent public accountants furnished to the Trustee
pursuant to the Pooling and Servicing Agreement as soon as such statement is
furnished to the Company and (iii) any information required to be delivered by
the Company or the Servicer pursuant to Section 5.09 of the form of Pooling and
Servicing Agreement heretofore delivered to the Underwriter.
I. The Company will enter into the Pooling and Servicing
Agreement, the Indemnification Agreement and all related agreements on or prior
to the Closing Date.
J. The Company will endeavor to qualify the Class A
Certificates for sale to the extent necessary under any state certificates or
Blue Sky laws in any jurisdictions as may be reasonably requested by the
Underwriter, if any, and will pay all expenses (including fees and disbursements
of counsel) in connection with such qualification and in connection with the
determination of the eligibility of the Class A Certificates for investment
under the laws of such jurisdictions as the Underwriter may reasonably
designate, if any.
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6. Conditions of the Underwriter'(s) Obligation. The
obligation of the Underwriter to purchase and pay for the Class A Certificates
as provided herein shall be subject to the accuracy as of the date hereof and
the Closing Date (as if made at the Closing Date) of the representations and
warranties of the Company contained herein (including those representations and
warranties set forth in the Pooling and Servicing Agreement and incorporated
herein), to the accuracy of the statements of the Company made in any
certificate or other document delivered pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder, and to the
following additional conditions:
A. The Registration Statement shall have become
effective no later than the date hereof, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened, and the
Prospectus shall have been filed pursuant to Rule 424(b).
B. The Underwriter shall have received the Pooling and
Servicing Agreement and the Class A Certificates in form and substance
satisfactory to the Underwriter, duly executed by all signatories required
pursuant to the respective terms thereof.
C. The Underwriter shall have received the favorable opinion
of Dewey Ballantine, counsel to the Company with respect to the following
items, dated the Closing Date, to the effect that:
1. The Company has been duly organized and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, and is qualified to do business
in each state necessary to enable it to perform its
obligations under the Pooling and Servicing Agreement. The
Company has the requisite power and authority to execute and
deliver, engage in the transactions contemplated by, and
perform and observe the conditions of, this Agreement, the
Insurance Agreement and the Pooling and Servicing Agreement and
the Indemnification Agreement.
2. This Agreement, the Certificates, the
Insurance Agreement and the Pooling and Servicing Agreement
and the Indemnification Agreement have been duly and validly
authorized, executed and delivered by the Company, all
requisite corporate action having been taken with respect
thereto, and each (other than the Certificates) constitutes
the valid, legal and binding agreement of the Company,
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and, if such agreements (other than the Certificates) were
governed by the laws of the State of New York, would be
enforceable against the Company in accordance with their
respective terms.
3. Neither the transfer of the Receivables to
the Trust, the issuance or sale of the Certificates nor the
execution, delivery or performance by the Company of the
Pooling and Servicing Agreement, the Insurance Agreement, this
Agreement or the Indemnification Agreement (A) conflicts or
will conflict with or results or will result in a breach of,
or constitutes or will constitute a default under, (i) any
term or provision of the articles of incorporation or bylaws
of the Company; (ii) any term or provision of any material
agreement, contract, instrument or indenture, to which the
Company is a party or is bound; or (iii) any order, judgment,
writ, injunction or decree of any court or governmental agency
or body or other tribunal having jurisdiction over the
Company; or (B) results in, or will result in the creation or
imposition of any lien, charge or encumbrance upon the Trust
Fund or upon the Certificates, except as otherwise
contemplated by the Pooling and Servicing Agreement.
4. The endorsement and delivery of each
Receivable, and the preparation, delivery and recording of an
Assignment with respect to each Receivable is sufficient fully
to transfer to the Trust all right, title and interest of the
Company in the Receivables, and will be sufficient to permit
the Trustee to avail itself of all protection available under
applicable law against the claims of any present or future
creditors of the Company and to prevent any other sale,
transfer, assignment, pledge or other encumbrance of the
Receivables by the Company from being enforceable.
5. No consent, approval, authorization or order
of, registration or filing with, or notice to, courts,
governmental agency or body or other tribunal is required
under the laws of the State of New York, for the execution,
delivery and performance of the Pooling and Servicing
Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement or the offer, issuance, sale or
delivery of the Certificates or the consummation of any other
transaction contemplated
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<PAGE> 13
thereby by the Company, except such which have been obtained.
6. There are no actions, proceedings or
investigations pending or, to such counsel's knowledge,
threatened against the Company before any court, governmental
agency or body or other tribunal (i) asserting the invalidity
of the Pooling and Servicing Agreement, this Agreement, the
Indemnification Agreement, the Insurance Agreement or the
Certificates (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by the Pooling and Servicing Agreement, the
Indemnification Agreement, the Insurance Agreement or this
Agreement, (iii) which would materially and adversely affect
the performance by the Company of obligations under, or the
validity or enforceability of, the Pooling and Servicing
Agreement, the Certificates, the Indemnification Agreement,
the Insurance Agreement or this Agreement.
7. Except as to any financial or statistical
data contained in the Registration Statement and the
statements set forth in the Base Prospectus under the captions
"DESCRIPTION OF TRUST AGREEMENTS - Credit and Cash
Enhancements," "CERTAIN TAX CONSIDERATIONS" and "ERISA
CONSIDERATIONS," and the statements set forth in the
Prospectus Supplement under the captions "CERTAIN FEDERAL AND
STATE INCOME TAX CONSIDERATIONS" and "ERISA CONSIDERATIONS"as
to which no opinion or belief need be expressed, to the best
of such counsel's knowledge, the Registration Statement does
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading.
8. The Certificates, assuming due execution and
authentication by the Trustee, and delivery and payment
therefore pursuant to this Agreement, are validly issued and
outstanding and are entitled to the benefits of the Pooling and
Servicing Agreement.
9. To the best of the knowledge of such counsel,
the Commission has not issued any stop order suspending the
effectiveness of the Registration Statement or any order
directed to any prospectus relating to the Certificates
(including
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<PAGE> 14
the Prospectus), and has not initiated or threatened any
proceeding for that purpose.
10. For federal income tax purposes, the
Certificates will be characterized as indebtedness that is
secured by the Transferred Property and the issuance of the
Certificates will not be treated as a sale of the Transferred
Property by the Seller.
In rendering their opinions, the counsel described in this
Paragraph C may rely, as to matters of fact, on certificates of responsible
officers of the Company, the Trustee and public officials. Such opinions may
also assume the due authorization, execution and delivery of the instruments
and documents referred to therein by the parties thereto other than the
Company.
D. The Underwriter shall have received a letter from
Certified Public Accountants, dated on or before the Closing Date, in form and
substance satisfactory to the Underwriter and counsel for the Underwriter, to
the effect that they have performed certain specified procedures requested by
the Underwriter with respect to the information set forth in the Prospectus and
certain matters relating to the Company.
E. The Class A Certificates shall have been rated in the
highest rating category by Moody's Investors Service and by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, and such ratings
shall not have been rescinded. The Underwriter and counsel for the Underwriter
shall have received copies of any opinions of counsel supplied to the rating
organizations relating to any matters with respect to the Class A Certificates.
Any such opinions shall be dated the Closing Date and addressed to the
Underwriter or accompanied by reliance letters to the Underwriter or shall
state that the Underwriter may rely upon them.
F. The Underwriter shall have received from the Company
a certificate, signed by the president, a senior vice president or a vice
president of the Company, dated the Closing Date, to the effect that the signer
of such certificate has carefully examined the Registration Statement, the
Pooling and Servicing Agreement and this Agreement and that, to the best of his
or her knowledge based upon reasonable investigation:
1. the representations and warranties of the Company in this
Agreement and in the Indemnification Agreement, as of the Closing
Date, in the Pooling and Servicing Agreement, the Insurance Agreement
and in all related agreements, as of the date specified in such
agreements, are true and correct, and the Company has
13
<PAGE> 15
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
2. there are no actions, suits or proceedings pending, or to
the best of such officer's knowledge, threatened against or affecting
the Company which if adversely determined, individually or in the
aggregate, would be reasonably likely to adversely affect the
Company's obligations under the Pooling and Servicing Agreement, the
Insurance Agreement, this Agreement or under the Indemnification
Agreement in any material way; and no merger, liquidation, dissolution
or bankruptcy of the Company is pending or contemplated;
3. the information contained in the Registration Statement
relating to the Company, the Receivables or the servicing procedures
of it or its affiliates is true and accurate in all material respects
and nothing has come to his or her attention that would lead such
officer to believe that the Registration Statement includes any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein not misleading;
4. the information set forth in the Schedule of Receivables
required to be furnished pursuant to the Pooling and Servicing
Agreement is true and correct in all material respects;
5. there has been no amendment or other document filed
affecting the articles of incorporation or bylaws of the Company since
April 1, 1996, and no such amendment has been authorized. No event
has occurred since November 7, 1996, which has affected the good
standing of the Company under the laws of the State of California;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
September 30, 1996;
7. on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating, if any,
accorded the Company or in any rating accorded any certificates of the
Company, if any, by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act; and
14
<PAGE> 16
8. each person who, as an officer or representative of the
Company, signed or signs the Registration Statement, the Pooling and
Servicing Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date of such execution, or on the Closing Date, as the
case may be, in connection with the transactions described in the
Pooling and Servicing Agreement, the Indemnification Agreement, the
Insurance Agreement and this Agreement was, at the respective times of
such signing and delivery, and is now, duly elected or appointed,
qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their
genuine signatures.
The Company shall attach to such certificate a true and
correct copy of its articles of incorporation and bylaws which are in full
force and effect on the date of such certificate, and a certified true copy of
the resolutions of its Board of Directors with respect to the transactions
contemplated herein.
G. The Underwriter shall have received a favorable
opinion of counsel to the Trustee, dated the Closing Date and in form and
substance satisfactory to the Underwriter, to the effect that:
1. the Trustee is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of
New York and has the power and authority to enter into and to take all
actions required of it under the Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the Pooling and
Servicing Agreement constitutes the legal, valid and binding obligation
of the Trustee, enforceable against the Trustee in accordance with its
terms, except as enforceability thereof may be limited by (A)
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally, as such laws would
apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Trustee, and (B) general principles of
equity regardless of whether such enforcement is sought in a proceeding
at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Trustee in connection with its execution and delivery of the
Pooling
15
<PAGE> 17
and Servicing Agreement or the performance of its obligations
thereunder;
4. the Certificates have been duly executed, authenticated
and delivered by the Trustee; and
5. the execution and delivery of, and performance by the
Trustee of its obligations under, the Pooling and Servicing Agreement
do not conflict with or result in a violation of any statute or
regulation applicable to the Trustee, or the charter or bylaws of the
Trustee, or to the best knowledge of such counsel, any governmental
authority having jurisdiction over the Trustee or the terms of any
indenture or other agreement or instrument to which the Trustee is a
party or by which it is bound.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Trustee.
H. The Underwriter shall have received from the Trustee
a certificate, signed by the President, a senior vice president or a vice
president of the Trustee, dated the Closing Date, to the effect that each
person who, as an officer or representative of the Trustee, signed or signs the
Certificates, the Pooling and Servicing Agreement or any other document
delivered pursuant hereto, on the date hereof or on the Closing Date, in
connection with the transactions described in the Pooling and Servicing
Agreement was, at the respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such documents
are their genuine signatures.
I. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or potential
downgrading or (B) any review or possible changes in rating the direction of
which has not been indicated, in the rating, if any, accorded the Company or in
any rating accorded any certificates of the Company, if any, by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of the Act.
J. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations, since September 30, 1996, of (A) the
Company its subsidiaries and affiliates or (B) the Insurer, that is in the
Underwriter'(s) judgment material and adverse and that makes
16
<PAGE> 18
it in the Underwriter'(s) judgment impracticable to market the Class A
Certificates on the terms and in the manner contemplated in the Prospectus.
K. The Underwriter shall have received from Dewey
Ballantine, special counsel to the Underwriter, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Certificates,
the Prospectus and such other related matters as the Underwriter shall
reasonably require.
L. The Underwriter and counsel for the Underwriter shall
have received copies of any opinions of counsel to the Company or the Insurer
supplied to the Trustee relating to matters with respect to the Certificates or
the Policies. Any such opinions shall be dated the Closing Date and addressed
to the Underwriter or accompanied by reliance letters to the Underwriter or
shall state the Underwriter may rely thereon.
M. The Underwriter shall have received such further
information, certificates and documents as the Underwriter may reasonably have
requested not fewer than three (3) full business days prior to the Closing
Date.
N. The Policies relating to the Class A Certificates
shall have been duly executed and issued at or prior to the Closing Date and
shall conform in all material respects to the description thereof in the
Prospectus.
O. The Underwriter shall have received a favorable
opinion of Kutak Rock, counsel to the Insurer, dated the Closing Date and in
form and substance satisfactory to counsel for the Underwriter, to the effect
that:
1. the Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New
York. The Insurer is validly licensed and authorized to issue the
Policies and perform its obligations under the Policies in accordance
with the terms thereof, under the laws of the State of New York;
2. the execution and delivery by the Insurer of the
Policies, the Insurance Agreement and the Indemnification Agreement
are within the corporate power of the Insurer and have been authorized
by all necessary corporate action on the part of the Insurer; the
Policies have been duly executed and are the valid and binding
obligations of the Insurer enforceable in accordance with its terms
except that the enforcement of the Policies may be limited by laws
relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights
generally and by general principles of equity;
17
<PAGE> 19
3. the Insurer is authorized to deliver the Insurance
Agreement and the Indemnification Agreement, and the Insurance
Agreement and the Indemnification Agreement have been duly executed
and are the valid and binding obligations of the Insurer enforceable
in accordance with its terms except that the enforcement of the
Insurance Agreement and the Indemnification Agreement may be limited
by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors'
rights generally and by general principles of equity and by public
policy considerations relating to indemnification for securities law
violations;
4. no consent, approval, authorization or order of any
state or federal court or governmental agency or body is required on
the part of the Insurer, the lack of which would adversely affect the
validity or enforceability of the Policies; to the extent required by
applicable legal requirements that would adversely affect validity or
enforceability of the Policies, the form of each Policy has been filed
with, and approved by, all governmental authorities having
jurisdiction over the Insurer in connection with such Policy;
5. to the extent the Policies constitute certificates
within the meaning of Section 2(1) of the Securities Act of 1933, as
amended (the "Act"), they are certificates that are exempt from the
registration requirements of the Act; and
6. the information set forth under the caption "THE
CERTIFICATE INSURANCE POLICY AND THE CERTIFICATE INSURER" in the
Prospectus forming a part of the Registration Statement Form S-3 (No.
33-98822) filed by the Company with the Securities and Exchange
Commission and declared effective on April 18, 1996, insofar as such
statements constitute a description of the Policies, accurately
summarizes the Policies.
In rendering this opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the Company, the
Trustee, the Certificate Insurer and public officials. Such opinion may assume
the due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Insurer.
P. On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (A) any
intended or potential downgrading or (B) any review or possible change in
rating the direction of which has not been indicated, in the rating accorded
the Insurer's
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<PAGE> 20
claims paying ability by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the Act.
Q. The Underwriter shall have received from the Insurer
a certificate, signed by the President, a senior vice president or a vice
president of the Insurer, dated the Closing Date, to the effect that the signer
of such certificate has carefully examined the Policies, the Insurance
Agreement, the Indemnification Agreement and the related documents and that, to
the best of his or her knowledge based on reasonable investigation:
1. there are no actions, suits or proceedings pending or
threatened against or affecting the Insurer which, if adversely
determined, individually or in the aggregate, would adversely affect
the Insurer's performance under the Policies, the Insurance Agreement
or the Indemnification Agreement;
2. each person who as an officer or representative of
the Insurer, signed or signs the Policies, the Insurance Agreement,
the Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection
with the transactions described in this Agreement was, at the
respective times of such signing and delivery, and is now, duly elected
or appointed, qualified and acting as such officer or representative,
and the signatures of such persons appearing on such documents are
their genuine signatures;
3. the information contained in the Prospectus under the
caption "THE CERTIFICATE INSURANCE POLICY AND THE CERTIFICATE INSURER"
is true and correct in all material respects and does not omit to
state a material fact with respect to the description of the Policies
or the ability of the Insurer to meet its payment obligations under
the Policies;
4. the tables regarding the Insurer's capitalization set
forth in the Prospectus under the heading "THE CERTIFICATE INSURANCE
POLICY AND THE CERTIFICATE INSURER" presents fairly the capitalization
of the Insurer as of December 31, 1995 and June 30, 1996,
respectively;
5. on or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible changes in rating
the direction of which has not been indicated, in the rating accorded
the claims paying ability of the Insurer by any "nationally recognized
19
<PAGE> 21
statistical rating organization," as such term is defined for purposes
of the Act;
6. the consolidated financial statements of the
Insurer, a wholly owned subsidiary of MBIA Inc., and its subsidiaries
as of December 31, 1995 and December 31, 1994 and for the three years
ended December 31, 1995, included in the Annual Report on Form 10-K of
MBIA Inc., for the year ended December 31, 1995, and the consolidated
financial statements of the Insurer and its subsidiaries for the six
months ended June 30, 1996 and for the periods ended June 30, 1996 and
June 30, 1995 included in the Quarterly Report on Form 10-Q of MBIA
Inc., for the period ending June 30, 1996, incorporated by referenced
into the Prospectus, fairly present in all material respects the
financial condition of the Insurer as of such date and for the period
covered by such statements in accordance with generally accepted
accounting principles consistently applied; and
7. to the best knowledge of such officer, since June 30,
1996, no material adverse change has occurred in the financial
position of the Insurer other than as set forth in the Prospectus.
The officer of the Insurer certifying to items 5 through 7 shall be an officer
in charge of a principal financial function.
The Insurer shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as appropriate,
and its bylaws, all of which are in full force and effect on the date of such
certificate.
R. The Underwriter shall have received from Dewey
Ballantine, special counsel to the Company, a survey in form and substance
satisfactory to the Underwriter, indicating the requirements of applicable
local law which must be complied with in order to transfer and service the
Receivables pursuant to the Pooling and Servicing Agreement and the Company
shall have complied with all such requirements.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all respects when and as provided in this Agreement, if
the Company is in breach of any covenants or agreements contained herein or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriter and counsel to the Underwriter, this Agreement
and all obligations of the Underwriter hereunder, may be canceled on, or at any
time prior to, the Closing Date by the Underwriter. Notice of
20
<PAGE> 22
such cancellation shall be given to the Company in writing, or by telephone or
telegraph confirmed in writing.
7. Expenses. If the sale of the Class A Certificates
provided for herein is not consummated by reason of a default by the Company in
its obligations hereunder, then the Company will reimburse the Underwriter,
upon demand, for all reasonable out-of-pocket expenses (including, but not
limited to, the reasonable fees and expenses of counsel for the Underwriter)
that shall have been incurred by it in connection with its investigation with
regard to the Company and the Class A Certificates and the proposed purchase
and sale of the Class A Certificates.
8. Indemnification and Contribution.
A. Regardless of whether any Class A Certificates are sold,
the Company and First Sierra will, jointly and severally, indemnify and hold
harmless the Underwriter, each of their respective officers and directors and
each person who controls the Underwriter within the meaning of the Act
or the Securities Exchange Act of 1934 (the "1934 Act"), against any and all
losses, claims, damages, or liabilities (including the cost of any
investigation, legal and other expenses incurred in connection with and amounts
paid in settlement of any action, suit, proceeding or claim asserted), joint or
several, to which they may become subject, under the Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement, or any amendment
thereof or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein, not misleading or (ii) in the Base Prospectus or the
Prospectus Supplement or any amendment thereto or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and will reimburse
each such indemnified party for any legal or other expenses reasonably incurred
by it in connection with investigating or defending against such loss, claim,
damage, liability or action; provided, however, that neither the Company nor
First Sierra shall be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information relating to the
Underwriter furnished to the
21
<PAGE> 23
Company by the Underwriter specifically for use in connection with the
preparation thereof.
B. Regardless of whether any Class A Certificates are
sold, the Underwriter will indemnify and hold harmless the Company, each of its
officers and directors and each person, if any, who controls the Company within
the meaning of the Act or the 1934 Act against any losses, claims, damages or
liabilities to which they become subject under the Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, to the same
extent as the foregoing indemnity, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
(i) the Registration Statement (other than any Derived Information, which is
subject to the indemnification provision of subsection (E) below), or any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading or in (ii) the Base Prospectus or the
Prospectus Supplement or any amendment thereto or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information relating to the Underwriter furnished to
the Company by the Underwriter specifically for use in the preparation thereof
and so acknowledged in writing, and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending against such loss, claim, damage, liability or
action.
C. In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Paragraphs A and B above, such person
(hereinafter called the indemnified party) shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the indemnifying
party) in writing thereof; but the omission to notify the indemnifying party
shall not relieve such indemnifying party from any liability which it may have
to any indemnified party otherwise than under such Paragraph. The indemnifying
party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and
any others the indemnifying party may designate in such proceeding and shall
pay the fees and disbursements of such counsel related to such proceeding. In
any such proceeding any
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<PAGE> 24
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel, or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to any
local counsel) for all such indemnified parties, and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Underwriter in the case of parties indemnified
pursuant to Paragraph A and by the Company in the case of parties indemnified
pursuant to Paragraph B. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated above, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
D. The Underwriter agrees to provide the Company no
later than two Business Days after the day on which the Prospectus Supplement
in required to be filed pursuant to Rule 424 with a copy of its Derived
Information for filing with the Commission on Form 8-K.
E. The Underwriter severally agrees to indemnify and
hold harmless the Company, each of the Company's officers
23
<PAGE> 25
and directors and each person who controls the Company parties within the
meaning of Section 15 of the Securities Act against any and all losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of a material fact contained in the Derived Information
provided by such Underwriter, or, when read in conjunction with the Prospectus,
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party for
any legal or other expenses reasonably incurred by him, her or it in connection
with investigating or defending or preparing to defend any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however, in
no event shall an Underwriter be liable to the Company parties under this
paragraph (E) in an amount in excess of the fees received by such Underwriter in
connection with the offering of the Offered Certificates. The obligations of an
Underwriter under this Section 8(E) shall be in addition to any liability which
such Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally
applicable to this Section 8(E).
For purposes of this Agreement, "Derived Information" means
such portion, if any, of the information delivered to the Company (comforted by
an independent public accounting firm) pursuant to Section 8(D) for filing with
the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking
into account information incorporated therein by reference; and
(ii) does not constitute Company-Provided Information
(as defined below).
"Company-Provided Information" means any computer tape or data furnished to the
Underwriter by the Company concerning the Mortgage Loans assigned to the Trust
on behalf of the Trust.
F. If the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages or liabilities referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the
24
<PAGE> 26
Company and the Underwriter from the sale of the Certificates or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only relative benefits referred
to in clause (i) above but also the relative fault of the Company and of the
Underwriter in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Underwriter shall be deemed to be in such proportion so that the Underwriter are
responsible for that portion determined by multiplying the total amount of such
losses, claims, damages and liabilities, including legal and other expenses, by
a fraction, the numerator of which is (x) the excess of the Aggregate Resale
Price (as defined below) of the Class A Certificates over the aggregate purchase
price of the Class A Certificates specified in the third paragraph of this
Agreement and the related Prospectus Supplement, and the denominator of which is
(y) the Aggregate Resale Price of the Class A Certificates, and the Company is
responsible for the balance, provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of the immediately preceding
sentence, the "Aggregate Resale Price" of the Class A Certificates at the time
of any determination shall be the weighted average of the purchase prices (in
each case expressed as a percentage of the aggregate principal amount of the
Class A Certificates so purchased), determined on the basis of such principal
amounts, paid to the Underwriter by all subsequent purchasers that purchased the
Class A Certificates on or prior to such date of determination. The relative
fault of the Company and the Underwriter shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
G. The Company and the Underwriter agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in Paragraph
D. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in Paragraph D shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
25
<PAGE> 27
Notwithstanding the provisions of this Section 8, the Underwriter shall not be
required to contribute any amount by which the Aggregate Resale Price exceeds
the amount of any damages that the Underwriter have otherwise been required to
pay by reason of any untrue or alleged untrue statement or omission or alleged
omission.
H. The Company and the Underwriter each expressly
waives, and agree not to assert, any defense to their respective
indemnification and contribution obligations under this Section 8 which they
might otherwise assert based upon any claim that such obligations are
unenforceable under federal or state securities laws or by reasons of public
policy.
I. The obligations of the Company under this Section 8
shall be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Underwriter within the meaning of the Act or the 1934 Act; and the
obligations of the Underwriter under this Section 8 shall be in addition to any
liability that the Underwriter may otherwise have and shall extend, upon the
same terms and conditions, to each director of the Company and to each person,
if any, who controls the Company within the meaning of the Act or the 1934 Act;
provided, however, that in no event shall the Company or the Underwriter be
liable for double indemnification.
9. Information Supplied by Underwriter. The statements set
forth in the last paragraph on the front cover page of the Prospectus regarding
market-making and under the heading "Underwriting" in the Supplement (to the
extent such statements relate to the Underwriter) constitute the only
information furnished by the Underwriter to the Company for the purposes of
Sections 2(B) and 8(A) hereof. The Underwriter confirms that such statements
(to such extent) are correct.
10. Notices. All communications hereunder shall be in
writing and, if sent to the Underwriter, shall be mailed or delivered or
telecopied and confirmed in writing to the addresses set forth in Schedule I
hereto, and, if sent to the Company, shall be mailed, delivered or telegraphed
and confirmed in writing to the Company at First Sierra Receivables II, Inc.,
1061 East Indiantown Road, Suite 204, Jupiter, Florida 33477, Attention: Robert
Quinn.
11. Survival. All representations, warranties, covenants and
agreements of the Company contained herein or in
26
<PAGE> 28
agreements or certificates delivered pursuant hereto, the agreements of the
Underwriter and the Company contained in Section 8 hereof, and the
representations, warranties and agreements of the Underwriter contained in
Section 3 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Underwriter or any controlling
persons, or any subsequent purchaser or the Company or any of its officers,
directors or any controlling persons, and shall survive delivery of and payment
for the Certificates. The provisions of Sections 5, 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
12. Termination. The Underwriter shall have the right to
terminate this Agreement by giving notice as hereinafter specified at any time
at or prior to the Closing Date if (a) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (b) trading of any
certificates of the Company shall have been suspended on any exchange or in any
over-the-counter market, (c) a general moratorium on commercial banking
activities shall have been declared by either federal or New York State
authorities, (d) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis which,
in the Underwriter' reasonable judgment, is material and adverse, and, in the
case of any of the events specified in clauses (a) through (d), such event
singly or together with any other such event makes it in the Underwriter'
reasonable judgment impractical to market the Class A Certificates. Any such
termination shall be without liability of any other party except that the
provisions of Paragraph G of Section 5 (except with respect to expenses of the
Underwriter) and Sections 7 and 8 hereof shall at all times be effective. If
the Underwriter elects to terminate this Agreement as provided in this Section
12, the Company shall be notified promptly by the Underwriter by telephone,
telegram or facsimile transmission, in any case, confirmed by letter.
13. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns (which successors and assigns do not include any person purchasing a
Security from the Underwriter), and the officers and directors and controlling
persons referred to in Section 8 hereof and their respective successors and
assigns, and no other persons will have any right or obligations hereunder.
27
<PAGE> 29
14. Applicable Law; Venue. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York. ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF ANY
PROVISION OF THIS AGREEMENT SHALL BE BROUGHT ONLY IN A STATE OR FEDERAL COURT
LOCATED IN THE COUNTY OF NEW YORK, AND THE PARTIES HERETO EXPRESSLY CONSENT TO
THE JURISDICTION OF SUCH COURTS AND AGREE TO WAIVE ANY DEFENSE OR CLAIM OF
FORUM NON CONVENIENS THEY MAY HAVE WITH RESPECT TO ANY SUCH ACTION OR
PROCEEDING BROUGHT.
15. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall together constitute but one and the
same instrument.
16. Amendments and Waivers. This Agreement may be amended,
modified, altered or terminated, and any of its provisions waived, only in a
writing signed on behalf of the parties hereto.
17. No Petition. Each of First Sierra and the
Underwriter covenant and agree that they will not institute bankruptcy
proceedings against the Company until one year and one day following the
maturity of the latest maturing securities issued by the Company.
28
<PAGE> 30
FIRST SIERRA RECEIVABLES II, INC.
By:__________________________
Name: Sandy M. Ho
Title: Senior Vice President
FIRST SIERRA FINANCIAL, INC.
By:__________________________
Name: Thomas Depping
Title: President
FIRST UNION CAPITAL MARKETS CORP.
By:__________________________
Name: E.R. Gebhart
Title: Vice President
<PAGE> 31
SCHEDULE I
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
EQUIPMENT LEASE BACKED CERTIFICATES, CLASS A
Percentage of Certificates
Underwriter to be Purchased
- ----------- --------------------------
First Union Capital Markets Corp. 100%
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0610
----
Total 100%
====
<PAGE> 1
EXHIBIT 4.1
-----------
<PAGE> 2
===============================================================================
POOLING AND SERVICING AGREEMENT
by and among
FIRST SIERRA FINANCIAL, INC.
as Servicer,
FIRST SIERRA RECEIVABLES II, INC.
as Depositor,
and
BANKERS TRUST COMPANY
as Back-up Servicer and Trustee
-------------------------------
Dated as of November 1, 1996
-------------------------------
First Sierra Equipment Lease Trust 1996-2
Equipment Lease-Backed Certificates
===============================================================================
<PAGE> 3
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. General Interpretive Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRANSFER OF INITIAL TRANSFERRED PROPERTY; ORIGINAL ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . 2
Section 2.01. Transfer of Initial Transferred Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Trustee to Act as Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.04. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.05. Liabilities of the Trust and Parties to this Agreement; Limitations Thereon . . . . . . . . . . . 5
Section 2.06. Intended Tax Characterization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.01. Representations, Warranties and Covenants of Depositor . . . . . . . . . . . . . . . . . . . . . 7
Section 3.02. Representations, Warranties and Covenants of the Servicer . . . . . . . . . . . . . . . . . . . . 21
Section 3.03. Representations and Warranties of the Back-up Servicer . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV. PERFECTION OF TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.01. Filing; Custody of Lease Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.02. Name Change or Relocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.03. Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.04. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V. ADMINISTRATION AND SERVICING
OF LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.01. Acceptance of Appointment; Duties of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.02. Collection of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.03. Servicer Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.04. Realization Upon Defaulted Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.05. Maintenance of Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.06. Servicing Compensation; Payment of Certain Expenses by Servicer . . . . . . . . . . . . . . . . . 36
</TABLE>
i
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Section 5.07. Monthly Statement; Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.08. Quarterly Certificate as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.09. Annual Independent Public Accountant's Servicing Reports . . . . . . . . . . . . . . . . . . . . 37
Section 5.10. Access to Certain Documentation and Information Regarding the Transferred Property . . . . . . . 38
Section 5.11. Financial Statements and Other Necessary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.12. Security Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.13. Responsibilities of the Back-up Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.14. Back-up Servicer Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.15. Merger or Consolidation of, or Assumption of the Obligations of, Back-up Servicer . . . . . . . . 43
Section 5.16. Back-up Servicer's Waiver of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VI. ACCOUNTS; ALLOCATION AND APPLICATION OF THE TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.01. Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.02. Security Deposit Account and New Transferred Property Funding Account . . . . . . . . . . . . . . 45
Section 6.03. Investment of Monies Held in the Accounts; Subaccounts . . . . . . . . . . . . . . . . . . . . . 45
Section 6.04. The Certificate Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.05. Transfer of New Transferred Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.06. Disbursements From Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.07. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.08. Compliance With Withholding Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VII. REMOVAL OF NONCONFORMING TRANSFERRED
PROPERTY; SUBSTITUTION OF LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.01. Removal of Non-Conforming Transferred Property. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.02. Substitution of Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VIII. THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.01. The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.02. Initial Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
ii
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<TABLE>
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Section 8.03. Registration of Transfer and Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . 66
Section 8.04. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.05. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.06. Access to List of Certificateholders' Names and Addresses . . . . . . . . . . . . . . . . . . . . 68
Section 8.07. Acts of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX. THE SERVICER, THE DEPOSITOR AND THE BACK-UP SERVICER . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 9.01. Liability of Servicer; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 9.02. Merger, Consolidation, or Assumption of the Obligations of Servicer . . . . . . . . . . . . . . 70
Section 9.03. Limitation on Liability of Servicer and Others . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 9.04. Servicer Not to Resign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 9.05. Liability of the Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 9.06. Limitation on Liability of the Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 9.07. Limitation on Liability of Back-up Servicer and Others . . . . . . . . . . . . . . . . . . . . . 72
Section 9.08. Back-up Servicer Not to Resign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.09. Indemnity for Liability Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.10. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 9.11. General Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE X. EARLY AMORTIZATION EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 10.01. Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 10.02. Declaration of Early Amortization Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.03. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . . 78
Section 10.04. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.05. Trustee May Enforce Claims Without Possession of Certificates. . . . . . . . . . . . . . . . . . 79
Section 10.06. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 10.07. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 10.08. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 10.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 10.10. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.11. Control by Certificateholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
iii
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<TABLE>
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Section 10.12. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.13. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE XI. SERVICING TERMINATION; BACK-UP SERVICING TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 11.01. Events of Servicing Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 11.02. Trustee to Act; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 11.03. Notification to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 11.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 11.05. Effects of Termination of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 11.06. Events of Back-up Servicing Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 11.07. Waiver of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE XII. THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 12.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 12.02. Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 12.03. Trustee's Assignment of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 12.04. Certain Matters Affecting the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 12.05. Trustee Not Liable for Certificates or Leases . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 12.06. Trustee May Own Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 12.07. Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 12.08. Eligibility Requirements for Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 12.09. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 12.10. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 12.11. Merger or Consolidation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.12. Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.13. Trustee May Enforce Claims Without Possession of Certificate . . . . . . . . . . . . . . . . . 101
Section 12.14. Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 12.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 12.16. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
</TABLE>
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ARTICLE XIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 13.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 13.02. Optional Removal of All Transferred Property; Final Disposition of Funds . . . . . . . . . . . 104
ARTICLE XIV. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 14.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 14.02. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 14.03. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 14.04. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 14.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 14.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 14.07. Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.09. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.10. Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.11. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.12. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.13. Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 14.14. No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
EXHIBITS
Exhibit A - Custody Receipt
Exhibit B - Forms of Lease
Exhibit C - Form of Monthly Statement
Exhibit D - Form of Wire Instructions
Exhibit E - Form of Class A Certificate
Exhibit F - Form of Class B-1 Certificate
Exhibit G - Form of Class B-2 Certificate
Exhibit H - Form of Trust Certificate
Exhibit I - Form of Transferee Letter (Non-144A)
Exhibit J - Form of Transferee Letter (144A)
Exhibit K - Form of Transferee Letter (Investment Company)
Exhibit L - Form of Instrument of Transfer
ANNEX
Annex A - Defined Terms
</TABLE>
v
<PAGE> 8
This POOLING AND SERVICING AGREEMENT, dated as of November 1,
1996, is made with respect to the formation of the First Sierra Equipment Trust
1996-2 and is made by and among First Sierra Financial, Inc., a Delaware
corporation, as Servicer (the "Servicer"), Bankers Trust Company, a New York
banking corporation, as Back-up Servicer (the "Back-up Servicer"), First Sierra
Receivables II, Inc. a Delaware corporation, as Depositor (the "Depositor"),
and Bankers Trust Company, not in its individual capacity but solely as Trustee
(the "Trustee").
WITNESSETH:
In consideration of the mutual agreements herein contained,
and of other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. Capitalized terms used and not
defined herein shall have the meanings specified in Annex A hereto.
Section 1.02. General Interpretive Principles. For purposes of
this Agreement except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Agreement have the
meanings assigned to them in this Agreement and include the plural as well as
the singular, and the use of any gender herein shall be deemed to include the
other gender;
(b) accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections",
"subsections", "Paragraphs" and other subdivisions without reference to a
document are to designated Articles, Sections, subsections, Paragraphs and
other subdivisions of this Agreement;
(d) a reference to a Subsection without further
reference to a Section is a reference to such Subsection as contained in the
same Section in which the reference appears,
<PAGE> 9
and this rule shall also apply to Paragraphs and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular provision; and
(f) the term "include" or "including" shall mean
without limitation by reason of enumeration.
ARTICLE II.
TRANSFER OF INITIAL TRANSFERRED PROPERTY;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Transfer of Initial Transferred Property;
Characterization of the Transaction. The Depositor, simultaneously with the
execution and delivery of this Agreement, does hereby contribute, transfer,
assign, and otherwise transfer and grant to the Trustee on behalf of the Trust,
without recourse (except as otherwise expressly set forth herein), to be held
in trust for the benefit of the Certificateholders and the Certificate Insurer
as their interests may appear as provided in this Agreement, all the right,
title, and interest of the Depositor in and to (a)(i) any Initial Equipment
that is owned by the Depositor and any and all income and proceeds from such
Initial Equipment, but subject to the rights of the Lessee to quiet enjoyment
of such Initial Equipment under the related Initial Lease and (ii) any security
interest of the Depositor in any of the Initial Equipment that is not owned by
the Depositor, (b) the Initial Leases, including, without limitation, all
Scheduled Payments, Residual Receipts, Defaulted Residual Receipts and any
other payments due or made with respect to the Initial Leases after the Cut-Off
Date relating to such Initial Leases, (c) any guarantees of a Lessee's
obligations under an Initial Lease, (d) all other documents in the Lease Files
relating to the Initial Leases, including, without limitation, any UCC
financing statements related to the Initial Leases or the Initial Equipment,
(e) any Insurance Policies and Insurance Proceeds with respect to the Initial
Leases, (f) all of the Depositor's right, title and interest in and to, and
rights under the Sale Agreement executed and delivered in accordance therewith,
(g) the Certificate Insurance Policy, (h) all amounts on deposit in the
Collection Account, the Lockbox Account, the Security Deposit Account and the
New Transferred Property Funding Account; and (i) any and all income and
proceeds of any of the foregoing; provided, however, that the contribution,
transfer and assignment effected by this Section 2.01 shall not include the
Initial Unpaid Amounts relating thereto.
2
<PAGE> 10
It is the intention of the Depositor, which intention is
acknowledged by the Trustee, that this assignment and related issuance of
Certificates hereunder constitute the acquisition by the Trust of the
Transferred Property conveying good title thereto and constituting a sale for
financial accounting purposes, free and clear of all Liens from the Depositor
to the Trust, and that the Transferred Property not be part of the Depositor's
estate in the event of the insolvency or bankruptcy of the Depositor. In the
event that the Transferred Property is held to be property of the Depositor's
estate, or if for any reason this Agreement is held or deemed to create a
security interest in the Transferred Property, then (a) this Agreement shall
also be deemed to be a security agreement within the meaning of Article 8 and
Article 9 of the Uniform Commercial Code as in effect in the States of Florida,
New York and Texas and (b) the transfer provided for in this Section 2.01 shall
be deemed to be a grant by the Depositor to the Trustee on behalf of the Trust
of (i) a valid first priority perfected security interest in all of the
Depositor's right, title and interest in and to the Transferred Property,
except for the Equipment not owned by the Depositor, and (ii) a valid
assignment of its security interest in the Equipment not owned by the
Depositor. The Depositor hereby grants such a security interest.
In the case of any Initial Lease which has been prepaid in
full after the Cut-Off Date relating to the Initial Leases and prior to the
Closing Date, the Depositor shall, on the Closing Date, deposit the
Reconveyance Amount therefor and for the related Equipment in the Collection
Account in lieu of taking the actions described in Section 4.01 with respect
thereto.
Section 2.02. Trustee to Act as Custodian. The executed
original counterpart of each Lease, together with the other documents or
instruments, if any, which constitute a part of a Lease File shall be held by
the Trustee for the benefit of the Certificateholders and the Certificate
Insurer in accordance with the provisions herein.
Section 2.03. Conditions to Closing. As conditions to the
execution, authentication and delivery of the Certificates by the Trustee and
the sale of the Certificates by the Depositor (by issuance thereof by the Trust
upon the Depositor's instructions) on the Closing Date, (i) the Depositor shall
have received by wire transfer the net proceeds of sale of the Class A
Certificates in authorized denominations equal in the aggregate to the Initial
Class A Certificate Principal Amount and (ii) the Trustee shall have received
the following on or before the Closing Date:
3
<PAGE> 11
(a) The List of Initial Leases, certified by the
President, any Senior Vice President, any Vice President or any Assistant Vice
President of the Servicer;
(b) Copies of resolutions of the Board of Directors of
the Depositor approving the execution, delivery and performance of the
Transaction Documents to which it is a party and the transactions contemplated
hereby, certified by a Secretary or an Assistant Secretary of the Depositor;
(c) A copy of an officially certified document, dated
not more than 30 days prior to the Closing Date, evidencing the due
organization and good standing of the Depositor in the State of Delaware;
(d) Copies of the Certificate of Incorporation and
By-Laws of the Depositor certified by the Secretary of the Depositor;
(e) Delivery of the executed Financing Statements,
prepared for filing;
(f) A certificate listing the Servicing Officers of
the Servicer as of the Closing Date;
(g) Executed copies of the Sale Agreement, the Pooling
and Servicing Agreement and the Lockbox Agreement in form and substance
acceptable to the Certificate Insurer;
(h) Copies of resolutions of the Board of Directors of
First Sierra approving the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby, certified by a Secretary or an
Assistant Secretary of such entity;
(i) A copy of an officially certified document, dated
not more than 30 days prior to the Closing Date, evidencing the due
organization and good standing of First Sierra and the Servicer in the States
of Delaware and Texas;
(j) An executed Certificate Insurance Policy;
(k) Custody Receipt, substantially in the form of
Exhibit A hereto, pursuant to which the Trustee certifies that it has received
the Lease File with respect to each Lease on the List of Initial Leases; and
(l) All Necessary Consents.
and (iii) the Certificate Insurer shall have received in writing on or before
the Closing Date the following:
4
<PAGE> 12
(a) Acknowledgement by the Back-up Servicer that it
and the Servicer have agreed to a format pursuant to which data will be
received;
(b) An opinion of counsel to the Back-up Servicer
dated as of the Closing Date, as to the due authorization, execution and
delivery of this Agreement by the Back-up Servicer; and
(c) An officer's certificate from a responsible
officer of the Back-up Servicer, dated as of the Closing Date, to the effect
that (i) the representations and warranties contained in Section 3.03 hereof
are true and correct in all material respects as of the Closing Date and (ii)
no Event of Back-up Servicing Termination exists hereunder.
Section 2.04. Acceptance by Trustee. The Trustee acknowledges
its acceptance, simultaneously with the execution and delivery of this
Agreement, of all right, title and interest in and to the Transferred Property
on behalf of the Trust and declares that the Trustee holds and will hold such
right, title and interest on behalf of the Trust upon the trusts herein set
forth for the benefit of all present and future Certificateholders, the
Certificate Insurer and the holder of the Trust Certificate for the use and
purpose and subject to the terms and provisions of this Agreement. The
Depositor hereby (a) appoints the Trustee as the Depositor's attorney-in-fact
with all power independently to enforce all of the Depositor's rights against
First Sierra hereunder, under the Sale Agreement and under the Receivables
Transfer Agreement and (b) directs the Trustee to enforce such rights. The
Trustee hereby accepts such appointment and agrees to enforce such rights.
Section 2.05. Liabilities of the Trust and Parties to this
Agreement; Limitations Thereon. (a) The obligations evidenced by the
Certificates provide recourse only to the Trust Property and provide no
recourse against the Depositor, First Sierra, the Servicer, the Trustee, or any
other Person. The Holder of the Trust Certificate hereby instructs the Trustee
to, and the Trustee hereby agrees to, cause the Trust to pay to (i) the Class A
Certificateholders (A) an amount of principal equal to the Initial Class A
Certificate Principal Amount and (B) Class A Certificate Interest, (ii) to the
Certificate Insurer, the Reimbursement Amount, (iii) to the Class B-1
Certificateholders (A) an amount of principal equal to the Initial Class B-1
Certificate Principal Amount and (B) Class B-1 Certificate Interest and (iv) to
the Class B-2 Certificateholders (A) an amount of principal equal to the
Initial Class B-2 Certificate Principal Amount and (B) Class B-2 Certificate
Interest, in each case at the times, from the sources and on the terms and
conditions set forth herein.
5
<PAGE> 13
(b) The Depositor, First Sierra, the Servicer and the
Back-up Servicer shall not be liable to the Trust, the Trustee or the
Certificateholders except as provided in Article VII and Sections 9.01, 9.03,
9.05, 9.06, 9.07, 9.08, 9.09, 9.11, 9.12 and 9.13 hereof, and, with respect to
First Sierra, as provided in the Sale Agreement. Without limiting the
generality of the foregoing, if any Lessee fails to pay any Scheduled Payment,
Final Lease Payment, exercised Purchase Option Payment or other amounts due
under a Lease, then neither the Trustee, the Trust nor the Certificateholders
will have any recourse against the Depositor, First Sierra or the Servicer for
such Scheduled Payment, Final Lease Payment, exercised Purchase Option Payment,
other amounts due under the Lease or any losses, damages, claims, liabilities
or expenses incurred by the Trustee, the Trust or any Certificateholder as a
direct or indirect result thereof, except as may be provided for in Article VII
and Sections 9.01, 9.03, 9.05, 9.06, 9.07, 9.08, 9.09, 9.11, 9.12 and 9.13
hereof, and, with respect to First Sierra, as provided in the Sale Agreement.
(c) The Trustee agrees that in the event of a default
by a Lessee under the terms of a Lease, which default is not cured within any
applicable cure period set forth in such Lease, the Trustee, the Trust, and the
Certificateholders shall be expressly limited to the sources of payment
specified herein. In addition, the Trustee shall have the right to exercise the
rights of First Sierra (assigned by First Sierra to the Depositor and then to
the Trustee) under the Leases, the Insurance Policies and any document in any
Lease File in the name of the Trustee, the Trust and the Certificateholders,
either directly or through the Servicer as agent, and the Trustee is hereby
directed by the Depositor to exercise such rights; provided, however, that the
Trustee shall not be required to take any action pursuant to this Section
2.05(c) except upon written instructions from the Servicer. A carbon,
photographic or other reproduction of this Agreement or any financing statement
is sufficient as a financing statement in any State.
(d) The receipt of the Transferred Property by the
Trustee on behalf of the Trust pursuant to this Agreement does not constitute
and is not intended to result in an assumption by the Trustee, the Trust or any
Certificateholder of any obligation (except for the obligation not to disturb a
Lessee's right of quiet enjoyment) of First Sierra or the Servicer to any
Lessee or other Person in connection with the Equipment, the Leases, the
Insurance Policies or any document in the Lease Files.
Section 2.06. Intended Tax Characterization. The parties
hereto agree that it is their mutual intent that, for all applicable tax
purposes, the Class A Certificates and the Class B Certificates shall
constitute indebtedness and that
6
<PAGE> 14
for all applicable tax purposes, accordingly, the Holder of the Trust
Certificate shall be treated as sole and exclusive owner of the Transferred
Property. Further, each party hereto, including the Certificateholders, hereby
covenants to every other party hereto to treat the Class A Certificates and the
Class B Certificates as indebtedness for all applicable tax purposes in all tax
filings, reports and returns and otherwise, and further covenants that neither
it nor any of its Affiliates will take or participate in the taking of, or
permit to be taken, any action that is inconsistent with the treatment of the
Class A Certificates or of the Class B Certificates as indebtedness for tax
purposes. All successors and assigns of the parties hereto shall be bound by
the provisions hereof.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. Representations, Warranties and Covenants of
Depositor. The Depositor hereby makes the following representations, warranties
and covenants to the Trustee, the Trust, the Certificate Insurer and the
Certificateholders on which the Trustee relies in accepting the Initial
Transferred Property in trust and in authenticating the Certificates, on which
the Certificate Insurer relies in executing and delivering the Certificate
Insurance Policy and on which the initial Certificateholders have relied in
purchasing the Certificates. Such representations, warranties and covenants are
made as of the Closing Date, shall be deemed to be re-affirmed on each
subsequent Transfer Date and shall survive each sale, transfer and assignment
of any Transferred Property to the Trustee, until the Certificates have been
paid in full.
(a) The Depositor represents and warrants, as to itself:
(i) The Depositor is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is in compliance with the laws of the State of
Delaware and each other applicable jurisdiction to the extent
necessary to perform its obligations under this Agreement and the
other Transaction Documents to which it is a party. The Depositor has
the full power and authority and all requisite authorizations,
approvals, orders, licenses, certificates and permits of and from all
government or regulatory officials and bodies to own its properties,
to conduct its business and to execute and deliver, engage in the
transactions contemplated by, and perform and observe its obligations
under, this Agreement and the
7
<PAGE> 15
other Transaction Documents to which it is a party; all such
authorizations, approvals, orders, licenses and certificates are in
full force and effect; and, there are no legal or governmental
proceedings pending or, to the best knowledge of the Depositor,
threatened that would result in a material modification, suspension or
revocation thereof;
(ii) Each of this Agreement and the other
Transaction Documents to which it is a party has been duly and validly
authorized, executed and delivered by the Depositor, all requisite
corporate action having been taken, and, assuming the due
authorization, execution and delivery hereof by the Servicer and the
Trustee, constitutes or will constitute the legal, valid and binding
agreement of the Depositor, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws
relating to or affecting creditors' rights generally and by general
equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law) and by an implied
covenant of good faith and fair dealing;
(iii) No consent, approval, authorization or order
of or registration or filing with, or notice to, any governmental
authority, court or any other third party is required for the
execution, delivery and performance of or compliance by the Depositor
with its obligations under this Agreement and the other Transaction
Documents or the consummation by the Depositor of any of the
transactions contemplated hereby or thereby other than the Necessary
Consents, each of which has been obtained and complete copies of which
have been provided to the Trustee;
(iv) None of the execution and delivery of this
Agreement and the other Transaction Documents, the consummation of the
transactions contemplated hereby or thereby, or the fulfillment of or
compliance with the terms and conditions of this Agreement, (A)
conflicts or will conflict with or results or will result in a breach
of, or constitutes or will constitute a default or results or will
result in an acceleration under (1) the certificate or bylaws of the
Depositor, or (2) of any term, condition or provision of any material
indenture, deed of trust, contract or other agreement or instrument to
which the Depositor or any of its subsidiaries is a party or by which
it or any of its subsidiaries is bound; (B) results or will result in
a violation of any law, rule, regulation, order, judgment or decree
applicable to the Depositor of any court or governmental authority
8
<PAGE> 16
having jurisdiction over the Depositor or its subsidiaries; or (C)
results in the creation or imposition of any lien, charge or
encumbrance which would have a material adverse effect upon the
Transferred Property or any documents or instruments evidencing or
securing the Transferred Property;
(v) There are no actions, suits or proceedings
before or against or investigations of, the Depositor pending, or to
the knowledge of the Depositor, threatened, before any court,
administrative agency or other tribunal, and no notice of any such
action, which, in the Depositor's reasonable judgment, might
materially and adversely affect the performance by the Depositor of
its obligations under this Agreement and the other Transaction
Documents, or the validity or enforceability of this Agreement and the
other Transaction Documents;
(vi) The Depositor is not in default with respect
to any order or decree of any court or any order, regulation or demand
of any federal, state, municipal or governmental agency that would
materially and adversely affect its performance hereunder or under the
other Transaction Documents;
(vii) The Depositor's principal place of business
and chief executive office are located at the address of Depositor set
forth in Section 14.05 hereof and, there are now no, and during the
past four months there have not been, any other locations where the
Depositor is located (as that term is used in the UCC in the state of
such location) except that, with respect to such changes occurring
after the date of this Agreement, as shall have been specifically
disclosed to the Servicer, the Certificate Insurer and the Trustee in
writing;
(viii) The Depositor's Registration Statement
relating to the Class A Certificates has been declared effective under
the Securities Act of 1933, as amended; such Registration Statement
complies as to form with all requirements of such Act. The statements
contained in the Registration Statement which describe the Depositor
or matters or activities for which the Depositor is responsible or
which are attributed to the Depositor therein are true and correct in
all material respects, and the Registration Statement does not
9
<PAGE> 17
contain any untrue statement of a material fact with respect to the
Depositor or omit to state a material fact required to be stated
therein or necessary in order to make the statements contained therein
with respect to the Depositor not misleading. To the best of the
Depositor's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact required to be stated
therein or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading;
(ix) The Depositor is solvent and will not become
insolvent after giving effect to the contemplated transactions. The
Depositor is paying its debts as they become due and will have
adequate capital to conduct its business after giving effect to the
contemplated transactions;
(x) The Depositor has no subsidiaries;
(xi) As of the Closing Date, the Depositor has
filed, or has obtained an extension of time to file, returns for, and
paid in full, all federal, State and local taxes required to be paid
by it to the extent such filings and payments were required prior to
the date of this Agreement except as disclosed prior to the Closing
Date to the Certificate Insurer to the extent being contested in good
faith and as to which adequate reserves have been maintained in
accordance with GAAP;
(xii) The legal name of the Depositor is as set
forth in the signature line of this Agreement and the Depositor has
not changed its name since its incorporation and since its
incorporation the Depositor did not use, nor does the Depositor now
use any trade names, fictitious names, assumed names or "doing
business as" names except that, with respect to such changes occurring
after the date of this Agreement, as shall have been specifically
disclosed to the Servicer, the Back-up Servicer, the Trustee and the
Certificate Insurer in writing; and
(xiii) This Agreement constitutes a valid
assignment, transfer and conveyance to the Trust of all right, title
and interest of the Depositor in, to and under the Transferred
Property.
(b) The Depositor represents and warrants with respect
to the Leases as of the applicable Cut- Off Date as follows:
(i) Each Lease is for the Equipment identified
therein and no Equipment (other than Vehicles) is of a type which
requires issuance of a certificate of title to evidence ownership
thereof or a security interest therein.
10
<PAGE> 18
(ii) The information with respect to each Lease
and the Equipment subject to each Lease in the List of Leases is true
and correct and the computer tape from which the selection of the
Leases was made, was made available to the Underwriter by First Sierra
prior to the Closing Date and was complete and accurate as of its date
and includes a description of the same Leases that are described in
the List of Leases.
(iii) No provision of any Lease has been waived,
altered or modified in any respect, except by instrument or documents
contained in its Lease File and identified by the Depositor and no
modification or amendment of any Lease would individually or in the
aggregate materially and adversely affect the Depositor or the
Trustee's rights thereunder or has reduced the amount of any Scheduled
Payment or the aggregate amount of Scheduled Payments owing thereunder
or extended the expiration date thereof.
(iv) Each Lease is a valid and binding payment
obligation of the related Lessee and is enforceable in accordance with
its terms (except as may be limited by applicable insolvency,
bankruptcy, moratorium, reorganization, or other similar laws
affecting enforceability of creditors' rights generally and the
availability of equitable remedies) and is in full force and effect.
(v) Each Lease contains a "hell or high water"
clause under which the Lessee's obligations are non-cancelable and
unconditional and not subject to any right of set-off, defense,
abatement, counterclaim, reduction or recoupment; no Lease is or will
be subject to rights of rescission, set-off, counterclaim or defense,
and each Lease provides for acceleration of the Scheduled Payments
upon default by the Lessee.
(vi) The Leases do not violate the laws of any
applicable state or of the United States, including, without
limitation, usury, truth-in-lending and equal credit opportunities
laws applicable to such Lease.
(vii) Each Lease is net to the lessor of any
maintenance, taxes, insurance or other expenses and each Lease
contains provisions requiring the Lessee to maintain the Equipment, at
its sole expense, at all times during the term of the Lease, in good
operating order, repair, condition and appearance, and protect the
Equipment from deterioration (except for normal wear and tear) and
maintain an Insurance Policy with respect to the Equipment in an
amount at least equal to the replacement value thereof (and to the
extent such
11
<PAGE> 19
Equipment had an original cost in excess of $35,000, a copy of such
Insurance Policy shall be included in the Lease File delivered to the
Trustee), and upon the occurrence of a casualty, to pay any difference
between the proceeds of such insurance and the implicit principal
balance of such Lease and to pay all sales, rental, property or
similar taxes or fees, fines and penalties with respect to the
Equipment and to assume all risk of loss or malfunction of the related
Equipment.
(viii) As of the Closing Date (or as of the related
Conveyance Date, Addition Date or Transfer Date), all action shall
have been taken by the Depositor to convey all of its right, title and
interest in and to the Leases and the related Equipment to the
Trustee.
(ix) Any party executing a Lease on behalf of
First Sierra had the legal capacity and authority to execute such
Leases and, to the Depositor's knowledge, all other parties to the
Lease had the legal capacity to execute such Lease.
(x) The right, title and interest of the
Depositor in and to each Lease and the related Equipment (or any other
property conveyed by the Depositor pursuant to this Agreement) have
not been sold, transferred, assigned or pledged by the Depositor to
any other Person (or any such pledge has been released as evidenced by
releases of collateral) and at the time of the conveyance of such
Lease to the Trustee the Depositor was the sole owner of such Lease
and the rights thereunder in and to the related Equipment and had good
and marketable title to each Lease and had the power to convey such
Lease and assign its interest in the related Equipment free and clear
of any Liens.
(xi) No Lease provides for the substitution,
addition or exchange of any item of Equipment which would result in
any reduction of payments due under such Lease.
(xii) There is not more than one counterpart of
each Lease that constitutes "chattel paper" for purposes of Section
9-105(1)(b) and 9-308 of the UCC and such counterpart shall be
delivered to the Trustee on the respective Conveyance Date.
(xiii) The Depositor has duly fulfilled all material
obligations on its part to be fulfilled under or in connection with
each Lease, including, without limitation, giving any notices or
consents necessary to effect the contribution, assignment, transfer,
and conveyance of the Lease from the Depositor to the Trustee and has
done nothing to materially impair the rights of
12
<PAGE> 20
the Trustee, the Trust, the Certificateholders, or the Certificate
Insurer in such Lease or the proceeds with respect thereto.
(xiv) No Lease has been amended after the Cut-Off
Date such that the amount of any Scheduled Payment (or the aggregate
Scheduled Payments) has been reduced or the expiration date thereof
has been extended.
(xv) No proceedings or, to the best of the
Depositor's knowledge, investigations, are pending, or have been
threatened asserting the invalidity of any Lease, or seeking any
determination or ruling that might adversely and materially affect the
validity or enforceability of any Lease.
(xvi) All filings (including UCC filings) necessary
to evidence the conveyance of the Leases to the Trustee and to perfect
the first perfected priority security interest of the Trustee in the
Leases and related Equipment (in accordance with the Filing
Requirements) have been made in all appropriate jurisdictions and are
in full force and effect.
(xvii) No Lessee is, to the Depositor's knowledge,
subject to bankruptcy or other insolvency proceedings.
(xviii) Each Lessee's billing address is in the
United States.
(xix) All payments under each Lease are required to
be made in United States dollars.
(xx) No Lease requires the prior written consent
of a Lessee or contains another restriction relating to the transfer
or assignment of such Lease (except such as have been obtained).
(xxi) No Lease permits the prepayment thereof at
the option of the Lessee for an amount that is less than the
Prepayment Amount related to such Lease from time to time.
(xxii) No Lease is the subject of litigation or has
been referred to counsel, and the Depositor has no knowledge of any
challenge or dispute by any Lessee under any Lease.
(xxiii) With respect to each Lease for which the
Depositor collects maintenance payments, the Depositor remits such
maintenance payments to the related maintenance providers.
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(xxiv) No Lease is a "consumer lease" as defined in
Article 2A of the UCC or a "consumer credit contract" subject to the
FTC Rule (16 C.F.R., Part 433).
(xxv) Each Lease was originated after October 31,
1994, and will commence no later than March 1, 1997, and no Lease had
a final payment date later than May 1, 2004.
(xxvi) No Lessee is a government or municipality and
no Lessee is an affiliate of the Depositor.
(xxvii) Each Lease is either a lease "intended as
security" within the meaning of UCC Section 1-201(37) or a "lease"
within the meaning of UCC Section 2A-103(1)(j).
(xxviii) As of the Cut-Off Date each Lease provides
for monthly, quarterly or annual Scheduled Payments; no Lease has more
than 10% of its total Scheduled Payments due on its final Scheduled
Payment date; the weighted average life of the remaining Scheduled
Payments comprising the Aggregate Discounted Contract Principal
Balance does not exceed 28 months as of the Closing Date and the
weighted average life of the remaining Scheduled Payments will not
exceed 28 months as of any Addition Date.
(xxix) In the event of a Casualty Loss, the Source
may require the Lessee, at the Lessee's expense, to (a) replace the
Equipment with like equipment in good repair, acceptable to the
Source; or (b) pay the Discounted Contract Principal Balance and the
booked residual value of the Equipment.
(xxx) No Lease permits the Lessee to utilize any
Security Deposit to offset any Scheduled Payment.
(xxxi) Any guarantees required at the time of
origination of a Lease remain in full force and effect.
(xxxii) No Lease was originated by First Sierra
Graphics.
(xxxiii) Each Lessee, Lease and Source meet First
Sierra's Credit and Collections Policies and Procedures and no Lease
was selected on any adverse basis which would have any material effect
on the Certificateholders or the Certificate Insurer.
(xxxiv) Each Source has entered into a valid sale and
assignment of each Lease originated by such Source to First Sierra.
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(xxxv) No one Source (including its affiliates) has
originated more than 20% of all Leases except consented to by the
Certificate Insurer.
(xxxvi) Each Lease agreement conforms, in all
material respects, to one of the forms of leases contained in Exhibit
B hereto.
(xxxvii) Each Source has agreed pursuant to its Source
Agreement that the reserves established under each Source Agreement
may be utilized to satisfy a default under any of the Leases covered
by such Source Agreement.
(xxxviii) As of the Cut-Off Date no one Lessee
(including its Affiliates) is the Lessee under Leases for which the sum
of the Discounted Contract Principal Balances exceeds $834,418; no more
than $3,651,406 of the Aggregate Discounted Contract Principal Balance
is attributable to Leases with any 10 Lessees (including their
respective affiliates), and the average original equipment cost (based
on GAAP) of the Equipment subject to the Leases shall not exceed
$100,000.
(xxxix) The transfer, assignment and contribution to
the Trustee on behalf of the Trust of the Leases and the Depositor's
right, title and interest in and to any item of Equipment will not
violate the terms or provisions of any such Lease or any other
agreement to which the Depositor then is a party or by which it is
bound.
(xl) After giving effect to each assignment,
transfer and contribution contemplated by this Agreement, the Trustee
on behalf of the Trust will be (i) the sole owner of, and have good
and marketable title to, the related Lease and (ii) the holder of a
valid perfected first priority security interest in the related
Equipment.
(xli) At the time that any item of the Equipment is
assigned, transferred and contributed pursuant to the terms of this
Agreement, the Depositor will have no knowledge that such Equipment
has suffered any loss or damage except for such Equipment that has
been restored to its original value, ordinary wear and tear excepted.
(xlii) To the best of the Depositor's knowledge
after due inquiry, (i) there has been no default by First Sierra which
is reasonably likely to have a material adverse effect on any Lease,
(ii) no event has occurred and is continuing which with notice, the
lapse of time or both would constitute a default under any Lease and
(iii) First Sierra has not waived any of the foregoing.
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(xliii) As of the time of each assignment, transfer
and contribution pursuant to the terms hereof (and based upon the
Aggregate Discounted Contract Principal Balance of the Leases as of
the Cut-off Date), (i) the sum of the Aggregate Discounted Contract
Principal Balance of all Leases in any one state will not exceed 14%
of the Aggregate Discounted Contract Principal Balance of all Leases
except for California which will not exceed 25%, (ii) no Leases permit
early termination for an amount less than the Prepayment Amount and
(iii) the maximum collateral value of any Additional Lease purchased
pursuant to a subsequent funding will not exceed the lesser of (a)
1.1% of the Aggregate Discounted Contract Principal Balance and (b)
$813,000.
(xliv) As of the applicable Cut-Off Date, no Lessee
will have been released, in whole or in part, from any of its
obligations in respect of any such Lease; no such Lease will have been
satisfied, canceled, extended or subordinated, in whole or in part, or
rescinded, and no Equipment covered by any such Lease will have been
released from such Lease, in whole or in part, nor will any instrument
have been executed that would effect any such satisfaction, release,
cancellation, subordination or rescission.
(xlv) No Lease has been originated in or be subject
to the laws of any jurisdiction whose laws would make the assignment
and transfer thereof pursuant to the terms hereof or any transaction
contemplated by the Transaction Documents unlawful.
(xlvi) Each Lease provides that First Sierra has no
obligation to assemble, install, test, adjust or service the Equipment
subject to a Lease.
(xlvii) As of the applicable Cut-off Date, no Lease
has a balloon payment which is more than five times the amount of the
regular Lease Payments or payments of principal and interest on such
Lease, except as has been disclosed to, and approved by, the
Certificate Insurer.
(xlviii) To the Depositor's knowledge, no item of
Equipment has been relocated from the jurisdiction set forth in the
Lease or, if the Depositor has knowledge of any such relocation, all
UCC filings necessary to continue the first priority security interest
in such Equipment have been made in a manner consistent with the
Filing Requirements.
(xlix) Each Lessee has accepted the related
Equipment and, after reasonable opportunity to inspect
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<PAGE> 24
and test, has not notified the Depositor of any defects therein.
(l) The Leases were originated or acquired by the
Depositor in the ordinary course of its business. The origination and
collection practices used by the Depositor with respect to each Lease
have been legal in all respects except where the failure to do so
would not result in a material adverse effect on the Leases.
(li) No Lease has been rewritten or extended other
than with respect to non-credit related matters (ie. change in day of
the month for payment or change due to damage to Equipment) and any
document evidencing any such change has been included in the related
Lease File.
(lii) The Aggregated Discounted Contract Principal
Balance of all Leases as of the Cut-Off Date is equal to
$72,024,443.60; and no Lease has a Discounted Contract Principal
Balance as of the Cut-Off Date of more than $318,661.
(liii) As of the Cut-off Date, no item of Equipment
has been repossessed.
(liv) Not more than 5% of the Leases (based upon
the Aggregate Discounted Contract Principal Balance as of the Cut-Off
Date) are true leases as of the Cut-Off Date.
(lv) The Depositor has the right under each Lease
to exercise appropriate remedies with respect to the related Equipment
without obtaining the consent of any third parties.
(lvi) The Depositor will cause its records to be
marked to reflect the transfer of the Leases to the Trustee on behalf
of the Trust.
(lvii) The Depositor purchased each item of
Equipment from either (A) the manufacturer or other supplier following
receipt of an invoice from such manufacturer or supplier or (B) a
Lessee following confirmation that such item of Equipment was on such
Lessee's premises.
(lviii) The sale, transfer, assignment and conveyance
contemplated by this Agreement is not subject to and will not result
in any tax, fee or governmental charge payable by the Depositor to any
federal, state or local government ("Transfer Taxes") other than
Transfer Taxes which have been or will be paid by the Depositor as
due. In the event that the Trustee receives actual
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<PAGE> 25
notice of any Transfer Taxes arising out of such transfer, assignment
and conveyance, on written demand by the Trustee, or upon the
Depositor's otherwise being given notice thereof, the Depositor shall
pay, and otherwise indemnify and hold the Trustee, and the Certificate
Insurer harmless, on an after-tax basis, from and against any and all
such Transfer Taxes (it being understood that the Certificateholders,
the Trustee, and the Certificate Insurer shall have no obligation to
pay such Transfer Taxes).
(lix) Each Lease has a remaining term of at least 2
months but not greater than 84 months. With respect to Additional
Leases, the remaining term is no greater than six months prior to the
Maturity Date and each Lease includes only the remaining noncancellable
payments purchased and funded by First Sierra.
(lx) Except with respect to Leases for which the
related Equipment is Vehicles, First Sierra has filed UCC-1 financing
statements naming the Trustee as secured party and the Equipment as
collateral with respect to all Leases for which the related Equipment
had an original cost in excess of $75,000.
(lxi) As of the related Transfer Date, the Depositor
had no actual knowledge that any Lease would not be paid in full.
(lxii) Each Additional Lease was acquired by First
Sierra from a Source pursuant to First Sierra's Private Label Program
and not more than 1% of the Aggregate Discounted Contract Principal
Balance of the Leases will result from the lease of software.
(lxiii) Not more than 3.3% of the Leases (based upon
the Aggregate Discounted Contract Principal Balance as of the Cut-Off
Date) are Leases with respect to which the related Equipment are
Vehicles.
(lxiv) With respect to each Lease for which the
related Equipment is a Vehicle, First Sierra has filed, prior to the
related Conveyance Date, an application for a Certificate of Title
naming the Trustee as lienholder with the appropriate titling office
and had provided the Trustee with a copy of such application and has
taken all steps necessary to perfect the Trustee's security interest
in such Vehicle.
(lxv) With respect to each Lease secured by a
Vehicle, the Certificate of Title for such Vehicle shows, or if a new
or replacement Certificate of Title is being applied for with respect
to such Vehicle the Certificate
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<PAGE> 26
of Title will show, the Trustee as the sole holder of a security
interest in such Vehicle.
(lxvi) As of the Closing Date, or the related
Addition or Transfer Date, there is no lien or claims against any
Vehicle securing a Lease for delinquent taxes or for work, labor or
material affecting any Vehicle.
(lxvii) In connection with any Lease secured by a
Vehicle, the related Source required the related Lessee to furnish
evidence that the related Vehicle was covered by a comprehensive and
collision insurance policy naming such Source as loss payee and
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and
collision coverage in an amount equal to the actual cash value on the
related Vehicle.
(lxviii) With respect to any Lease secured by a
Vehicle, the Lessee is in fact the primary or sole operator of the
related Vehicle.
(lxix) Each Lease constitutes an Eligible Lease.
(lxx) Each Source has agreed to cross-collateralize
any Lease sold to First Sierra with respect to defaults and reserves
established, subject to the terms of the related Source Agreement.
(lxxi) With respect to each Lease (including,
without limitation, any Additional Lease or Substitute Lease) secured
by a Vehicle, the final maturity of such Lease is not less than 30
months prior to the Maturity Date.
(lxxii) With respect to each Lease, the Lease File
for such Lease has been delivered to the Trustee on or prior to (i)
the Closing Date, with respect to the Initial Leases and (ii) the
Transfer Date, with respect to the Additional Leases and Substitute
Leases; provided, however, that with respect to Initial Lease No.
16870-1, the Lease File shall be delivered to the Trustee prior to the
Payment Date occurring in January 1997.
(c) The Depositor additionally represents and
covenants that:
(i) The Depositor shall be operated in such a
manner that it would not be substantively consolidated in the trust
estate of any other Person in the event of a bankruptcy or insolvency
of such Person and in such regard, the Depositor shall:
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<PAGE> 27
(A) not become involved in the day-to-day
management of any other Person;
(B) not permit First Sierra to become involved in
the day-to-day management of the Depositor except to the
extent provided in the Transaction Documents;
(C) not engage in transactions with any other
Person other than those activities described in Article II
hereof and matters necessarily incident thereto;
(D) maintain separate corporate records and books
of account in a separate business office from any other
Person;
(E) the financial statements and books and
records of First Sierra prepared after the Closing Date will
reflect the separate existence of the Depositor;
(F) maintain its assets separately from the
assets of any other Person (including through the maintenance
of a separate bank account);
(G) maintain separate financial statements, books
and records from any other Person;
(H) not guarantee any other Person's obligations
or advance funds to, or accept funds from, any other Person
for the payment of expenses or otherwise permit First Sierra
to guarantee any of the Depositor's obligations;
(I) conduct all business correspondence of the
Depositor and other communications in the Depositor's own
name;
(J) not act as an agent of any other Person in
any capacity except pursuant to contractual documents
indicating such capacity and only in respect of transactions
described in Article II hereof and matters necessarily
incident thereto;
(K) not fail to hold appropriate meetings of the
Board of Directors at least three times per annum and
otherwise as necessary to authorize all corporate action;
(L) not fail to hold meetings of the stockholders
at least one time per annum;
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(M) not form, or cause to be formed, any
subsidiaries;
(N) not act as an agent of First Sierra nor
permit First Sierra to act as its agent except to the limited
extent permitted under the Transaction Documents;
(O) maintain two independent directors at all
times; and
(P) maintain a separate office from First Sierra;
and
(Q) not engage in intercorporate transactions
except to the extent permitted under the Transaction Documents
or as contemplated in the Registration Statement or Article
III of its Certificate of Incorporation; and
(ii) The Depositor's Certificate of Incorporation
limits the Depositor's activities to (A) the purchasing and lending
against interests in pools of trade, account, consumer and lease
receivables, loans and other obligations representing part or all of
the sales price of merchandise, insurance or services or the
obligations due under leases, (B) issuing securities secured by such
obligations and (C) any activities incidental to the foregoing.
(d) It is understood and agreed that the
representations, warranties and covenants set forth in this Section 3.01 shall
survive delivery of the respective Lease Files to the Trustee and shall inure
to the benefit of the Trustee, the Trust, the Certificate Insurer and the
Certificateholders.
Section 3.02. Representations, Warranties and Covenants of the
Servicer. The Servicer hereby makes the following representations, warranties
and covenants to the Trustee, the Trust, the Back-up Servicer, the Certificate
Insurer and the Certificateholders on which the Trustee relies in accepting the
Initial Transferred Property in trust and authenticating the Certificates, on
which the Certificate Insurer relies in executing and delivering the Certificate
Insurance Policy and on which the initial Certificateholders have relied in
purchasing the Certificates from the Depositor. Such representations, warranties
and covenants are made as of the Closing Date, shall be deemed to be re-affirmed
on each subsequent Transfer Date and shall survive the contribution, transfer,
and assignment of any Transferred Property to the Trustee.
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(a) The Servicer represents and warrants as to itself
and its responsibilities:
(i) Organization and Good Standing. The Servicer
is a corporation duly organized, validly existing in good standing
under the laws of the State of Delaware, has the power to own its
assets and to transact the business in which it is presently engaged,
and had at all relevant times and now has the power, authority and
legal right to service the Leases and perform its obligations
hereunder and under the other Transaction Documents to which it is a
party.
(ii) Due Qualification. The Servicer is duly
qualified to do business as a foreign corporation and is in good
standing, and has obtained all necessary licenses and approvals, in
all jurisdictions where the failure to be so qualified and in good
standing or obtain such licenses or approvals would have a material
adverse effect on the Servicer's business and operations or in which
the servicing of the Leases as required by this Agreement or the
performance of its obligations under the Transaction Documents
requires or will require such qualification, licenses or approvals.
(iii) Authorization. The Servicer has the power,
authority and legal right to execute, deliver and perform this
Agreement, and the execution, delivery and performance of this
Agreement and the other Transaction Documents have been duly
authorized by the Servicer by all necessary corporate action.
(iv) Binding Obligation. Each of this Agreement
and the other Transaction Documents to which it is a party, assuming
due authorization, execution and delivery by the Trustee and the
Depositor, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its
terms, except that (A) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws (whether
statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, whether in
a proceeding at law or in equity.
(v) No Violation. The consummation by the
Servicer of the transactions contemplated by this Agreement and the
other Transaction Documents and the fulfillment of the terms hereof
and thereof will not
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<PAGE> 30
conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice, lapse of time or both) a
default under, the charter documents or by-laws of the Servicer, or
any material indenture, agreement, mortgage, deed of trust or other
instrument to which the Servicer is a party or by which it is bound,
or result in the creation or imposition of any Lien upon any of its
material properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than
this Agreement, or violate any law or, to the best of the Servicer's
knowledge, any order, rule or regulation applicable to the Servicer of
any court or of any Federal or State regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Servicer or any of its properties.
(vi) No Proceedings. There are no proceedings or
investigations to which the Servicer, or any of the Servicer's
Affiliates, is a party pending or, to the best of the Servicer's
knowledge, threatened before any court, regulatory body, administrative
agency or other tribunal or governmental instrumentality (A) asserting
the invalidity of this Agreement or the other Transaction Documents,
the other Transaction Documents or the Certificates, (B) seeking to
prevent the issuance of the Certificates or the consummation of any of
the transactions contemplated by this Agreement or the other
Transaction Documents or (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of, this
Agreement.
(vii) Approvals. All approvals, authorizations,
consents, orders or other actions of any Person or court required on
the part of the Servicer in connection with the execution and delivery
of this Agreement and the other Transaction Documents to which it is a
party have been or will be taken or obtained on or prior to the
Closing Date.
(viii) Servicer Default. No Event of Servicing
Termination has occurred and no condition exists, which, upon the
issuance of the Certificates would constitute an Event of Servicing
Termination or a default or event of default under any Transaction
Document.
(b) The Servicer additionally covenants as follows as
to the Transferred Property:
(i) Lease Management System. First Sierra as
Servicer of the Leases will, at its own cost and expense, (A) retain
the Lease Management System, or an alternative
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<PAGE> 31
system of equal capability, used by the Servicer as a master record of
the Leases and all Lease Files (except the original executed contract
for each Lease) which shall be delivered to the Trustee and (ii) mark
the Lease Management System and the secured party's original of each
Lease, or other physical records of the Leases to the effect that the
Leases listed thereon have been transferred to the Depositor pursuant
to the Sale Agreement and conveyed by the Depositor to the Trustee on
behalf of the Certificateholders and the Certificate Insurer pursuant
hereto.
(ii) Compliance with Law. The Servicer will
comply, in all material respects, with all acts, rules, regulations,
orders, decrees and directions of any Governmental Authority
applicable to the Leases and the Equipment or any part thereof;
provided, however, that the Servicer may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not
materially and adversely affect the rights of the Certificateholders
in the Leases and the Equipment; provided, however, that such contests
shall be in good faith by appropriate proceedings and as to which
adequate reserves in accordance with GAAP have been established, but
only so long as such proceedings shall not individually or in the
aggregate subject the Certificate Insurer or the Trustee to any civil
or criminal liability or involve any risk of loss of any collateral.
(iii) Preservation of Security Interest. The
Servicer shall execute and file such continuation statements and any
other documents requested by the Trustee or which may be required by
law to fully preserve and protect the interest of the Trustee on
behalf of the Trust in and to the Transferred Property.
(iv) Obligations with Respect to Leases. The
Servicer will use commercially reasonable best efforts to duly fulfill
and comply, in all material respects, with all obligations on the part
of the "lessor" to be fulfilled under or in connection with each Lease
and Servicer will do nothing to impair the rights of the Trustee in
the Leases and the Equipment. The Servicer will use such efforts and
will not change or modify the Leases, except insofar as any change or
failure so to comply or conform would not materially and adversely
affect the rights of the Trust, the Trustee or the Certificateholders;
provided, however, that any successor Servicer will be obligated to
use commercially reasonable best efforts to fulfill and comply with
the obligations on the part of the "lessor" under each Lease only to
the extent that any out-of-pocket costs associated with such
compliance or fulfillment are reimbursed.
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(v) Notification. The Servicer agrees to notify
the Depositor, the Certificate Insurer and the Trustee as soon as
practicable, but in no event later than two (2) Business Days, upon a
breach of any representation or warranty contained herein, or upon the
failure of the Servicer to perform its duties hereunder.
(vi) Lien in Force. The Servicer shall not release
or assign any Lien in favor of the Trustee on any item of Equipment
related to any Lease in whole or in part, except as provided herein.
The Servicer shall use its best efforts to remove, or to cause the
related Lessee to remove, any Liens on the Trust Estate other than the
Lien created hereby.
(vii) Fulfill Obligations. The Servicer will in all
material respects duly fulfill all obligations on the Servicer's part
to be fulfilled under or in connection with the Trust Property. The
Servicer will not amend, rescind, cancel or modify any Lease or term
or provision thereof, except as contemplated herein, and the Servicer
will not do anything that would materially impair the rights of the
Certificateholders or the Certificate Insurer in the Transferred
Property, except as contemplated herein.
(viii) Preservation of the Equipment. As more
specifically set forth in this Agreement, in performing its servicing
duties hereunder, the Servicer shall, in accordance with the Servicing
Standard, collect all payments required to be made by the Lessees
under the Leases, enforce all material rights of the Depositor under
the Leases and defend the Equipment against all Persons, claims and
demands whatsoever. The Servicer shall not assign, sell, pledge, or
exchange, or in any way encumber or otherwise dispose of the
Equipment, except as permitted under this Agreement.
(ix) Requests for Information. The Servicer shall
deliver to the Depositor, the Certificate Insurer, each
Certificateholder, the Trustee and the Back-up Servicer:
(1) Notice of Event of Servicing Termination or
Early Amortization Event. Immediately upon becoming aware of
the existence of any condition or event which constitutes an
Event of Servicing Termination or an Early Amortization Event,
or any event, which with the lapse of time would constitute an
Event of Servicing Termination or an Early Amortization Event,
a written notice describing its nature and period of existence
and, in the case of an Event of Servicing Termination,
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<PAGE> 33
which action the Servicer is taking or proposes to take with
respect thereto; and
(2) Requested Information. With reasonable
promptness, any other data and information which may be
reasonably requested from time to time, including any
information required to be made available at any time to any
prospective transferee of any Certificates in order to satisfy
the requirements of Rule 144A under the Securities Act.
(x) Delivery of Leases. Upon an Event of
Servicing Termination, the Servicer shall promptly deliver possession
of the Leases to the Trustee.
(xi) Delivery of Computer Tapes. On each
Determination Date, the Servicer shall deliver a computer tape to the
Back-up Servicer to enable the Back-up Servicer to confirm the
information contained in the Monthly Statement. Such computer tape
shall be in the format agreed to by the parties.
Section 3.03. Representations and Warranties of the Back-up
Servicer. The Back-up Servicer hereby makes the following representations and
warranties for the benefit of the Depositor, the Trustee, the Certificate
Insurer and the Certificateholders. Such representations and warranties are
made as of the Closing Date, but shall survive the execution and delivery of
this Agreement.
(a) The Back-up Servicer represents and warrants as to
itself and its responsibilities:
(i) Organization and Good Standing. The Back-up
Servicer is a banking corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has the
power, authority and legal right to perform its obligations hereunder.
(ii) Due Qualification. The Back-up Servicer has
obtained all necessary licenses and approvals, in the State of New
York where the failure to be so qualified and in good standing or
obtain such licenses or approvals would have a material adverse effect
on the Back-up Servicer's business and operations or in which the
performance of its obligations hereunder requires or will require such
qualification, licenses or approvals.
(iii) Authorization. The Back-up Servicer has the
power, authority and legal right to execute, deliver and perform this
Agreement, and the execution, delivery and performance of this
Agreement has been duly
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<PAGE> 34
authorized by the Back-up Servicer by all necessary corporate action.
(iv) Binding Obligation. This Agreement, assuming
due authorization, execution and delivery by the Depositor,
constitutes a legal, valid and binding obligation of the Back-up
Servicer, enforceable against the Back-up Servicer in accordance with
its terms, except that (A) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws (whether statutory, regulatory or decisional) now or hereafter in
effect relating to creditors' rights generally and (B) the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought, whether in a proceeding at law or in equity.
(v) No Violation. The consummation by the Back-up
Servicer of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof will not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice, lapse of time or both) a default under, the charter
documents or by-laws of the Back-up Servicer.
(vi) No Proceedings. To the actual knowledge of a
Responsible Officer, there are no proceedings or investigations to
which the Back-up Servicer, or any of the Back-up Servicer's
Affiliates, is a party pending or, to the best of such Responsible
Officer's knowledge, threatened before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
(A) asserting the invalidity of this Agreement or the Certificates, (B)
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement or (C)
seeking any determination or ruling that might materially and adversely
affect the performance by the Back-up Servicer of its obligations
under, or the validity or enforceability of, this Agreement.
(vii) Approvals. All approvals, authorizations,
consents, orders or other actions of any Person or court required on
the part of the Back-up Servicer in connection with the execution and
delivery of this Agreement in the State of New York have been or will
be taken or obtained on or prior to the Closing Date.
(viii) Back-up Servicer Default. No Event of Back-up
Servicing Termination has occurred and no condition exists, which,
upon the issuance of the
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Certificates would constitute an Event of Back-up Servicing
Termination.
ARTICLE IV.
PERFECTION OF TRANSFER
Section 4.01. Filing; Custody of Lease Files. (a) On the
Closing Date with respect to the Initial Transferred Property and on the related
Transfer Date with respect to the New Transferred Property, the Servicer shall
submit the Financing Statements for filing in the respective filing offices
named therein. From time to time thereafter, the Servicer shall take or cause to
be taken such actions and execute such documents as are necessary to perfect and
protect the Trust's, the Trustee's, the Certificateholders' and the Certificate
Insurer's interests in the Transferred Property against all other Persons,
including, without limitation, the filing of financing statements, amendments
thereto and continuation statements, the execution of transfer instruments and
the making of notations on or taking possession of all records or documents of
title.
(b) (i) The Trustee on behalf of the Trust hereby
acknowledges the transfer of the Transferred Property by the Depositor hereunder
and declares that the Trustee, will hold such Transferred Property, including
the Lease Files, in trust, for the use and benefit of all Certificateholders and
the Certificate Insurer subject to the terms and provisions hereof.
(ii) The Servicer shall hold and acknowledges that
it is holding the Lease Files and all other Transferred Property that it may
from time to time receive hereunder as custodian for the Trustee.
(iii) To the extent the Servicer, as agent of the
Trustee and the Trust holds any Lease File or other Transferred Property it
shall do so in accordance with the Servicing Standard as such standard applies
to servicers acting as custodial agents. The Servicer shall promptly report to
the Trustee any failure by it to hold the complete Lease Files previously
provided by the Trustee as herein provided and shall promptly take appropriate
action to remedy any such failure but only to the extent (A) any such failure
is caused by the acts or omissions of the Servicer and (B) such remedial action
is otherwise within its capabilities or control. As custodian, the Servicer
shall have and perform the following powers and duties:
(1) hold the Lease Files on behalf of the Trustee
for the benefit of the Trust, the
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Certificateholders and the Certificate Insurer, maintain
accurate records pertaining to each Lease (including any
Certificate of Title or other title documentation) to enable
it to comply with the terms and conditions of this Agreement,
and maintain a current inventory thereof;
(2) implement policies and procedures in
accordance with the Servicer's normal business practices with
respect to the handling and custody of the Lease Files and
consistent with the Servicing Standard so that the integrity
and physical possession of the Lease Files will be maintained;
and
(3) attend to all details in connection with
maintaining custody of the Lease Files on behalf of the
Trustee on behalf of the Trust.
(iv) In acting as custodian of the Lease Files
pursuant to this Article IV, the Servicer agrees further that it does not and
will not have or assert any beneficial ownership interest in the Leases or the
Lease Files. Promptly upon the Trust's acquisition thereof and the Servicer's
receipt thereof, the Servicer on behalf of the Trust shall mark conspicuously
each original contractual document with a Lessee, and its Lease Management
System with a legend evidencing that the Trust has acquired the Leases and all
right and title thereto and interest therein as provided herein.
(v) The Servicer agrees to maintain the related
Lease Files at its office located in Houston, Texas or at such other offices of
the Servicer as shall from time to time be identified by prior written notice
to the Trustee. Subject to the foregoing, the Servicer may temporarily move
individual Lease Files or any portion thereof without notice as necessary to
conduct collection and other servicing activities in accordance with the
Servicing Standard.
Section 4.02. Name Change or Relocation. If any change in the
Depositor's name, identity, structure or the location of its principal place of
business or chief executive office occurs, then the Depositor shall deliver
thirty (30) days' prior written notice of such change or relocation to the
Servicer and the Trustee. No later than five days after the effective date of
such change or relocation, the Depositor shall file such amendments or
statements as may be required to preserve and protect the Trust's, the
Certificateholders' and the Certificate Insurer's interests in the Transferred
Property and deliver copies thereof to the Trustee.
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Section 4.03. Chief Executive Offices. During the term of this
Agreement, the Depositor will maintain its chief executive office and principal
places of business in one of the States of the United States.
Section 4.04. Costs and Expenses. The Servicer agrees to pay
all reasonable costs and disbursements in connection with the perfection and
the maintenance of perfection, as against all third parties, of the Trust's,
the Certificateholders' and the Certificate Insurer's right, title and interest
in and to the Trust Property (other than the Equipment). The Servicer agrees to
pay all taxes (other than net income taxes or taxes imposed in lieu thereof),
if any, owed in connection with ownership of the Equipment, together with all
taxes required by the terms of the Leases to be paid by the Servicer on behalf
of the related Lessees.
ARTICLE V.
ADMINISTRATION AND SERVICING
OF LEASES
Section 5.01. Acceptance of Appointment; Duties of Servicer.
(a) The Servicer shall service, administer and enforce the Leases as Servicer
and shall have full power and authority to do any and all things in connection
with such servicing and administration which it may deem necessary or desirable
in accordance with this Agreement. The Servicer will manage, service,
administer, and make collections on the Leases in accordance with the terms of
this Agreement, the Leases, the Credit and Collection Policies and applicable
law and, to the extent consistent with such terms, in the same manner in which,
and with the same care, skill, prudence and diligence with which, it services
and administers leases of similar credit quality for itself or others, if any,
giving due consideration to customary and usual standards of practice of prudent
institutional small ticket equipment finance lease servicers and, in each case,
taking into account its other obligations hereunder (the "Servicing Standard").
Notwithstanding the prior sentence, the Servicer shall, not later than five
Business Days after the related Closing Date, Addition Date or Transfer Date, as
the case may be, direct each Lessee to make all payments with respect to the
respective Leases which are due after the related Cut-Off Date directly to the
Lockbox Account. The Servicer's duties shall include collection and posting of
all payments, responding to inquiries of Lessees on the Leases, investigating
delinquencies, accounting for Collections and furnishing monthly, quarterly and
annual statements as provided herein, making Servicer Advances and using
commercially reasonable best efforts to maintain the perfected security interest
of the Trust in the Transferred Property and to maintain the
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first priority perfected security interest of the Trustee on behalf of the
Trust, for the benefit of the Certificateholders and the Certificate Insurer,
in the Depositor's interest in the Equipment, including, but not limited to,
the filing of any financing or continuation statements required to be filed
pursuant to the Uniform Commercial Code, which continuation statements shall be
filed on or before the 60th day prior to the expiration date of such financing
statement; and promptly delivering evidence of all such filings to the Trustee
and the Certificate Insurer which evidence shall be satisfactory in form and
substance to the Trustee and the Certificate Insurer, with evidence of the
filing of continuation statements being delivered on or before the 30th day
before the expiration of such financing statements. The Servicer shall follow
its customary standards, policies, and procedures as set forth in its Credit
and Collection Policies and Procedures and shall have full power and authority,
acting alone, to do any and all things in connection with such managing,
servicing, administration, and collection that it may deem necessary or
desirable; provided, however, that the Servicer shall not allow any optional
termination of any Lease prior to its scheduled expiration unless the Lessee
shall have paid an amount not less than the sum of (i) the Discounted Contract
Principal Balance and (ii) one-twelfth of the product of (A) the Discounted
Contract Principal Balance (as of the date of such optional termination) and
(B) the Discount Rate. If the Servicer commences a legal proceeding to enforce
a Defaulted Lease pursuant to Section 5.04 hereof or participates in a legal
proceeding (including, without limitation, a bankruptcy proceeding relating to
or involving a Lease or Defaulted Lease), the Trustee shall thereupon be deemed
to have automatically assigned such Lease to the Servicer for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Trustee, pursuant to this
Section 5.01, to execute and deliver, on behalf of itself or the Trustee, any
and all instruments of satisfaction or cancellation, or partial or full release
or discharge, and all other notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceedings. The Trustee shall furnish the Servicer, and the Servicer shall
furnish any subservicer, with any powers of attorney and other documents
necessary or appropriate to enable the Servicer or a subservicer, as
applicable, to carry out its servicing and administrative duties under the
Agreement. If in any enforcement suit or legal proceeding it shall be held that
the Servicer may not enforce a Lease on the ground that it shall not be a real
party in interest or a holder entitled to enforce the Lease, the Depositor
shall, at the Servicer's expense and direction, take steps to enforce the
Lease, including bringing suit in its name or the name of the Trustee (prior
written notice of which shall be given to the Trustee).
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(b) Consent to Assignment or Replacement. At the
request of a Lessee, the Servicer may in its sole discretion, consent to the
assignment or sublease of a unit of the Equipment under a Lease provided that
the Lessee will remain liable for all of its obligations under such Lease;
provided, however, that such assignee or sublessee must satisfy the credit
criteria set forth in the Credit and Collection Policies. Upon the request of
any Lessee, the Servicer may, in its sole discretion, provide for additions and
upgrades to a Lease, and the substitution or replacement of any unit of
Equipment for a substantially similar unit of additional equipment having
substantially the same fair market value as the unit of Equipment that will be
replaced or substituted.
(c) Maintenance of Credit Files. The Servicer (i) shall
maintain the Credit Files in a manner consistent with the Servicing Standard and
the performance of its obligations as Servicer pursuant to the Agreement and
will not dispose of any documents constituting the Lease Files in any manner
which is inconsistent with the performance of its obligations as the Servicer
pursuant to this Agreement, (ii) legend all original lease documentation with a
notation indicating the Trustee's security interest and (iii) will not permit
any person other than the Trustee to maintain possession of, or any lien upon,
any Lease File (other than Lease Files which relate solely to an Early
Termination Lease, an Expired Lease or a Repurchased Lease and, to the extent
applicable, the related Equipment).
(d) Subservicers. The Servicer may enter into servicing
agreements with one or more subservicers acceptable to the Certificate Insurer
to perform all or a portion of the servicing functions on behalf of the
Servicer; provided that the Servicer will remain obligated and be liable to the
Trustee and the Trust for servicing and administering the Leases in accordance
with the provisions of this Agreement without diminution of such obligation and
liability by virtue of the appointment of such subservicer, to the same extent
and under the same terms and conditions as if the Servicer alone were servicing
and administering the Leases. The fees and expenses of the subservicer (if any)
will be as agreed between the Servicer and its subservicer and neither the
Trustee, the Trust, the Certificateholders nor the Certificate Insurer will have
any responsibility therefor. All actions of a subservicer taken pursuant to such
a subservicer agreement will be taken as an agent of the Servicer with the same
force and effect as though performed by the Servicer.
(e) Further Assurances. The Trustee will furnish the
Servicer, and the Servicer will furnish any subservicer, with any powers of
attorney and other documents necessary or appropriate to enable the Servicer or
a subservicer, as
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applicable, to carry out its servicing and administrative duties under this
Agreement.
(f) Notice to Lessees. The Servicer shall be required
to notify such Lessee in accordance with Section 5.01(a) hereof to make its
payments to the Lockbox Account; provided, however, that in the event that any
Servicer resigns or is replaced, then if the place for payment pursuant to any
Lease is changed, the Successor Servicer must give each related Lessee prompt
written notice of the appointment of the Successor Servicer the place to which
such Lessee should make payments pursuant to each such Lease.
Section 5.02. Collection of Payments.
(a) The Servicer shall use its best efforts to collect
all payments called for under the terms and provisions of the Leases as and
when the same shall become due, and shall follow such collection procedures as
it follows with respect to all comparable equipment leases that it services for
itself or others in a manner consistent with the Servicing Standard. The
Servicer may in its reasonable discretion waive any prepayment charge, late
payment charge, or any other fees that may be collected in the ordinary course
of servicing a Lease; if in the Servicer's reasonable and prudent determination
such waiver, is not materially adverse to the Certificateholders or the
Certificate Insurer.
(b) Notwithstanding the terms of a Lease, the Servicer
may in its discretion (if in the Servicer's reasonable determination, such
action is not materially adverse to the Certificateholders and the Certificate
Insurer) allow full Prepayments of a Lease by or on behalf of the Lessee. Any
Prepayments shall be in an amount no less than the Prepayment Amount with
respect to the prepaid Lease. All Prepayments shall be deposited in the
Collection Account.
(c) To the extent provided for in any Lease, the
Servicer shall make all reasonable efforts to collect all payments with respect
to amounts due for maintenance, taxes or assessments on the Equipment or the
Leases and shall remit such amounts to the appropriate maintenance provider,
governmental entity on or prior to the date such payments are due.
(d) The Servicer shall withdraw from the Lockbox
Account all Excluded Amounts (which shall be deposited in the Servicer
Account), and shall deposit or cause the Lockbox Bank to deposit all
Collections received in the Lockbox Account on an as collected basis (other
than Advance Payments which will be retained in the Lockbox Account as provided
in the immediately following sentence) by wire transfer into the Collection
Account no later than the second Business Day
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following the date of receipt of such Collections in the Lockbox Account or
otherwise by the Servicer. The Servicer shall retain all Advance Payments
(except to the extent that such Advance Payment relates to a Scheduled Payment
for which has been invoiced by the Servicer) in the Lockbox Account until the
last day of the Collection Period in which such Advance Payment or portion
thereof is due in accordance with the provisions of the related Lease. The
Servicer shall deposit on the Closing Date into the Collection Account all
Collections received during the period from the applicable Cut-Off Date through
the Closing Date or Addition Date, as the case may be.
(e) Based upon the amounts set forth on the Monthly
Statement, the Servicer shall cause the distribution of Available Funds in the
Collection Account according to the priority set forth in Section 6.06 hereof.
(f) On any date on or after a Covered Lease terminates
in accordance with its terms, then so long as all amounts owing by the Lessee
under such Lease have been paid in full and no default is then continuing with
respect to such Covered Lease, the Servicer shall cause the withdrawal of any
Security Deposit then on deposit in the Security Deposit Account with respect
to such terminated Lease and forward such amounts to the related Lessee.
(g) In the event that Servicer acquires title to any
item of Equipment in the enforcement of any lease, the Servicer shall use its
best efforts to sell or otherwise dispose promptly of such item of Equipment,
consistent with the Servicing Standard. The Servicer shall not lease, operate
or otherwise manage any such items of Equipment unless prior thereto, the
Servicer remits the related Prepayment Amount with respect to such Lease.
(h) Any payments received from a Lease will be
allocated first to any sales or use taxes due or payable to any taxing
authority, second to any Payments due on the related Lease (allocating such
payments in the order that Payments become due), and third to all other amounts
then payable under the Lease.
(i) The Servicer may not allow an offset of the amount
of any Security Deposit against any Payment under such Lease.
(j) The Servicer, pursuant to the Lock-Box Agreement,
shall establish the Lock-Box Account, for the benefit of the Trustee. The
Lock-Box Account shall be a segregated account, initially established and
maintained with the Lock-Box Bank. The Servicer shall not change the Lock-Box
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Account or the Lock-Box Bank without the prior written consent of the Trustee
and the Certificate Insurer.
Section 5.03. Servicer Advances. If on any Determination Date
occurring prior to the repayment in full of the Certificates, the Servicer
determines that any Scheduled Payments due on the Leases with respect to the
related Collection Period have not been received by such Calculation Date, the
Servicer, to the extent that in its reasonable discretion it determines that it
can recoup such Servicer Advance from subsequent collections or recoveries
under the related Lease, will make a Servicer Advance up to an amount equal to
the amount of such delinquent Scheduled Payments not received by such
Determination Date. The Servicer shall deposit any Servicer Advances into the
Collection Account on or prior to 10:00 a.m. (New York time) on such
Determination Date in next day funds. On each Determination Date, the Servicer
shall deliver to the Trustee, the Certificate Insurer and the Rating Agencies
the Servicer Report listing the aggregate amount of Scheduled Payments not
received for the immediate prior Collection Period as of the related
Determination Date which it has determined in its sole discretion and in
accordance with its customary servicing practices is likely to be recoverable
from the related Lessees. The Servicer shall be reimbursed for any outstanding
Servicer Advance pursuant to Article VI hereof from Collections on all Leases
or amounts on deposit in the Collection Account on any Payment Date.
Section 5.04. Realization Upon Defaulted Leases. (a) The
Servicer shall use commercially reasonable best efforts consistent with the
Servicing Standard and its customary servicing procedures, to repossess or
otherwise comparably convert the ownership of any Equipment that it has
reasonably determined should be repossessed or otherwise converted following a
default under the Lease remarket, either through sale or release, the Equipment
upon the expiration of the term of the related Lease and act as sales and
processing agent for Equipment which it repossesses. The Servicer shall follow
such practices and procedures as are consistent with the Servicing Standard and
as it shall deem necessary or advisable and as shall be customary and usual in
its servicing of equipment leases and other actions by the Servicer in order to
realize upon such a Lease, which may include reasonable efforts to enforce any
recourse obligations of Lessees and repossessing and selling the Equipment at
public or private sale. The foregoing is subject to the provision that, in any
case in which the Equipment shall have suffered damage, the Servicer shall not
be required to expend funds in connection with any repair or towards the
repossession of such Equipment unless it shall determine in its discretion that
such repair and/or repossession will increase the Liquidation Proceeds by an
amount greater than the amount of such expenses.
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(b) Notwithstanding the foregoing, the Servicer shall
take action to (i) enforce the obligations of the related Source and/or (ii)
accelerate all amounts due under any Lease immediately after such Lease becomes
a Defaulted Lease and shall, within 30 days of the declaration of default and
acceleration of any Lease, bring an action against the Source under the Source
Agreement or the Lessee for all amounts due under the Lease and, to the extent
applicable institute proceedings to repossess and sell or re-lease the
Equipment.
The Servicer shall remit to the Collection Account all
Liquidation Proceeds received in connection with the sale or disposition of a
Defaulted Lease to the extent such Liquidation Proceeds do not constitute
Excluded Amounts.
Section 5.05. Maintenance of Insurance Policies. In connection
with its activities as Servicer of the Leases, the Servicer agrees to present,
on behalf of itself, the Trustee, the Trust and the Certificateholders and the
Certificate Insurer claims to the insurer under each Insurance Policy, and to
settle, adjust and compromise such claims, in each case, consistent with the
terms of each Lease.
Section 5.06. Servicing Compensation; Payment of Certain
Expenses by Servicer. As compensation for its activities, the Servicer shall be
entitled to receive the Servicer Fee and any Servicing Charges. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities hereunder, including, without limitation, (a) fees and disbursements
of the Independent Public Accountants, taxes imposed on the Servicer or the
Trust (but excluding any sales taxes or other taxes imposed on any Lessee, the
Depositor, First Sierra, the Trustee, any Certificateholder, or any other
Person), (b) expenses incurred in connection with distributions and reports to
Certificateholders and the Certificate Insurer and (c) all other fees and
expenses not expressly stated hereunder to be for the account of the
Certificateholders or the Certificate Insurer. The Servicer shall be reimbursed
for any and all such amounts pursuant to Section 6.06(b)(iii) or 6.06(c)(iii)
hereof, by the Trustee on behalf of the Holder of the Trust Certificate.
Section 5.07. Monthly Statement; Annual Report. (a)Monthly
Statement. With respect to each Payment Date and the related Collection Period,
the Servicer will provide to the Trustee, the Certificate Insurer, the Rating
Agencies, the Clearing Agency and each Certificateholder, not less than three
Business Days prior to such Payment Date, a monthly statement (a "Monthly
Statement"), signed by a Responsible Officer of the Servicer and substantially
in the form of Exhibit C; provided, that such monthly statement shall only be
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provided to each Class B Certificateholder evidencing, in the aggregate, not
less than 25% of the unpaid principal amount of the Class B Certificates.
(b) Annual Statement. The Servicer will provide to the
Trustee, the Certificateholder, the Certificate Insurer, the Rating Agencies
and each Class B Certificateholder evidencing, in the aggregate, not less than
25% of the unpaid principal amount of the Class B Certificates, on or prior to
March 31 of each year, commencing March 31, 1997, a cumulative summary of the
information required to be included in the Monthly Statements for the
Collection Periods ending during the immediately preceding calendar year.
Section 5.08. Quarterly Certificate as to Compliance. The
Servicer will provide to the Trustee, the Certificateholder, the Certificate
Insurer, the Rating Agencies and each Class B Certificateholder evidencing, in
the aggregate, not less than 25% of the unpaid principal amount of the Class B
Certificates, no later than 30 days following the end of each fiscal quarter,
an Officer's Certificate stating that (a) a review of the activities of the
Servicer, and the Servicer's performance pursuant to this Agreement, for the
period ending on the last day of the immediately preceding fiscal quarter has
been made under such Person's supervision and (b) to the best of such Person's
knowledge, based on such review, the Servicer has performed or has caused to be
performed in all material respects all of its obligations under this Agreement
throughout such period and no Servicer Default has occurred and is continuing
(or, if a Servicer Default has so occurred and is continuing, specifying each
such event, the nature and status thereof and the steps necessary to remedy
such event, and, if a Servicer Default occurred during such fiscal quarter and
no notice thereof has been given to the Trustee and the Certificate Insurer,
specifying such Servicer Default and the steps taken to remedy such event).
Section 5.09. Annual Independent Public Accountant's Servicing
Reports. The Servicer will cause an Independent Public Accountant (who may also
render other services to the Servicer) to furnish to the Trustee, the
Certificateholder, the Certificate Insurer, the Rating Agencies and each Class
B Certificateholder evidencing, in the aggregate, not less than 25% of the
unpaid principal amount of the Class B Certificates, no later than March 31 of
each year, commencing March 31, 1997, a report relating to the previous
calendar year to the effect that (a) such firm has reviewed certain documents
and records relating to the servicing of the Leases, and (b) based on such
examination, such firm is of the opinion that the Monthly Statements for such
calendar year were prepared in compliance with this Agreement, except for
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such exceptions as it believes to be immaterial and such other exceptions as
will be set forth in such firm's report.
Section 5.10. Access to Certain Documentation and Information
Regarding the Transferred Property. (a) The Servicer shall provide the Trustee
and their duly authorized representatives, attorneys or accountants access to
any and all documentation regarding the Transferred Property (including the
List of Initial Leases and the Lists of Additional Leases described in Section
6.05(a)(iv) hereof) that the Servicer may possess, such access being afforded
without charge but only upon reasonable request and during normal business
hours, so as not to interfere unreasonably with the Servicer's normal
operations or customer or employee relations, at offices of the Servicer
designated by the Servicer.
(b) At all times during the term hereof, the Servicer
shall either (i) keep available in physical form at its principal executive
office for inspection by the Trustee, any Certificateholder, the Certificate
Insurer or their duly authorized representatives, attorneys or accountants a
list of all Leases then held as a part of the Trust, together with a
reconciliation of such list to the List of Initial Leases and all Lists of
Additional Leases and each of the Monthly Statements, indicating the cumulative
removals and additions of Leases from the Trust or (ii) maintain electronic
facilities which allow such list and reconciliation to be generated.
(c) The Servicer will maintain accounts and records as
to each respective Lease serviced by the Servicer that are accurate and
sufficiently detailed as to permit (i) the reader thereof to know as of the
most recent Calculation Date the status of such Lease, including payments and
recoveries made and payments owing (and the nature of each), and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Lease and the amounts from time to time deposited in the Collection Account in
respect of such Lease.
(d) The Servicer will maintain its Lease Management
System and other computerized records so that, from and after the time of
transfer hereunder of each Lease to the Trustee, the Servicer's accounts and
records (including any back-up computer archives) that refer to any Lease
indicate clearly that the Lease is Trust Property. Indication of a Lease being
Trust Property will be deleted from or modified on the Servicer's accounts and
records when, and only when such Lease is an Early Termination Lease, an
Expired Lease or a Repurchased Lease.
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(e) Nothing in this Section 5.09 shall derogate from
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Lessees, and the failure, as a result
of such obligation of the Servicer, to provide access as provided in this
Section 5.09 shall not constitute a breach of this Section 5.09.
(f) The Trustee and the Certificateholders shall use
their respective best efforts to maintain in confidence all information which
has been described as "confidential" and obtained by any of them regarding the
Lessees and the Leases, whether upon exercise of their respective rights under
this Section 5.09 or otherwise. Notwithstanding anything herein to the
contrary, the foregoing shall not be construed to prohibit (i) disclosure of
any and all information that is or becomes publicly known, or information
obtained by the Trustee from sources other than the Servicer or the Depositor,
(ii) disclosure of any and all information (A) if required to do so by any
applicable statute, law, rule or regulation, (B) to any government agency or
regulatory body having or claiming authority to regulate or oversee any
respects of the Trustee's Business or that of its affiliates; (C) pursuant to
any subpoena, civil investigative demand or similar demand or request of any
court, regulatory authority, arbitrator or arbitration to which the Trustee or
an affiliate or an officer, director, employer or shareholder thereof is a
party, (D) in any preliminary or final offering circular, registration
statement or contract or other document pertaining to the transactions
contemplated herein approved in advance by the Servicer and the Certificate
Insurer or (E) to any affiliate, independent or internal auditor, agent,
employee or attorney of the Trustee having a need to know the same, provided
that the Trustee advises such recipient of the confidential nature of the
information being disclosed, or (iii) any other disclosure authorized by the
Servicer, the Certificate Insurer or the Depositor. No person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Servicer or any lessee, or for
any other purpose except as set forth in this Agreement.
Section 5.11. Financial Statements and Other Necessary Data.
(a) The Servicer shall provide to the Rating Agencies (i) any quarterly
unaudited financial statements of the Servicer for the then-current fiscal year
and (ii) annual audited financial statements of the Servicer for one or more of
the most recently completed five fiscal years for which such statements are
available. Such financial statements shall also be supplied to the Certificate
Insurer.
(b) The Servicer shall, on request of the Trustee, furnish the
Trustee such data necessary for the administration of the Trust as can be
generated by the Servicer's existing data processing systems; to the extent
that the Servicer's existing
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data processing systems cannot generate such data, the Servicer will cooperate
with the Trustee in finding a method of furnishing such data.
Section 5.12. Security Deposits. On the Closing Date the
Servicer shall deposit to the Security Deposit Account the aggregate amount of
Security Deposits held by it as of the Closing Date with respect to the Leases,
together with any Security Deposits received by the Servicer after the Closing
Date. The Security Deposits are held in the Security Deposit Account on behalf
of the Lessees, the Certificateholders and the Certificate Insurer, as their
interests may appear. In the event that (i) any Lessee requests that a Security
Deposit be applied as an offset against such Lessee's payment obligations or
Purchase Option Payment under a Lease or (ii) any Lease becomes a Defaulted
Lease, the Servicer shall direct the Trustee in writing, on the related
Determination Date, to withdraw from the Security Deposit Account and deposit
to the Collection Account an amount (the "Offset Amount") equal to the lesser
of (a) the amount of such Security Deposit and (b) the amount of all unpaid and
remaining Scheduled Payments, Final Lease Payments and Purchase Option Payments
not then on deposit in the Collection Account, as payment in respect of, first,
any unpaid Scheduled Payments or Final Lease Payments under the related Lease,
and second, any unpaid Purchase Option Payment under the related Lease. The
Servicer shall not permit any Lessee any offset for its Security Deposit until
the Offset Amount is deposited in the Collection Account, as required by this
Section 5.12.
In no event shall the Trust, the Depositor, the Trustee, any
Certificateholder or the Certificate Insurer be liable to any Lessee with
respect to the Security Deposits. The Servicer shall indemnify and hold
harmless the Trustee, the Certificateholders and the Certificate Insurer for
any loss, cost and expense (including legal fees and expenses incurred by such
parties in connection with the prosecution of claims made in connection
therewith) suffered as a result of the Servicer's misappropriation or
misapplication of any Security Deposit. This right of indemnification shall
survive the termination of this Agreement or the earlier resignation or removal
of the Trustee.
Section 5.13. Responsibilities of the Back-up Servicer.
(a) On or before the Closing Date until the receipt by the
Servicer of a written notice of termination from the Trustee in accordance with
Section 11.01 hereof (a "Servicer Termination Notice"), the Back-up Servicer
shall perform, on
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behalf of the Certificate Insurer, the Depositor and the Trustee, the following
duties and obligations:
(i) On or before the Closing Date, the Back-up
Servicer shall accept from the Servicer delivery of the information
required to be set forth in the Monthly Statements in hard copy and on
tape (including, without limitation, the Computer Tape); provided,
however, the Tape is in an MS-DOS, PC readable ASCII format or format
to be agreed upon by the Back-up Servicer and the Servicer prior to
closing.
(ii) Not later than 12:00 noon New York time two
(2) Business Days prior to each Determination Date, the Back-up
Servicer shall accept delivery on tape from the Servicer, the data
base with respect to the Leases used to verify the mathematical
accuracy of the Monthly Statements (the "Tape").
(iii) The Back-up Servicer shall convert the data
base received on Tape from the Servicer to the data base used by the
Back-up Servicer and validate that the data therein matches the same
received on the Tape.
(iv) Prior to the related Payment Date, the
Back-up Servicer shall review the Monthly Statement for completeness.
(v) Within thirty (30) days after each Payment
Date, beginning with the Payment Date occurring in December 1996, the
Back-up Servicer shall verify the mathematical accuracy of the related
Monthly Statement, the Back-up Servicer shall notify the Trustee, the
Certificate Insurer and the Servicer of any material inconsistencies
between the related Monthly Statement and the Tape and of any
information that is missing from such Monthly Statement and shall
confirm conformity of actual Servicer remittances to such Monthly
Statement.
(vi) If the Servicer disagrees with the
computations provided under paragraph (v) above by the Back-up Servicer
or if the Servicer or any subservicer has not reconciled such
discrepancy, the Back-up Servicer agrees to confer with the Servicer to
resolve such disagreement on or prior to the next succeeding
Determination Date and shall settle such discrepancy with the Servicer,
and notify the Trustee of the resolution thereof. Servicer hereby
agrees to cooperate, at its own expense, with the Back-up Servicer in
reconciling any discrepancies herein. If within 30 days of notice to
the Servicer, the Certificate Insurer and the Trustee, such discrepancy
is not resolved, the Back-up Servicer shall promptly notify the Trustee
and the Certificate Insurer
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of such discrepancy. Following receipt of such notice from the Trustee,
the Servicer shall deliver to the Rating Agencies, the
Certificateholders, the Certificate Insurer, the Back-up Servicer and
the Trustee no later than the related Payment Date a certificate
describing the nature and cause of such discrepancies and the actions
the Servicer proposes to take with respect thereto.
(vii) Within 30 days after the Closing Date,
Depositor will provide to Back-up Servicer the information agreed to
by the Servicer and the Back-up Servicer.
With respect to the foregoing, the Back-up Servicer, in the
performance of its duties and obligations hereunder, is entitled to rely in
good faith on the contents of each Tape, including, but not limited to, the
completeness and accuracy thereof, provided by the Servicer. The Servicer
agrees that the Back-up Servicer will have access to the Lockbox Account for
the purpose of carrying out its duties hereunder.
(b) After the receipt of an effective Servicer Termination
Notice by the Servicer in accordance with this Agreement, all authority, power,
rights and responsibilities of the Servicer, under this Agreement, whether with
respect to the Leases or otherwise shall pass to and be vested in the Back-up
Servicer as long as the Back-up Servicer is not prohibited by an applicable
provision of law from fulfilling the same, as evidenced by an Opinion of
Counsel.
Section 5.14. Back-up Servicer Compensation. (a) As
compensation for its performance under Section 5.13(a) above, the Depositor
agrees that the Back-up Servicer shall be paid the following amounts: (A) due
upon Closing Date, the sum of $6,000 and (B) as a monthly fee payable on each
Payment Date from the Collection Account, the product of (1) one-twelfth (1/12),
(2) 0.02% per annum and (3) the Aggregate Discounted Contract Principal Balance
on the first day of the immediately preceding Collection Period.
(b) As compensation for its performance under
Section 5.13(b) above, the Back-up Servicer shall be entitled to such Back-up
Servicer Fee and other amounts (whether payable out of the Collection Account
or otherwise) as the Servicer would have been entitled to under this Agreement
as if no Servicer Termination Notice has been given to the Servicer. The
Back-up Servicer shall not be entitled to receive any compensation in excess of
that which the Servicer was entitled to under this Agreement.
(c) In the event of an Event of Servicing
Termination hereunder, the Depositor shall pay to the Back-up
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Servicer a fee in an amount agreed to by the Depositor and the Back-up Servicer
for conversion to Back-up Servicer's software system.
Section 5.15. Merger or Consolidation of, or Assumption of the
Obligations of, Back-up Servicer. Any Person (a) into which the Back-up
Servicer may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Back-up Servicer shall be a party, or (c) which may
succeed to the properties and assets of the Back-up Servicer substantially as a
whole, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Back-up Servicer hereunder, shall
be the successor to the Back-up Servicer under this Agreement without further
act on the party of any of the parties to this Agreement. In the event that the
resulting entity is not acceptable to the Certificate Insurer in its reasonable
judgment, the Back-up Servicer, upon the written request of the Certificate
Insurer, shall resign from its obligations and duties under this Agreement.
Section 5.16. Back-up Servicer's Waiver of Set-off. The
Back-up Servicer, solely in its capacity as Back-up Servicer hereunder, hereby
irrevocably and unconditionally waives all right of set-off that it may have
under contract (including this Agreement), applicable law or otherwise with
respect to any funds or monies of First Sierra or the Certificate Insurer, at
any time held by or in the possession of the Back-up Servicer.
ARTICLE VI.
ACCOUNTS; ALLOCATION AND APPLICATION OF
THE TRUST FUND
Section 6.01. Collection Account. (a) The Servicer shall
establish and maintain the Collection Account with the Trustee for the benefit
of the Certificate Insurer and the Certificateholders, as their interests
appear herein, as an Eligible Bank Account, in the name of "First Sierra
Equipment Trust 1996-2 Collection Account." At the Servicer's written
direction, the Trustee shall make withdrawals from the Collection Account only
as provided in this Agreement. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Collection Account
and all proceeds thereof. The Collection Account shall be under the sole
dominion and control of the Trustee for the benefit of the Certificateholders
and the Certificate Insurer as their interests appear herein.
(b) At the times indicated in this Section 6.01(b) or
in Section 6.01(c) below, the following amounts
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(net of Excluded Amounts) shall be deposited in the Collection Account in
immediately available funds:
(i) The Servicer shall deposit or cause to be
deposited the aggregate amounts of Actual Payments;
(ii) The Servicer shall deposit the aggregate
Servicer Advances payable pursuant to Section 5.03 hereof;
(iii) The Trustee shall transfer from the Security
Deposit Account any Scheduled Payment, Final Lease Payment (or portion
thereof) or Purchase Option Payment theretofore funded by the related
Lessee through a deposit to the Security Deposit Account of a Security
Deposit;
(iv) The Servicer shall deposit any Reconveyance
Amounts payable by it under this Agreement, or by First Sierra under
the Sale Agreement;
(v) Investment Earnings, as described in Section
6.03(a);
(vi) The amount, if any, on deposit in the New
Transferred Property Funding Account shall be withdrawn therefrom on
the Initial Amortization Date and deposited in the Collection Account
in immediately available funds; and
(vii) The amount, if any, payable to the Class A
Certificateholders pursuant to Section 6.04(d) hereof.
(c) The Servicer shall so transfer the aggregate
amount of Actual Payments no later than two Business Days after the Servicer's
receipt of such amount. The Servicer shall so deposit the aggregate amount of
Servicer Advances no later than the related Determination Date. The Servicer
shall instruct the Trustee in writing to deposit the portion of any Advance
Payment due and owing for a Collection Period no later than the related
Determination Date, and any Offset Amount as provided by Section 5.12. Except
as otherwise expressly set forth, any other deposits and transfers of funds to
be made pursuant to this Section 6.01 shall be made no later than the second
Business Day immediately preceding the related Payment Date.
(d) Notwithstanding the foregoing, the Servicer may
deduct from amounts otherwise payable to the Collection Account, Security
Deposit Account or New Transferred Property Funding Account amounts previously
deposited by the Servicer into the Collection Account but (i) subsequently
uncollectible as a result of dishonor of the instrument of payment for or on
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behalf of the Lessee or (ii) later determined to have resulted from mistaken
deposits.
Section 6.02. Security Deposit Account and New Transferred Property Funding
Account.
(a) The Servicer shall establish and maintain the
Security Deposit Account with the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests appear
herein as one or more Eligible Bank Accounts in the Trustee's corporate trust
department, in the name of "First Sierra Equipment Trust 1996-2 Security
Deposit Account." The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Security Deposit Account. The
Security Deposit Account will be under the sole dominion and control of the
Trustee for the benefit of the Certificateholders and the Certificate Insurer
as their interests appear herein. The Trustee shall make withdrawals from the
Security Deposit Account only as provided in this Agreement.
(b) Security Deposits shall be deposited in the
Security Deposit Account as required by Section 5.12 hereof.
(c) The Trustee shall withdraw payments from the
Security Deposit Account in accordance with Section 6.01(d) hereof and deposit
such amounts into the Collection Account.
(d) The Servicer shall establish and maintain the New
Transferred Property Funding Account with the Trustee for the benefit of the
Certificateholders and the Certificate Insurer as their interests appear
herein, as one or more Eligible Bank Accounts in the Trustee's corporate trust
department, in the name of "First Sierra Equipment Trust 1996-2 New Transferred
Property Funding Account." The Trustee shall make withdrawals from the New
Transferred Property Funding Account only as provided in this Agreement. The
New Transferred Property Funding Account will be under the sole dominion and
control of the Trustee for the benefit of the Certificateholders and the
Certificate Insurer as their interests appear herein.
Section 6.03. Investment of Monies Held in the Accounts;
Subaccounts. (a) The Servicer shall direct the Trustee in writing to invest the
amounts in each Account in Eligible Investments that mature not later than the
Business Day immediately preceding the next Payment Date following the
investment of such amounts. Eligible Investments shall not be sold or disposed
of prior to their maturities. Net investment earnings on amounts held in any
Account shall be deposited in the Collection Account as earned. The amount of
any Insured Payment shall be held uninvested.
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(b) The Trustee and the Servicer may, from time to
time and in connection with the administration of each Account, establish and
maintain with the Trustee one or more sub-accounts of any of the Accounts, as
the Trustee and/or the Servicer may consider useful.
Section 6.04. The Certificate Insurance Policies. (a) On each
Determination Date the Servicer shall determine with respect to the immediately
following Payment Date, the amounts to be on deposit in the Collection Account
on such Payment Date with respect to the immediately preceding Collection
Period and equal to the total of (A) Available Funds with respect to such
Collection Period, minus (B) the Trust Operating Expenses (the "Available
Distribution Amount") and shall inform the Trustee in writing of the results of
such determination.
(b) If the Class A Insured Distribution Amount for any
Payment Date exceeds the Available Distribution Amount for such Payment Date
(such event being an "Available Funds Shortfall"), the Trustee shall complete a
Notice in the form of Exhibit A to the Certificate Insurance Policy and submit
such notice to the Certificate Insurer no later than 12:00 noon New York City
time on the second Business Day preceding such Payment Date as a claim for a
Insured Payment in an amount equal to such Available Funds Shortfall.
(c) Upon receipt of Insured Payments from the
Certificate Insurer, the Trustee shall immediately deposit such Insured
Payments in the Collection Account and shall distribute such Insured Payments,
or the proceeds thereof, in accordance with Section 6.06 to the Class A
Certificateholders. The parties hereto recognize that the making of an Insured
Payment does not relieve any of the parties hereto of any obligation hereunder
or under any of the Transaction Documents.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each of the Class A Certificateholders and (ii) disburse
such Insured Payment to the Class A Certificateholders as set forth in Section
6.06. The Certificate Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to Sections 6.06(b)(xi) and 6.06(c)(xii) hereof
with respect to each Insured Payment made by the Certificate Insurer. The
Trustee hereby agrees on behalf of each Class A Certificateholder and the Trust
for the benefit of the Certificate Insurer that it recognizes that to the extent
the Certificate Insurer makes Insured Payments, either directly or indirectly
(as by paying through the Trustee), to the Class A Certificateholders, the
Certificate Insurer will be entitled to receive the related Reimbursement Amount
pursuant to Sections 6.06(b)(xi) and 6.06(c)(xii) hereof.
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(e) The Class A Certificates will be insured by the
Certificate Insurance Policy pursuant to the terms set forth therein,
notwithstanding any provisions to the contrary contained in this Agreement. All
amounts received under the Certificate Insurance Policy shall be used solely
for the payment to Class A Certificateholders of principal at maturity and
interest on the Class A Certificates.
(f) If a Responsible Officer of the Trustee at any
time has actual knowledge that there will not be sufficient moneys in the
Collection Account to make all required payments of principal and interest to
the Certificateholders on the applicable Payment Date, the Trustee shall
immediately notify the Certificate Insurer or its designee by telephone,
promptly confirmed in writing by overnight mail or facsimile transmission, of
the amount of such deficiency. In addition, if a Responsible Officer of the
Trustee has actual notice that any of the Class A Certificateholders have been
required to disgorge payments of principal or interest on the Class A
Certificate pursuant to a final judgment by a court of competent jurisdiction
that such payment constitutes a voidable preference to such Holders within the
meaning of any applicable bankruptcy laws, then the Trustee shall notify the
Certificate Insurer or its designee of such fact by telephone, promptly
confirmed in writing by overnight mail or facsimile transmission. Such notice
shall be in addition to the procedures set forth in the Certificate Insurer
Policy for making a claim under the Certificate Insurance Policy.
(g) The parties hereto recognize that, to the extent
that the Certificate Insurer makes payments, directly or indirectly, on account
of principal of or interest on the Class A Certificates, the Certificate
Insurer shall be subrogated to the rights of the Holders to receive
distributions of principal and interest in accordance with the terms hereof.
(h) The parties hereto grant to the Certificate
Insurer the right of prior approval of amendments or supplements to the
Transaction Documents and of the exercise of any option, vote, right, power or
the like available to the Class A Certificateholders hereunder.
Section 6.05. Transfer of New Transferred Property. (a)(i) On
each Payment Date during the Interest- Only Period, and provided that no Early
Amortization Event has occurred as set forth in the Monthly Statement and at
the written direction of the Servicer (with the written consent of the
Certificate Insurer) and in accordance therewith,
(1) pursuant to Section 6.06(b)(xiv), the Trustee
shall pay from the Available Funds and
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Residual Receipts then remaining in the Collection Account, an
amount equal to the Base Principal Amount with respect to such
Payment Date, in consideration of the transfer of the New
Transferred Property, which New Transferred Property shall have
been transferred by First Sierra under the Sale Agreement, and
which relate to Leases having an Aggregate Discounted Contract
Principal Balance on such Payment Date equal as nearly as
practicable to but not less than the amount of such Adjusted
Base Principal Amount; and
(2) if the Trust Certificate Principal Balance on
such Payment Date is below 6.50% of the Aggregate Discounted
Contract Principal Balance of the Leases as of such Payment
Date, any amounts otherwise payable to the holder of the Trust
Certificate pursuant to Sections 6.06(b)(xv) or 6.06(c)(xviii)
("Excess Cash") hereof shall be disbursed upon the order of
the Depositor in consideration of the transfer of the New
Transferred Property to the extent described in the next
sentence. The Additional Leases relating to such New
Transferred Property shall have an Aggregate Discounted
Contract Principal Balance on such Payment Date equal as
nearly as practicable to, but in no event less than the Excess
Cash; provided, however, that the Depositor shall only be
required to transfer Additional Leases to the extent necessary
to increase the Trust Certificate Principal Balance to 6.50%.
(ii) If the Depositor, on any Payment Date during
the Interest-Only Period, provided that no Early Amortization Event
has occurred or, due to the operation of this clause (ii), will occur
on such Payment Date, advises the Trustee in writing that it cannot
convey to the Trust New Transferred Property relating to Additional
Leases having an Aggregate Discounted Contract Principal Balance as of
the day preceding such Payment Date at least equal to an amount which,
in the absence of losses, would equal the sum of (x) Base Principal
Amount with respect to such Payment Date and (y) the amount described
in Section 6.05(a)(i)(2) hereof, if any, on such Payment Date, then,
pursuant to Section 6.06(b)(xiv)(B), the Trustee shall deposit to the
New Transferred Property Funding Account to the extent funds are
available therefor pursuant to Section 6.06(b)(xiv)(B) any difference
between (A) an amount which, in the absence of losses, would equal the
Base Principal Amount with respect to such Payment Date and (B) the
Aggregate Discounted Contract Principal Balances of all Additional
Leases relating to the New Transferred Property
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transferred to the Trust by the Depositor on such Payment Date. On
future Payment Dates during the Interest-Only Period, amounts shall
be disbursed from the New Transferred Property Funding Account upon
the order of the Depositor in an amount equal to the Aggregate
Discounted Contract Principal Balances of the Additional Leases
relating to the New Transferred Property, to the extent that such New
Transferred Property is available from the Depositor after the
Depositor has transferred to the Trust the New Transferred Property
required to be transferred on such future Payment Dates pursuant to
clauses (1) and (2) of Section 6.05(a)(i) above. No deposit shall be
made to the New Transferred Property Funding Account if following such
deposit the amount on deposit therein would exceed $2,000,000. Such
excess amounts will be retained in the Collection Account until such
time as they may be deposited into the New Transferred Property
Funding Account in accordance with this Section 6.05. If, on the
Initial Amortization Date, any amount is on deposit in the New
Transferred Property Funding Account, it shall be deposited in the
Collection Account prior to making any payments or distributions on
such Payment Date from the Collection Account and the New Transferred
Property Funding Account shall be closed and any amounts retained in
the Collection Account pursuant to this Section 6.05(a)(ii) shall be
included in Available Funds for disbursement pursuant to Section
6.06(c) hereof.
(iii) Following the Interest-Only Period, the
Depositor has the option with the consent of the Certificate Insurer
(but not the obligation) to convey New Transferred Property to the
Trust on each Payment Date. Such New Transferred Property shall relate
to Additional Leases having an Aggregate Discounted Contract Principal
Balance not in excess of the aggregate amount of Prepayments deposited
to the Collection Account with respect to the prior Collection Period;
provided, however, that the Depositor may not so transfer New
Transferred Property relating to Additional Leases having an Aggregate
Discounted Contract Principal Balance in excess of $5,000,000 or which
otherwise does not comply with the provision of Section 7.02 hereof;
and provided, further, that the final maturity date of any such
Additional Lease shall not be later than May 1, 2004. The Trustee
shall disburse on the applicable Transfer Date upon the order of the
Depositor an amount equal to the lesser of 100% of the aggregate
Discounted Contract Principal Balances of such Additional Leases as of
the day preceding such Transfer Date and the aggregate amount of
Prepayments deposited to the Collection Account with respect to the
prior Collection Period. The Trustee on behalf of the Trust shall
accept the transfer of any
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qualifying Additional Leases so tendered by the Depositor.
(iv) In connection with each transfer of New
Transferred Property pursuant to this Section 6.05(a), the Trustee
shall have received on the Determination Date preceding each Payment
Date a List of Additional Leases listing all Additional Leases to be
transferred to the Trust on such Transfer Date, together with an
Assignment properly completed by an appropriate officer of First
Sierra.
(b) Following the earlier to occur of (i) the Payment
Date occurring in November 1997 and (ii) the declaration of an Early
Amortization Event, no further transfers of Additional Leases pursuant to
paragraphs (a)(i) or (a)(ii) above shall occur, and all amounts that would
otherwise have been disbursed in consideration of such conveyances shall be
retained in the Collection Account and shall be distributed, as provided in
Section 6.06.
Section 6.06. Disbursements From Collection Account. (a) On
each Payment Date, the Trustee shall pay the entire amount of money then on
deposit in the Collection Account with respect to the related Collection
Period, as indicated on the Monthly Statement, pursuant to Section 6.06(b) or
(c) hereof, as applicable, to the Persons to which such money is then due,
calculated on the basis of and in accordance with the Monthly Statement for the
related Collection Period; provided, however, that in the event the Servicer
fails to deliver a Monthly Statement by a Payment Date the Trustee shall make
the following payments in the following amounts (i) the Class A Certificate
Interest due on such Payment Date pursuant to Section 6.06(b)(viii) in an
amount equal to the product of (a) one-twelfth of the Class A Certificate Rate
and (b) the Class A Certificate Principal Balance reflected on the Monthly
Statement most recently delivered by the Servicer (net of any payments in
respect thereof on the immediately preceding Payment Date), (ii) the Class B-1
Certificate Interest due on such Payment Date pursuant to Section 6.06(b)(ix)
hereof in an amount equal to the product of (A) one-twelfth of the Class B-1
Certificate Rate and (B) the Class B-1 Certificate Principal Balance reflected
on the Monthly Statement most recently delivered by the Servicer (net of any
payments in respect thereof on the immediately preceding Payment Date), and
(iii) the Class B-2 Certificate Interest due on such Payment Date pursuant to
Section 6.06(b)(x) hereof in an amount equal to the product of (A) one-twelfth
of the Class B-2 Certificate Rate and (B) the Class B-2 Certificate Principal
Balance reflected on the Monthly Statement most recently delivered by the
Servicer (net of any payments in respect thereof on the immediately preceding
Payment Date).
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(b) On each Payment Date prior to the Initial
Amortization Date, the Trustee shall disburse amounts on deposit in the
Collection Account with respect to the immediately preceding Collection Period
in the following order of priority, without duplication (to the extent funds
are available therefor), all in accordance with the applicable Monthly
Statement:
(i) To First Sierra by wire transfer of
immediately available funds, the aggregate amount of any Initial
Unpaid Amounts inadvertently deposited in the Collection Account;
(ii) From the amount then remaining in the
Collection Account, to any party entitled thereto, by check, any other
payments not included in the Trust Assets paid pursuant to any Lease,
to the extent that such amounts are inadvertently deposited in the
Collection Account;
(iii) From the Available Funds then remaining in
the Collection Account, to the Servicer by wire transfer to the
account designated in writing by the Servicer of immediately available
funds, the aggregate amount of the following:
(A) An amount equal to the unreimbursed Servicer
Advances (other than Servicer Advances for the current
Collection Period); and
(B) An amount equal to the Servicing Fee owing on
such Payment Date, plus any unpaid Servicing Fee owing from
prior Collection Periods; and
(C) Any Servicing Charges inadvertently deposited
in the Collection Account;
(iv) From the Available Funds then remaining in the
Collection Account, to the Back-up Servicer by wire transfer to the
account designated in writing by the Back-up Servicer of immediately
available funds, an amount equal to the Back-up Servicing Fee owing on
such Payment Date, plus any unpaid Back-up Servicing Fees from prior
Collection Periods;
(v) From the Available Funds then remaining in
the Collection Account, to the Certificate Insurer by wire transfer to
the account designated in writing by the Certificate Insurer, an
amount equal to the Premium Amount owing on such Payment Date, plus
any unpaid Premium Amounts from prior Collection Periods;
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(vi) From the Available Funds then remaining in
the Collection Account, to the Trustee by wire transfer to the account
designated in writing by the Trustee, an amount equal to the Trustee
Fees owing on such Payment Date, plus any unpaid Trustee Fees from
prior Collection Periods;
(vii) From the Available Funds then remaining in the
Collection Account, to the Trustee by wire transfer to the account
designated in writing by the Trustee, an amount equal to the
reimbursable expenses due and unpaid to the Trustee in accordance with
Section 12.07(a)(ii);
(viii) From the Available Funds then remaining in
the Collection Account, to the Class A Certificateholders, the Class A
Certificate Interest and Class A Overdue Interest for the related
Collection Period;
(ix) From the Available Funds then remaining in
the Collection Account, to the Class B-1 Certificateholders, first in
respect of the Class B-1 Overdue Interest for the related Collection
Period and then in respect of the Class B-1 Certificate Interest for
the related Collection Period;
(x) From the Available Funds then remaining in
the Collection Account, to the Class B-2 Certificateholders first in
respect of the Class B-2 Overdue Interest for the related Collection
Period and then in respect of the Class B-2 Certificate Interest for
the related Collection Period;
(xi) From the Available Funds then remaining in
the Collection Account, to the Certificate Insurer by wire transfer to
the account designated in writing by the Certificate Insurer, an
amount equal to the Reimbursement Amount, if any, owing on such
Payment Date;
(xii) From the Available Funds them remaining in
the Collection Account, to the Trustee by wire transfer to the account
designated in writing by the Trustee, an amount equal to the
reimbursable expenses due and unpaid to the Trustee in accordance with
Section 12.07(a)(iii);
(xiii) From the Available Funds then remaining in the
Collection Account, to the Servicer by wire transfer of immediately
available funds to the account designated in writing by the Servicer,
any other amounts due the Servicer as expressly provided in this
Agreement, under Section 9.03 or otherwise;
(xiv) From the Available Funds and Residual Receipts
then remaining in the Collection Account,
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(A) first, to the Depositor an amount equal to the lesser of (i) the
Base Principal Amount and (ii) an amount equal to the Aggregate
Discounted Contract Principal Balances of the new Leases available to
be transferred to the Trust, and (B) second, the remainder of the Base
Principal Amount, if any, to the New Transferred Property Funding
Account; and
(xv) To the Holder of the Trust Certificate, any
remaining amounts.
(c) On and after the Payment Date which is also the
Initial Amortization Date, the Trustee shall pay such money to the following
Persons, in the following order of priority, without duplication:
(i) To First Sierra by wire transfer of
immediately available funds, the aggregate amount of any Initial
Unpaid Amounts inadvertently deposited in the Collection Account;
(ii) From the amount then remaining in the
Collection Account, to any party entitled thereto, by check, any
indemnity payments paid pursuant to any Lease, to the extent that such
amounts are inadvertently deposited in the Collection Account;
(iii) From the Available Funds then remaining in
the Collection Account, to the Servicer by wire transfer to the
account designated in writing by the Servicer of immediately available
funds, the aggregate amount of the following:
(A) An amount equal to the unreimbursed Servicer
Advances (other than Servicer Advances for the current
Collection Period);
(B) An amount equal to the Servicing Fee owing on
such Payment Date, plus any unpaid Servicing Fee owing from
prior Collection Periods; and
(C) Any Servicing Charges inadvertently deposited
in the Collection Account;
(iv) From the Available Funds then remaining in
the Collection Account to the Back-up Servicer by wire transfer to the
account designated in writing by the Back-up Servicer of immediately
available funds, an amount equal to the Back-up Servicing Fee owing on
such Payment Date, plus any unpaid Back-up Servicing Fees from prior
Collection Periods;
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(v) From the Available Funds then remaining in
the Collection Account to the Certificate Insurer by wire transfer to
the account designated in writing by the Certificate Insurer, an
amount equal to the Premium Amount owing on such Payment Date, plus
any unpaid Premium Amounts from prior Collection Periods;
(vi) From the Available Funds then remaining in
the Collection Account to the Trustee by wire transfer to the account
designated in writing by the Trustee, an amount equal to the Trustee
Fees owing on such Payment Date, plus any unpaid Trustee Fees from
prior Collection Periods;
(vii) From the Available Funds then remaining in
the Collection Account, to the Trustee by wire transfer to the account
designated in writing by the Trustee, an amount equal to the
reimbursable expenses due and unpaid to the Trustee in accordance with
Section 12.07(a)(ii);
(viii) From the Available Funds then remaining in
the Collection Account, to the Class A Certificateholders, the Class A
Certificate Interest and Class A Overdue Interest for the related
Collection Period;
(ix) To the extent that such disbursement shall not
result in an Available Funds Shortfall, from Available Funds then
remaining in the Collection Account to the Class B-1 Certificateholders
an amount equal to the Class B-1 Overdue Interest and the Class B-1
Certificate Interest for the related Collection Period;
(x) To the extent that such disbursement shall
not result in an Available Funds Shortfall, from Available Funds then
remaining in the Collection Amount to the Class B-2 Certificateholders
an amount equal to the Class B-2 Overdue Interest and the Class B-2
Certificate Interest for the related Collection Period;
(xi) Until the Class A Certificate Principal
Balance has been reduced to zero, to the Class A Certificateholders
from the Available Funds then remaining in the Collection Account, the
sum of (a) the Class A Base Principal Distribution Amount for such
Payment Date, and (b) any Class A Overdue Principal;
(xii) From the Available Funds then remaining in
the Collection Account, to the Certificate Insurer by wire transfer to
the account designated in writing by the Certificate Insurer, the
Reimbursement Amount, if any, owing on such Payment Date;
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(xiii) Until the Class B-1 Certificate Principal
Balance has been reduced to zero, to the Class B-1 Certificateholders
from the Available Funds then remaining in the Collection Account, the
sum of (a) the Class B-1 Base Principal Distribution Amount for such
Payment Date, and (b) any Class B-1 Overdue Principal; provided,
however, that if a Restricting Event exists on such Payment Date and
the Outstanding Class A Principal Balance on such Payment Date (after
giving effect to the payments to the Class A Certificateholders made
on such Payment Date) exceeds zero, the amount otherwise required to
be paid to the Class B-1 Certificateholders under this clause (xiii),
the Class B-2 Certificateholders under clause (xiv) and the Holder of
the Trust Certificate under clause (xviii) shall be paid to the Class
A Certificateholders as an additional reduction of the Outstanding
Class A Principal Balance up to the amount necessary to reduce the
Outstanding Class A Principal Balance to zero;
(xiv) Until the Class B-2 Certificate Principal
Balance has been reduced to zero, to the Class B-2 Certificateholders
from the Available Funds then remaining in the Collection Account, the
sum of (a) the Class B-2 Base Principal Distribution Amount for such
Payment Date, and (b) any Class B-2 Overdue Principal; provided,
however, that if a Restricting Event exists on such Payment Date and
the Outstanding Class A Certificate Principal Balance on such Payment
Date (after giving effect to the payments to the Class A
Certificateholders made on such Payment Date) exceeds zero, the amount
otherwise required to be paid to the Class B-2 Certificateholders under
this clause (xiv) shall be paid to the Class A Certificateholders
during such time as a Restricting Event is continuing as an additional
reduction of the Outstanding Class A Principal Balance up to the amount
necessary to reduce such balance to zero; provided, further that if an
Issuer Restricting Event exists on such Payment Date and the
Outstanding Class B-1 Certificate Principal Balance on such Payment
Date (after giving effect to the payments to the Class B-1
Certificateholders made on such Payment Date) is greater than zero,
then so long as a Restricting Event is not continuing, to the Class B-1
Certificateholders during such time as an Issuer Restricting Event is
continuing as an additional reduction of the Outstanding Class B-1
Principal Balance up to the amount necessary to reduce the Outstanding
Class B-1 Principal Balance to zero;
(xv) From the Available Funds them remaining in
the Collection Account, to the Trustee by wire transfer to the account
designated in writing by the Trustee, an
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amount equal to the reimbursable expenses due and unpaid to the
Trustee in accordance with Section 12.07(a)(iii);
(xvi) From the Available Funds then remaining in the
Collection Account, to the Servicer by wire transfer of immediately
available funds to the account designated in writing by the Servicer,
any other amounts due the Servicer as expressly provided in this
Agreement, under Section 9.03 or otherwise;
(xvii) Upon the order of the Depositor, the amount
of Prepayments retained in the Lockbox Account with respect to the
related Collection Period may be deposited to the Collection Account
and disbursed in consideration of the transfer of New Transferred
Property relating to Additional Leases having a cumulative Aggregate
Discounted Contract Principal Balance not in excess of $5,000,000 in
accordance with Section 6.05(a)(iii); and
(xviii) To the Holder of the Trust Certificate, any
remaining amounts; provided, however, that except to the extent
provided in clause (xiii) if an Issuer Restricting Event exists on
such Payment Date and the Outstanding Class B-1 Principal Balance or
Class B-2 Principal Balance on such Payment Date (after giving effect
to the payments to the Class B Certificateholders made on such Payment
Date) exceeds zero, the amount otherwise required to be paid to the
Holder of the Trust Certificate under this clause (xviii) shall be
paid to the Class B Certificateholders first to the Class B-1
Certificateholders up to the amount necessary to reduce the
Outstanding Class B-1 Principal Balance to zero and thereafter to the
Class B-2 Certificateholders up to the amount necessary to reduce the
Outstanding Class B-2 Principal Balance to zero; provided, further, in
the event that any disbursement of funds to the Holder of the Trust
Certificate would result in the total of (i) the Aggregate Discounted
Contract Principal Balance as of the end of the immediately preceding
Collection Period, minus (ii) the Class A Certificate Principal
Balance, minus (iii) the Class B-1 Certificate Principal Balance and
minus (iv) the Class B-2 Certificate Principal Balance (calculated
with respect to clauses (ii), (iii) and (iv) after giving effect to
the disbursements to be made on such Payment Date) being less than
3.5% of the Initial Aggregate Discounted Contract Principal Balance
such amount shall not be disbursed to the Holder of the Trust
Certificate but shall instead be disbursed to the Class A
Certificateholders, the Class B-1 Certificateholders and the Class B-2
Certificateholders as an additional reduction of principal in an
amount equal to the product of (x) a fraction, the numerator of which
is the Class A Percentage, the Class B-1 Percentage, or the Class B-2
Percentage, as the case may be, and the denominator of which is the
sum of the Class A
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Percentage, the Class B-1 Percentage and the Class B-2 Percentage (to
the extent such class is outstanding) and (y) the amount that would
otherwise be distributable to the Holder of the Trust Certificate
pursuant to this clause (xviii).
(d) All payments to Certificateholders shall be made
on each Payment Date to each Certificateholder of record on the related Record
Date by check, or, if requested by such Certificateholder, by wire transfer to
the account designated in writing in the form of Exhibit D hereto (or such
other account as the Certificateholder may designate in writing) delivered to
the Trustee on or prior to the related Determination Date, in immediately
available funds, in amounts equal to such Certificateholder's pro rata share
(based on the aggregate Class A Percentage Interest in the case of the Class A
Certificateholders, the aggregate Class B Percentage Interest in the case of
the Class B Certificateholders and the aggregate Trust Certificate Percentage
Interest in the case of Holder of the Trust Certificate) of such payment.
Section 6.07. Statements to Certificateholders. (a) If the
Servicer has delivered the Monthly Statement on the preceding Determination
Date, then on each Payment Date the Servicer will forward it to the Certificate
Insurer, and the Trustee will mail to the Rating Agencies and each Class B
Certificateholder, a statement (which statement will be prepared by the
Servicer furnished to the Trustee in the Monthly Statement delivered pursuant
to Section 5.07 hereof or otherwise pursuant to this Agreement), not later than
one Business Day prior to such Payment Date, setting forth the following
information (per $1,000 of Initial Class A Certificate Principal Amount or of
Initial Class B Certificate Principal Amount (as the case may be) as to (i) and
(ii) below):
(i) With respect to a statement to a Class A
Certificateholder or a Class B Certificateholder, the amount of such
payment allocable to such Certificateholder's Percentage Interest of
the Principal Distribution Amount and Class A or Class B Overdue
Principal;
(ii) With respect to a statement to a
Certificateholder, the amount of such payment allocable to such
Certificateholder's Percentage Interest of Class A, Class B-1 or B-2
Certificate Interest and Class A or Class B Overdue Interest;
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(iii) The aggregate amount of fees and compensation
received by the Servicer pursuant to Section 6.06 hereof for the
Collection Period;
(iv) The aggregate Class A Certificate Principal
Balance, the aggregate Class B-1 Certificate Principal Balance, the
aggregate Class B-2 Certificate Principal Balance, the Class A
Certificate Percentage, the Class A Certificate Factor, the Class B-1
Certificate Factor, the Class B-2 Certificate Factor, the Pool Factor
and the Aggregate Discounted Contract Principal Balance, after taking
into account all distributions made on such Payment Date;
(v) The total unreimbursed Servicer Advances with
respect to the related Collection Period;
(vi) The Subordinated Amount as of such Payment
Date;
(vii) The amount of Residual Receipts and Defaulted
Residual Receipts for the related Collection Period and the Aggregate
Discounted Contract Principal Balances for all Leases that became
Defaulted Leases during the related Collection Period;
(viii) The total number of Leases and the Aggregate
Discounted Contract Principal Balances thereof, together with the
number and Aggregate Discounted Contract Principal Balances of all
Leases as to which the Lessees, as of the related Calculation Date,
have missed one, two, three or four Scheduled Payments (including
Final Lease Payments), and Delinquent Leases reconveyed; and
(ix) The Aggregate Discounted Contract Principal
Balance of the New Transferred Property, if any.
(b) By January 31 of each calendar year, commencing
January 31, 1997, or as otherwise required by applicable law, the Trustee shall
furnish to each Person who at any time during the immediately preceding
calendar year was a Certificateholder a statement prepared by the Servicer
containing the applicable aggregate amounts with respect to such
Certificateholder hereof for such calendar year or, in the event such Person
was a Certificateholder during a portion of such calendar year, for the
applicable portion of such year, for the purposes of such Certificateholder's
preparation of federal income tax returns. In addition to the foregoing the
Servicer and the Trustee (to the extent the Servicer has provided the necessary
information to the Trustee) shall make available to Certificateholders or the
Certificate Insurer any
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other information provided to the Servicer or the Trustee or otherwise in the
Trustee's possession reasonably requested by Certificateholders or the
Certificate Insurer in connection with tax matters, in accordance with the
written directions of the Servicer.
(c) The Servicer shall furnish to each Class B
Certificateholder, on request, during the term of this Agreement, such
periodic, special or other reports or information not specifically provided for
herein, as shall be necessary, reasonable or appropriate with respect to such
Class B Certificateholder all such reports or information to be provided by and
in accordance with such applicable instructions and directions as the Class B
Certificateholder may reasonably require and as the Servicer may reasonably be
able to produce.
(d) The Trustee shall promptly send to the Certificate
Insurer, each Certificateholder and to the Rating Agencies in writing:
(i) Notice of any breach by First Sierra, the
Depositor or the Servicer of any of their respective representations,
warranties and covenants made herein or in a Sale Agreement;
(ii) A copy of each Servicer compliance statement
delivered to the Trustee pursuant to Section 5.07(b) hereof;
(iii) Notice of any breach by the Trustee of its
representations and warranties set forth in Section 12.15 hereof of
which a Responsible Officer has actual knowledge;
(iv) Notice of the occurrence of any Early
Amortization Event (which shall also be given to the Rating Agencies);
(v) Notice of any Event of Servicing Termination
or default under the Insurance Agreement, or any other event of
default under the Transaction Documents;
(vi) Notice of any Back-up Servicing Termination
Event;
(vii) Notice of the resignation or removal of the
Trustee;
provided, however, that in each case the Trustee shall only be required to send
such notices and other items to the Class B Certificateholders to the extent
that the Trustee has itself
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received the related information and the Class B Certificateholders have not
already received such notice or other items. Except as may be specifically
provided herein, the Trustee shall have no obligation to seek to obtain any
such information.
Section 6.08. Compliance With Withholding Requirements.
Notwithstanding any other provisions of this Agreement, the Trustee, as paying
agent for and on behalf of, and at the direction of the Servicer, shall comply
with all federal withholding requirements respecting payments (or advances
thereof) to Certificateholders as may be applicable to instruments constituting
indebtedness for federal income tax purposes. Any amounts so withheld shall be
treated as having been paid to the related Certificateholder for all purposes
of this Agreement. In no event shall the consent of Certificateholders be
required for any withholding.
ARTICLE VII.
REMOVAL OF NONCONFORMING TRANSFERRED
PROPERTY; SUBSTITUTION OF LEASES
Section 7.01. Removal of Non-Conforming Transferred Property.
(a) Upon discovery by the Depositor, the Certificate Insurer, the Servicer (or
any of its successors or assigns) or in the case of the Trustee, upon actual
knowledge of a Responsible Officer of the Trustee of a breach of any of the
representations or warranties set forth in Section 3.01(b) hereof that
materially and adversely affects any Lease, the related Equipment or the
related Lease File, as the case may be, or if the Servicer fails to cause
delivery of any UCC-3 financing statement or Certificate of Title in accordance
with this Agreement, the party (including any such successor or assign)
discovering such breach shall give prompt written notice to the other parties.
As of the last day of the calendar month following the month of its discovery
or its receipt of notice of breach (or, at the Depositor's election, any
earlier date), the Depositor shall deposit (or cause to be deposited) the
Reconveyance Amount with respect to such Lease or replace such contract with a
Substitute Lease pursuant to Section 7.02 hereof. The Depositor shall deposit
the Reconveyance Amount on the second Business Day prior to the second Payment
Date following discovery of such breach. Any such nonconforming Lease so
removed shall not be deemed to be a Defaulted Lease for purposes of this
Article VII.
The obligation of the Depositor to remove any Transferred
Property from the Trust and to remit the Reconveyance Amount, as appropriate,
with respect to the related Lease as to which a breach has occurred and is
continuing shall constitute the sole remedy against the
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Depositor for such breach available to the Trustee or the Certificateholders.
Section 7.02. Substitution of Leases. (a) Subject to the
provisions of Sections 7.02(b) through (d) hereof, the Depositor, with the
consent of the Certificate Insurer and upon notice from the Servicer, may
substitute one or more Leases (each a "Substitute Lease") and the related
Equipment for and replace Leases and the related Equipment that (i) becomes a
Defaulted Lease or an Early Termination Lease or (ii) are the subject of a
Prepayment, a Casualty Loss or a Warranty Event.
(b) Each Substitute Lease shall be a Lease, with
respect to which all of the representations and warranties set forth in Section
3.01(b) were true as of the related Substitute Lease Cut-Off Date except to the
extent such representation or warranty was expressly limited to the Initial
Cut-Off Date. No substitution pursuant to Section 7.02(a) hereof shall cause
any of the Specified Portfolio Characteristics to be untrue in any material
respect as of such Substitute Lease Cut-Off Date, or if any of the Specified
Portfolio Characteristics is untrue as of such Substitute Lease Cut-Off Date,
increase the amount by which any Specified Portfolio Characteristic is untrue.
(c) Prior to any substitution pursuant to Section
7.01(a) hereof, the Depositor shall have received a Substitute Lease Transfer
Agreement providing for the unconditional sale and transfer of the Substitute
Leases and related Equipment by First Sierra to the Depositor and an amendment
to the List of Leases reflecting the substitution.
(d) The Servicer shall not permit any substitution
under Section 7.01(a) hereof on any Transfer Date if:
(i) on a cumulative basis from the Closing Date,
the sum of the Discounted Contract Principal Balances (as of the
related Substitution Cut-Off Date) of Leases substituted for Leases,
including, without limitation, substitutions for Prepayments or other
early amortizations would exceed ten percent (10%) of the Aggregate
Discounted Contract Principal Balance as of the Cut-Off Date;
(ii) on a cumulative basis from the Closing Date,
the sum of the Discounted Contract Principal Balances (as of the
related Substitution Cut-Off Date) of Leases substituted for Defaulted
Leases would exceed five percent (5%) of the Aggregate Discounted
Contract Principal Balance as of the Cut-Off Date;
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(iii) as of the related Substitution Cut-Off Date,
the Substitute Leases and the related Equipment have a Discounted
Contract Principal Balance, not less than the Discounted Contract
Principal Balance of the Leases being replaced;
(iv) on such Transfer Date, the sum of the
Scheduled Payments on all Leases (including any Substitute Leases)
then subject to the Agreement due in any Collection Period prior to
the May 2004 Collection Period would be less than the Scheduled
Payments due on all Leases prior to such substitution for such
Collection Period (a "Payment Deficiency"), or increase the amount of
such a Payment Deficiency;
(v) as of such Transfer Date, a Restricting Event
has occurred and is continuing; and
(vi) the addition of such Lease must not result in
the Aggregate Discounted Contract Principal Balance of all Leases with
the same Lessee exceeding 1.2% of the Aggregate Discounted Contract
Principal Balance of all Leases.
(e) Upon the replacement of a Lease and the related
Equipment with a Substitute Lease as described above, the security interest of
the Trustee in such replaced Lease, the related Equipment and all proceeds
thereon shall be terminated and such replaced Lease and the related Equipment
shall be transferred to the Depositor.
ARTICLE VIII.
THE CERTIFICATES
Section 8.01. The Certificates. (a) Class A Certificates will
be issued in denominations of $1,000 and multiples thereof of Initial Class A
Certificate Principal Amount, and the Class B Certificates will be issued in
denominations of $1,000,000 and $1,000 increments above $1,000,000 of Initial
Class B-1 Certificate Principal Amount and the Initial Class B-2 Certificate
Principal Amount. The Trust Certificates will be issued without denomination.
Each Certificate shall represent a validly issued and binding obligation, but
only if such Certificate has been executed on behalf of the Trust, and
authenticated on behalf of the Trust, in each case, by a Responsible Officer of
the Trustee by manual signature. Certificates bearing the manual signatures of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Trust shall be valid and binding obligations,
notwithstanding that such individuals or any of them have ceased to be so
authorized
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prior to the authentication and delivery of such Certificates or did not hold
such offices at the date of such Certificates. No Certificate shall be entitled
to any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in
the form set forth in the form of the Certificates of the related Class,
attached as Exhibits hereto, signed by the Trustee by manual signature, and
such signature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Class A Certificates shall be substantially in the form set
forth in Exhibit E hereto, all Class B-1 Certificates shall be substantially in
the form set forth in Exhibit F hereto, the Class B-2 Certificates shall be
substantially in the form set forth in Exhibit G hereto, and the Trust
Certificate shall be substantially in the form set forth in Exhibit H hereto.
The Certificates shall be dated the date of their authentication. Neither the
Certificates nor the Leases are insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
(b) It is intended that the Class A Certificates be
registered so as to participate in a global book-entry system with the
Depository, as set forth herein. The Class A Certificates shall, except as
otherwise provided in the next paragraph, be initially issued in the form of a
single fully registered Class A Certificate with a denomination equal to the
Initial Class A Certificate Principal Amount. Upon initial issuance, the
ownership of each such Class A Certificate shall be registered in the
Certificate Register in the name of Cede & Co., or any successor thereto, as
nominee for the Depository.
The Depositor and the Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Certificate Register in the name of Cede & Co., as nominee of the Depository,
the Depositor and the Trustee shall have no responsibility or obligation to
Direct or Indirect Participants or beneficial owners for which the Depository
holds Class A Certificates from time to time as a Depository. Without limiting
the immediately preceding sentence, the Depositor, the Servicer and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect
Participant with respect to any ownership interest in any Class A Certificate,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, of any notice with respect to the Class A
Certificates or (iii) the payment to any Direct or Indirect
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Participant or any other Person, other than a Certificateholder, of any amount
with respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a Certificateholder shall receive a
certificate evidencing such Class A Certificate.
Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of interest by the mailing of checks or drafts to the
Certificateholders appearing as Certificateholders at the close of business on
a Record Date, the name "Cede & Co." in this Agreement shall refer to such new
nominee of the Depository.
(c) In the event that (i) the Depository or the
Servicer advises the Trustee in writing that the Depository is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Class A Certificates and the Servicer or the
Depository is unable to locate a qualified successor or (ii) the Trustee at its
sole option elects to terminate the book-entry system through the Depository,
the Class A Certificates shall no longer be restricted to being registered in
the Certificate Register in the name of Cede & Co. (or a successor nominee) as
nominee of the Depository. At that time, the Servicer may determine that the
Class A Certificates shall be registered in the name of and deposited with a
successor depository operating a global book-entry system, as may be acceptable
to the Servicer, or such depository's agent or designee but, if the Servicer
does not select such alternative global book-entry system, then the Class A
Certificates may be registered in whatever name or names Certificateholders
transferring Class A Certificates shall designate, in accordance with the
provisions hereof; provided, however, that any such registration shall be at
the expense of the Servicer.
(d) Notwithstanding any other provision of this
Agreement to the contrary, so long as any Class A Certificate is registered in
the name of Cede & Co., as nominee of the Depository, all distributions of
principal or interest on such Class A Certificates as the case may be and all
notices with respect to such Class A Certificates as the case may be shall be
made and given, respectively, in the manner provided in the Representation
Letter.
In the event any Certificates are issued in book-entry form
with the Depository: (i) the Trustee may deal with the Depository as the
authorized representative of the Certificateholders; (ii) the rights of the
Certificateholders shall be exercised only through the Depository and shall be
limited to those established by law and agreement between the
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Certificateholders and the Depository; (iii) the Depository will make
book-entry transfers among the direct participants of the Depository and will
receive and transmit distributions of principal and interest on the
Certificates to such direct participants; and (iv) the direct participants of
the Depository shall have no rights under this Agreement under or with respect
to any of the Certificates held on their behalf by the Depository, and the
Depository may be treated by the Trustee and its agents, employees, officers
and directors as the absolute owner of the Certificates for all purposes
whatsoever.
(e) No transfer of any Class B Certificate shall be
made unless such transfer is made in a transaction which does not require
registration or qualification under the Securities Act or qualification under
any state securities or "Blue Sky" laws. If such a transfer is to be made in
reliance upon an exemption from the Securities Act other than Rule 144A
thereunder, (i) the Trustee shall receive an Opinion of Counsel that such
transfer may be made pursuant to an exemption from the Securities Act,
describing the applicable exemption and the basis therefor, which Opinion of
Counsel shall not be an expense of First Sierra, the Servicer, the Depositor,
the Trustee or the Trust or (ii) the Trustee shall require the transferee to
execute a certification, substantially in the form of Exhibit I hereto, setting
forth the facts surrounding such transfer. In the event that a transfer is to
be made in reliance on Rule 144A under the Securities Act, the Class B
Certificateholder shall cause its prospective transferee to execute and deliver
a certificate substantially in the form of Exhibit J hereto; provided, however,
that with respect to any sale of a Class B Certificate by an investment company
registered under the Investment Company Act of 1940, as amended, made in
reliance on Rule 144A, the Class B Certificateholder may (in lieu of delivering
a certificate in the form of Exhibit J) deliver to the Trustee a certificate in
the form of Exhibit K hereto with a copy of a Qualified Institutional Buyer
Certificate in the form of Addendum 1 thereto. The Servicer promptly shall
furnish to any Holder, or any prospective purchaser designated by a Holder, the
information required to be delivered to Holders and prospective purchasers of
Class B Certificates in connection with the resale of the Class B Certificates
to permit compliance with Rule 144A in connection with such resale. No Class B
Certificate may be subdivided for resale or other transfer into a unit smaller
than a unit the initial offering price of which would have been in the
aggregate $1,000,000.
(f) Notwithstanding anything else contained in this Agreement,
neither the Trustee nor the Certificate Registrar and Transfer Agent shall
effect the registration of any transfer of a Class B Certificate (i) unless,
prior to such
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transfer, the Trustee shall have received from the Class B Certificateholder
(with a copy to each Rating Agency) an Opinion of Counsel to the effect that
such transfer will not result in the Trust becoming subject to taxation as an
association taxable as a corporation or (ii) if following such transfer there
would be more than 90 holders of the Class B Certificates and the Trust
Certificate. Ownership of the Trust Certificate shall be nontransferable, but
may be pledged to secure Non-Recourse Debt.
Section 8.02. Initial Issuance of Certificates. The Trustee
shall, upon the written instruction of the Depositor, in exchange for the
Transferred Property, execute on behalf of the Trust and authenticate and
deliver Class A Certificates, Class B-1 Certificates and Class B-2 Certificates
in authorized denominations equaling in the aggregate the Initial Class A
Certificate Principal Amount and the Initial Class B Certificate Principal
Amount and Trust Certificates evidencing an aggregate Trust Certificate
Percentage Interest of 100%.
Notwithstanding anything herein to the contrary, in the case
of the initial sale of a Certificate, the acquiror or of such Certificate shall
be deemed to have represented and warranted that it is not acquiring its
interest in the Certificate with the assets of (A) an employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), whether or not subject to Title I of ERISA, (B) a plan
or other arrangement described in Section 4975 of the Code or (C) any entity
whose underlying assets include plan assets by reason of an investment in such
entity by a plan described in (A) or (B) above (collectively, a "Benefit Plan
Investor").
Section 8.03. Registration of Transfer and Exchange of
Certificates. (a) The Trustee shall maintain, or cause to be maintained, at the
Corporate Trust Office, a register (the "Certificate Register") in which the
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. All Certificates shall be so
registered.
(b) Upon surrender for registration of transfer of any
Certificate at the Corporate Trust Office, the Trustee shall execute on behalf
of the Trust, authenticate and deliver, subject to the requirements of Section
8.01(e) hereof in the case of the Class B Certificates, in the name of the
designated transferee or transferees, one or more new Certificates in authorized
denominations of the same class, of a like aggregate Class A Percentage
Interest, Class B-1 Percentage Interest, Class B-2 Percentage Interest or Trust
Percentage Interest, as the case may be, dated the date of such authentication.
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(c) At the option of a Certificateholder, Certificates
may be exchanged for other Certificates of the same class (of authorized
denominations in the case of Class A Certificates and Class B Certificates) of
a like aggregate Class A Percentage Interest, Class B-1 Percentage Interest,
Class B-2 Percentage Interest or Trust Certificate Percentage Interest, as the
case may be, upon surrender of the Certificates to be exchanged at any such
office or agency. Whenever any Certificates are so surrendered for exchange the
Trustee shall execute on behalf of the Trust, authenticate and deliver the
Certificates that the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
substantially in the form of Exhibit L hereto, duly executed by the Holder
thereof or its attorney duly authorized in writing.
(d) No service charge shall be made for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of
Certificates.
(e) All Certificates surrendered for registration of
transfer or exchange shall be delivered to the Trustee and cancelled and
subsequently destroyed by the Trustee in accordance with its customary
practices in effect from time to time.
(f) Notwithstanding anything to the contrary herein,
the Trust Certificate shall not be transferable under any condition and the
Trust Certificateholder, by accepting the Trust Certificate, agrees absolutely
and unconditionally that it shall not assign any or all of its interest in the
Trust Certificate to any Person; provided that the Trust Certificateholder may
pledge its rights to distributions with respect to the Trust Certificate. Any
transfer of any or all of the interest in the Trust Certificate in violation of
the foregoing shall be null and void and of no effect.
(g) Notwithstanding the foregoing, in the case of any
sale or other transfer of record or beneficial ownership of a Certificate, the
transferee of such Certificate shall be deemed to have represented and
warranted that it is not a Benefit Plan Investor.
Section 8.04. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Depositor, the
Servicer and the Trustee such security or indemnity
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satisfactory to each of them as may be required by them to save each of them
harmless (provided, that with respect to a Class B Certificateholder which is
an insurance company whose long-term debt or claims paying ability is rated
investment grade or better by the Rating Agencies at such time, a letter of
indemnity furnished by it shall be sufficient for this purpose), then, in the
absence of notice to the Trustee that such Certificate has been acquired by a
bona fide purchaser, the Trustee on behalf of the Trust shall execute on behalf
of the Trust, authenticate and deliver in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate a new Certificate of like
Class and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 8.04, the Trustee may require the payment by the
Certificateholder of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto. Any other expenses (including
the fees and expenses of the Trustee) in connection therewith shall be paid by
the Servicer. Any duplicate Certificate issued pursuant to this Section 8.04
shall constitute a Certificate duly issued by the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 8.05. Persons Deemed Owners. The Certificate Insurer
and the Trustee may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 6.06 hereof and for all other purposes
whatsoever, and the Certificate Insurer and the Trustee shall not be affected
by any notice to the contrary.
Section 8.06. Access to List of Certificateholders' Names and
Addresses. The Trustee will furnish or cause to be furnished to the Servicer
within 15 days after receipt by the Trustee of a request therefor from the
Servicer in writing, a list, of the names and addresses of the
Certificateholders as of the most recent Record Date. If one or more
Certificateholders representing a Class A Percentage Interest, a Class B
Percentage Interest or a Trust Certificate Percentage Interest of not less than
25% (an "Applicant") shall apply in writing to the Trustee, and such application
shall state that the Applicant desires to communicate with other
Certificateholders with respect to its rights under this Agreement or under the
Certificates, then the Trustee shall, within five Business Days after the
receipt of such application, send such notice to the current list of
Certificateholders. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Depositor, the Servicer and the Trustee that none
of the Depositor, the Servicer nor the Trustee shall be held accountable by
reason of the disclosure of any such information, regardless of the source from
which such information was derived.
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Section 8.07. Acts of Certificateholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Certificateholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent duly appointed
in writing, and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Trustee and where required to the Depositor or the Servicer. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and (subject to Section 12.01
hereof) conclusive in favor of the Trustee, the Depositor, First Sierra and the
Servicer, if made in the manner provided in this Section 8.07.
(b) The fact and date of the execution by any
Certificateholder of any such instrument or writing may be proven in any
reasonable manner which the Trustee deems sufficient.
(c) The ownership of Certificates shall be proven by
the Certificate Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other act by a Certificateholder shall bind every
holder of every Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done or omitted
to be done by the Trustee or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Certificate.
ARTICLE IX.
THE SERVICER, THE DEPOSITOR AND THE BACK-UP SERVICER
Section 9.01. Liability of Servicer; Indemnities. (a) The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer herein. Such obligations
shall include the following:
(i) The Servicer shall indemnify, defend and hold
harmless the Trustee (which shall include any of its directors,
employees, officers and agents), the Trust, First Sierra, the Back-up
Servicer, the Certificateholders, the Certificate Insurer and the
Depositor against and from any and all costs, expenses, losses,
damages, claims and liabilities arising out of or
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resulting from the use, repossession or operation of the Equipment by
the Servicer or any of its Affiliates; and
(ii) The Servicer shall indemnify, defend and hold
harmless the Trustee (which shall include any of its directors,
employees, officers and agents), the Trust, First Sierra, the
Certificateholders, the Certificate Insurer, the Depositor, the Back-up
Servicer and First Sierra against and from any and all costs, losses,
expenses (including the reasonable fees and expenses of counsel)
claims, damages and liabilities to the extent that such losses, claims,
damages or liabilities arose out of, or were imposed upon the Trustee,
the Trust, the Certificateholders, the Certificate Insurer, First
Sierra, the Depositor or the Back-up Servicer in connection with or by
reason of (i) the failure by the Servicer to perform its duties under
this Agreement or errors or omissions of the Servicer related to such
duties including the making of any inaccurate representations or
warranties hereunder; or (ii) in the case of the Trustee and the
Back-up Servicer, its performance of its duties hereunder, except to
the extent that such loss, expense, claim or liability resulted from
the Trustee's or the Back-up Servicer's gross negligence or wilful
misconduct. The provisions of this section shall run directly to and be
enforceable by an injured party subject to the limitations hereof, and
the indemnification provided to the Trustee and the Back-up Servicer
pursuant to this Article IX by the Servicer shall survive the payment
in full of the Certificates, the termination of the Trust, and the
resignation of the Trustee or the Back-up Servicer or removal of the
Trustee or the Back-up Servicer.
(b) The Servicer shall pay any amounts owing pursuant
to Section 9.01(a) hereof directly to the indemnified Person, and such amounts
shall not be deposited in the Collection Account or the Security Deposit
Account.
(c) Indemnification under this Section 9.01 shall
include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation reasonably incurred. If the Servicer has made any
indemnity payments to the Trustee, the Trust, the Depositor, the
Certificateholders, the Certificate Insurer, First Sierra or the Depositor
pursuant to this Section 9.01 and such party thereafter collects any of such
amounts from others, such party will promptly repay such amounts collected to
the Servicer, without interest.
Section 9.02. Merger, Consolidation, or Assumption of the
Obligations of Servicer. Any corporation (i) into which the Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to
which the
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Servicer shall be a party or (iii) succeeding to the business of the Servicer,
shall be the successor to the Servicer hereunder provided such merger or
consolidation has been approved by the Certificate Insurer, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding, and such
corporation in any of the foregoing cases shall execute an agreement of
assumption, in a form reasonably satisfactory to the Trustee, agreeing to
perform every obligation of the Servicer hereunder; provided, however, that the
Servicer shall not merge or consolidate with any other corporation nor
discontinue its existence until the Trustee has received confirmation from the
Rating Agencies that such action shall not affect the rating of the Class A
Certificates or of the Class B Certificates, and any corporation succeeding to
the business of the Servicer by merger, consolidation or otherwise shall have a
net worth of at least $10,000,000. The Servicer shall provide prompt written
notice of any such event to the Trustee and to the Rating Agencies.
Section 9.03. Limitation on Liability of Servicer and
Others. Neither the Servicer nor any of the directors or officers or employees
or agents of the Servicer shall be under any liability to the Trustee, the
Trust, First Sierra, the Certificate Insurer, the Depositor or the
Certificateholders, except as provided herein, for any action taken or for
refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided, however, that this provision shall not protect
the Servicer or any Person against any liability that would otherwise be
imposed by reason of willful misconduct, bad faith or negligence in the
performance of duties hereunder. The Servicer and any director or officer or
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. Except as provided herein, the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action that is
not incidental to its duties to service the Transferred Property in accordance
with this Agreement and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may take any such non-
incidental action that is reasonable and that may be necessary or desirable in
respect of this Agreement and the rights and duties of the parties hereto and
the interests of the Certificateholders and the Certificate Insurer hereunder,
provided that the Servicer shall notify the Trustee and the Certificate Insurer
of such proposed action and the Servicer may thereafter commence such action
only with the consent of the Certificate Insurer, unless the Trustee shall have
disapproved the proposed action by so notifying the Servicer within five
Business Days. In the event the Servicer takes such action, the reasonably
incurred legal expenses and costs of such action and any liabilities resulting
therefrom
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shall be expenses, costs and liabilities of the Trust, and the Servicer shall
be entitled to be reimbursed therefor pursuant to Sections 6.06(b)(iii) and
6.06(c)(iii) hereof.
Section 9.04. Servicer Not to Resign. Subject to the
provisions of Section 9.02 hereof, the Servicer shall not resign from the
obligations and duties hereby imposed on it as Servicer except upon consent of
the Certificate Insurer or determination that the performance of its duties
hereunder is no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee and to the Rating Agencies. No
such resignation shall become effective until a successor Servicer acceptable
to the Certificate Insurer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 11.02 hereof.
Section 9.05. Liability of the Depositor. The Depositor shall
be liable for payments in respect of the Certificates in accordance herewith
only to the extent of the obligations specifically undertaken by the Depositor
herein. The Trust Certificateholder shall be liable for all other obligations
of the Trust.
Section 9.06. Limitation on Liability of the Depositor. The
directors, officers, employees or agents of the Depositor shall not be under
any liability to the Trust, the Trustee, the Certificateholders, First Sierra,
the Servicer, the Trust Certificateholder or any other Person hereunder or
pursuant to any document delivered hereunder, it being expressly understood
that all such liability is expressly waived and released as a condition of, and
as consideration for, the Depositor's execution and delivery of this Agreement
and the issuance of the Certificates. The Depositor shall not be under any
liability to the Trust, the Trustee, the Certificateholders, First Sierra, the
Servicer, the Trust Certificateholder or any other Person for any action taken
or for refraining from the taking of any action in its capacity as Depositor
pursuant to this Agreement whether arising from express or implied duties under
this Agreement; provided, however, that this provision shall not protect the
Depositor against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith, misrepresentation or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor may rely in good faith on any document of any
kind prima facie properly executed and submitted by any other Person respecting
any matters arising hereunder.
Section 9.07. Limitation on Liability of Back-up Servicer and Others.
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(a) Neither the Back-up Servicer nor any of the directors,
officers or employees or agents of the Back-up Servicer shall be under any
liability to the Servicer, the Trustee, the Depositor, the Certificateholders
or the Certificate Insurer except as provided herein, for any action taken or
for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment not involving willful misconduct, bad
faith or negligence; provided, however, that this provision shall not protect
the Back-up Servicer against any liability resulting from its breach of any
representation or warranty made herein, nor shall this provision protect the
Back-up Servicer against any liability that would otherwise be imposed by
reason of willful misconduct, bad faith or negligence in the performance of its
duties hereunder. Neither the Back-up Servicer nor any of its directors,
officers or employees or agents shall be under any liability of any kind or
type to any Person arising from the incomplete or inaccurate contents of any
Tape provided by the Servicer. The Back-up Servicer and any director, officer,
employee or agent of the Back-up Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder or in connection with the transactions
contemplated herein. The Back-up Servicer shall not be under any obligations to
appear in, prosecute or defend any legal motion that is not incidental to its
duties to service the Leases in accordance with this Agreement and that in its
reasonable opinion may involve it in any expense or liability; provided,
however, that the Back-up Servicer may, but shall not be obligated to, take any
such action that is reasonable and that may be necessary or desirable in
respect of this Agreement and the rights and duties of the parties hereto and
the interest of the Certificateholders and the Certificate Insurer; provided
that the Back-up Servicer shall notify the Depositor, the Certificateholders,
the Certificate Insurer and the Trustee of such proposed action and Back-up
Servicer may thereafter commence such action, provided the Certificate Insurer
has consented to such action, unless the Depositor, the Certificateholders or
the Trustee shall have disapproved the proposed action by so notifying the
Back-up Servicer within five (5) Business Days. If any such proposed action is
commenced, the reasonably incurred legal expenses and costs of such action and
any liabilities resulting therefrom shall be expenses, costs and liabilities of
the Certificateholders, and the Back-up Servicer shall be entitled to be
reimbursed therefor pursuant hereto.
The Servicer shall indemnify the Back-up Servicer its
officers, directors, employees and agents for, and to hold it harmless against,
any loss, liability or expense incurred, except to the extent that such loss,
liability or expense was incurred through gross negligence or bad faith on its
part, arising out of or in connection with the acceptance or
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administration of this Trust and the performance of its duties hereunder,
including the costs and expenses of defending against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.
Section 9.08. Back-up Servicer Not to Resign.
The Back-up Servicer shall not resign from the obligations and
duties hereby imposed on it as Back-up Servicer except (a) upon determination
that the performance of its duties hereunder is no longer permissible under
applicable law, as provided in Section 11.06 hereof, (b) upon the resignation
or removal of the Trustee, to the extent the Trustee and the Back-up Servicer
are the same Person or (c) to the extent the Back-up Servicer is otherwise
unable to perform its duties hereunder. Upon the Back-up Servicer resignation
or termination pursuant to Section 11.06 hereof, the Back-up Servicer shall
comply with the provisions of this Agreement until the acceptance of
appointment by a successor Back-up Servicer. Any such successor Back-up
Servicer shall be appointed by the Trustee subject to the approval of the
Certificate Insurer.
Section 9.09. Indemnity for Liability Claims. The Holder of
the Trust Certificate on behalf of the Trust shall indemnify, defend and hold
harmless the Trustee (which shall include any of its directors, employees,
officers and agents), the Trust, the Certificateholders, the Certificate
Insurer, the Depositor and First Sierra against and from any and all costs,
expenses, losses, damages, claims and liabilities arising out of or resulting
from the use, repossession or operation of the Equipment to the extent not
covered by the Servicer's indemnity provided by Section 9.01 hereof.
Section 9.10. Liabilities. Notwithstanding any provision of
this Agreement, by entering into this Agreement, the Depositor and any Holder
of the Trust Certificate agrees to be liable, directly to the injured party,
for the entire amount of any losses, claims, damages or liabilities (other than
those losses incurred by a Class A Certificateholder or a Class B
Certificateholder in the capacity of an investor in the Class A Certificates or
the Class B Certificates) imposed on or asserted against the Trust or otherwise
arising out of or based on the arrangements created by this Agreement (to the
extent of the Trust Fund remaining after the Class A Certificateholders, the
Class B Certificateholders and the Certificate Insurer have been paid in full
are insufficient to pay such losses, claims, damages or liabilities) or the
actions of the Servicer as though this Agreement created a partnership under
the New York Uniform Partnership Act in which the Depositor and each such
Holder was a general partner.
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Section 9.11. General Limitation of Liability. In no event
shall any indemnifying party hereunder be liable to any indemnified party for
any indirect, incidental, special or consequential damages arising out of its
representations, warranties, or agreements contained in this Agreement, even if
such party has been advised of the possibility of such damages, whether any
claim for recovery is based on theories of contract, negligence or tort
(including strict liability).
ARTICLE X.
EARLY AMORTIZATION EVENTS
Section 10.01. Early Amortization Events. "Early
Amortization Event", whenever used herein, means any one of the following
events (whatever the reason for such Early Amortization Event and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority):
(a) Default in the payment to the Class A
Certificateholders or the Class B Certificateholders of any interest or
principal due hereunder in accordance with the provisions of Section 6.06 when
such payment becomes due and payable and continuance of such default for a
period of five Business Days; or
(b) Default in the performance, or breach, of any
covenant or agreement of the Depositor in this Agreement (other than a covenant
or agreement a default in whose performance or whose breach is elsewhere in
this Section 10.01 specifically dealt with), and continuance of such default or
breach for a period of 30 days after there has been given, by registered or
certified mail, to the Depositor by the Servicer, the Certificate Insurer or
the Trustee, or to the Depositor, the Certificate Insurer and the Trustee by
the Certificateholders of at least 50% in aggregate principal amount of the
outstanding Class A Certificates a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder, or if, in any such case, the Depositor have
consented in writing that any such event shall be an Early Amortization Event;
or
(c) Any proceeding shall be instituted against the
Depositor (or, if the Depositor is actively contesting the merits thereof, such
proceeding is not dismissed within 90 days) seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or any of its Indebtedness
under any law relating to bankruptcy,
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insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property, or any of
the actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or
(d) The commencement by the Depositor of a voluntary
case or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of the Depositor in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing by it of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Depositor or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its Debts generally as they become due,
or the taking of corporate action by the Depositor in furtherance of any such
action; or
(e) Judgments or orders for the payment of money
(other than such judgments or orders in respect of which adequate insurance is
maintained for the payment thereof) against the Depositor shall remain unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of 30
days or more; or
(f) There is a material breach of any of the
representations and warranties of the Depositor set forth in Section 3.01(a)
and continuance of such default or breach for a period of 30 days after there
has been given, by registered or certified mail, to the Depositor by the
Servicer, the Certificate Insurer or the Trustee, or to the Depositor, the
Certificate Insurer and the Trustee by the Certificateholders of at least 50%
in aggregate principal amount of the outstanding Class A Certificates a written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, or if, in any such
case, the Depositor have consented in writing that any such event shall be an
Early Amortization Event; or
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(g) (i) 100% minus (ii) the percentage equivalent of a
fraction (A) the numerator of which is the Class A Certificate Principal
Balance on such date (after giving effect to the payment of any amounts payable
in reduction of the Class A Certificate Principal Balance on such date) and (B)
the denominator of which is the Aggregate Discounted Contract Principal Balance
plus the amount, if any, on deposit in the New Transferred Property Funding
Account, as of the end of the immediately preceding calendar month equals less
than 12%; or
(h) A Gross Charge-Off Event has occurred and is
continuing; or
(i) A Delinquency Trigger Event has occurred and is
continuing; or
(j) An Event of Servicing Termination has been
declared and has not been cured within the time period set forth in this
Agreement; or
(k) The Certificate Insurer has made an Insured
Payment under the Certificate Insurance Policy.
Section 10.02. Declaration of Early Amortization Event. (a)
If a default occurs under Sections 10.01(a), (c), or (d), and is continuing, the
Trustee, at the direction of the Certificate Insurer, upon a Responsible Officer
receiving written notice thereof, shall promptly declare that an Early
Amortization Event has occurred, without demand, protest, or notice of any kind
all of which are expressly waived by the Depositor; provided, that, in the event
any of the events described in Section 10.01(c) or (d) shall have occurred, an
Early Amortization Event shall automatically occur, without demand, protest, or
notice of any kind all of which are expressly waived by the Depositor. If an
Early Amortization Event occurs and is continuing, other than under Section
10.01(a), (c), or (d), then and in every such case the Trustee may in the case
of any such other Early Amortization Event, or Certificateholders evidencing an
aggregate unpaid principal amount of at least 51% of the aggregate unpaid
principal amount of the Class A Certificates and the Class B Certificates may
with the consent of the Certificate Insurer instruct the Trustee to and at the
direction of the Certificate Insurer the Trustee shall, declare that an Early
Amortization Event has occurred by a notice in writing to the Depositor. The
Trustee shall simultaneously with any declaration of any Early Amortization
Event, give notice thereof to the Rating Agency, the Certificate Insurer and the
Servicer.
(b) The Depositor shall promptly (but in any event
within five Business Days) notify the Trustee upon
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receiving actual knowledge of any event which constitutes an Early Amortization
Event or would constitute an Early Amortization Event but for the requirement
that notice be given or time elapse or both.
Section 10.03. Collection of Indebtedness and Suits for
Enforcement by Trustee. If an Early Amortization Event occurs and is continuing,
the Trustee may in its discretion proceed to protect and enforce its rights and
the rights of the Certificateholders and the Certificate Insurer by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Agreement or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy. The Trustee shall notify
the Depositor, the Certificate Insurer, the Servicer and the Rating Agency of
any such action.
Section 10.04. Trustee May File Proofs of Claim. (a) In case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Depositor, or any other obligor upon the
Certificates, or the property of the Depositor, or such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the
Certificates shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Depositor for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(1) to file and prove a claim for the whole amount
of principal and interest owing and unpaid in respect of the
Certificates or any amount owing on the Leases or the other
assets in the Trust Fund and to file such other papers or
documents as may be necessary or advisable in order to have
the claims of the Trustee and any predecessor Trustee
(including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee and any
predecessor Trustee, their agents and counsel) and of the
Certificateholders allowed in such judicial proceeding; and
(2) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Certificateholder to make such payments to the Trustee and, in the event
that the
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Trustee shall consent to the making of such payments directly to the
Certificateholders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and any
predecessor Trustee, their agents and counsel, and any other amounts due the
Trustee and any predecessor Trustee under Section 6.06.
(b) Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Certificateholder or the Certificate Insurer any plan or reorganization,
agreement, adjustment or composition affecting the Certificates or the
Certificate Insurer or the rights of any Certificateholder or the Certificate
Insurer thereof or affecting the Leases or the other assets included in the
Trust Fund or to authorize the Trustee to vote in respect of the claim of any
Certificateholder in any such proceeding.
Section 10.05. Trustee May Enforce Claims Without Possession
of Certificates. All rights of action and claims under this Agreement, the
Certificates, the Leases or the other assets included in the Trust Fund may be
prosecuted and enforced by the Trustee without the possession of any of the
Certificates or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provisions for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee and any predecessor Trustee, their
agents and counsel, be for the ratable benefit of the Certificateholders and
the Certificate Insurer in respect of which such judgment has been recovered.
Section 10.06. Application of Money Collected. Any money
collected by the Trustee pursuant to this Article X shall be deposited in the
Collection Account for disbursement in accordance with the provisions of
Article VI.
Section 10.07. Limitation on Suits. No Certificateholder
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Agreement, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(a) there is a continuing Early Amortization Event and
such Certificateholder has previously given written notice to the Trustee of a
continuing Early Amortization Event;
(b) the Certificateholders holding Certificates
evidencing at least 51% of the aggregate unpaid principal amount of the Class A
Certificates and the Class B Certificates shall have made written request to
the Trustee to
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institute proceedings in respect of such Early Amortization Event in its own
name as Trustee hereunder;
(c) such Certificateholder or Certificateholders have
offered to the Trustee indemnity satisfactory to it against the costs, expenses
and liabilities to be incurred in compliance with such request;
(d) the Trustee, for 60 days after its receipt of such
notice, request and offer of indemnity, has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the
Certificateholders of a majority in aggregate principal amount of the
outstanding Certificates;
it being understood and intended that no one or more Investor Certificateholders
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Agreement to affect, disturb or prejudice the rights of any
other Certificateholders, or to obtain or to seek to obtain priority or
preference over any other Certificateholders or to enforce any right under this
Agreement, except in the manner herein provided and for the ratable benefit of
all the Certificateholders.
Section 10.08. Restoration of Rights and Remedies. If the
Trustee, the Certificate Insurer or any Certificateholder has instituted any
proceeding to enforce any right or remedy under this Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to the Certificate Insurer or such
Certificateholder, then and in every such case, subject to any determination in
such proceeding, the Depositor, the Certificate Insurer or the Trustee and the
Certificateholders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee, the
Certificate Insurer and the Certificateholders shall continue as though no such
proceeding had been instituted.
Section 10.09. Rights and Remedies Cumulative. Except as
otherwise provided in Section 8.04 with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Certificates, no right or remedy herein
conferred upon or reserved to the Trustee or to the Certificateholders or to
the Certificate Insurer is intended to be exclusive of any other right or
remedy and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or
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otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 10.10. Delay or Omission Not Waiver. No delay or
omission of the Trustee, the Certificate Insurer or of any Certificateholder to
exercise any right or remedy accruing upon any Early Amortization Event shall
impair any such right or remedy or constitute a waiver of any such Early
Amortization Event or an acquiescence therein. Every right and remedy given by
this Article X or by law to the Trustee, the Certificate Insurer or to the
Certificateholders may be exercised from time to time, and as often as may be
deemed expedient, as permitted under the terms hereof, by the Trustee, the
Certificate Insurer or by the Certificateholders, as the case may be.
Section 10.11. Control by Certificateholders. The
Certificate Insurer shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; provided, that (a) such
direction shall not be in conflict with any rule of law or with this Agreement,
and (b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 10.12. Waiver of Past Defaults. The Certificate
Insurer may, on behalf of Certificateholders of not less than a majority in
aggregate principal amount of the outstanding Certificates waive, any past
default hereunder and its consequences, except a default:
(a) in the payment of the principal of or interest on
any Certificate, or
(b) in respect of a covenant or provision hereof which
under Article XII cannot be modified or amended without the consent of a
specified percentage of the Class of Certificates affected, or
(c) described under Section 10.01(c) or (d).
Upon any such waiver, such default shall cease to exist, and any Early
Amortization Event arising therefrom shall be deemed to have been cured, for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 10.13. Undertaking for Costs. All parties to this
Agreement agree, and each Certificateholder by his acceptance of an Certificate
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Agreement,
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or in any suit against the Trustee for any action taken, suffered or omitted by
it as Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees and disbursements,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 10.13 shall not apply to any suit instituted by the
Depositor, to any suit instituted by the Trustee, to any suit instituted by the
Certificate Insurer or any Certificateholder or group of Certificateholders
holding in the aggregate more than 10% in principal amount of the outstanding
Certificates, or to any suit instituted by the Certificate Insurer or any
Certificateholder for the enforcement of the payment of any principal of or
interest on any Certificate.
Section 10.14. Waiver of Stay or Extension Laws. The
Depositor covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Depositor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
ARTICLE XI.
SERVICING TERMINATION; BACK-UP SERVICING TERMINATION
Section 11.01. Events of Servicing Termination. (a) If any
of the following events (each an "Event of Servicing Termination") shall occur
and be continuing:
(i) Any failure by the Servicer to make any
payment, deposit, transfer or delivery required to be made hereunder
(other than with respect to the Monthly Statement, as to which the
remedy is set forth in Section 11.01(a)(ii) hereof) that continues
unremedied for a period of three Business Days after the date such
payment, deposit, transfer or delivery is required to be made;
provided, that the Servicer shall be granted a three Business Day
grace period on not more than one occasion during each Collection
Period;
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(ii) Any failure by the Servicer to submit a
Monthly Statement pursuant to Section 6.07 hereof that continues
unremedied for a period of three Business Days after the earlier of
the date upon which (A) the Certificate Insurer or a Certificateholder
provides written notification to the Servicer of such failure or (B)
the Depositor becomes aware that the Certificate Insurer and the
Certificateholders have not received a copy of the Monthly Statement
in accordance with the provisions hereof;
(iii) Any failure on the part of the Servicer duly
to observe or perform in any material respect any other covenants or
agreements of the Servicer set forth in the Certificates or in this
Agreement, as the case may be, or any breach of a representation or
warranty of the Servicer set forth in Section 3.02 of this Agreement,
which failure or breach (A) materially and adversely affects the
rights of the Trustee, Certificateholders, the Certificate Insurer or
the Depositor and (B) continues unremedied for a period of 30 days
after the earlier to occur of (x) the date on which written notice of
such failure or breach, requiring the situation giving rise to such
failure or breach to be remedied, shall have been given to a Servicing
Officer of the Servicer by the Trustee or to a Servicing Officer of
the Servicer or a Responsible Officer of the Trustee by the Depositor
or any Holder of Certificates or (y) the date on which any Servicing
Officer is required pursuant to the terms of this Agreement to provide
notice to the Certificateholders and the Certificate Insurer, of any
such failure or breach;
(iv) The Servicer shall consent to the appointment
of a custodian, receiver, trustee or liquidator (or other similar
official) of itself, or of a substantial part of its property, or
shall admit in writing its inability to pay its debts generally as
they come due, a court of competent jurisdiction shall determine that
the Servicer is generally not paying its debts as they come due or the
Servicer shall make a general assignment for the benefit of creditors;
(v) The Servicer shall file a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking
reorganization in a proceeding under any bankruptcy laws (as now or
hereafter in effect) or an answer admitting the material allegation of
a petition filed against the Servicer in any such proceeding, or the
Servicer shall, by voluntary petition, answer or consent, seek relief
under the provisions of any now existing or future bankruptcy or other
similar law providing for the reorganization or winding up of debtors,
or providing for
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an agreement, composition, extension or adjustment with its creditors;
(vi) An order, judgment or decree in excess of
$500,000 shall be entered in any proceeding and any such order,
judgment or decree or appointment or sequestration shall remain in
force undismissed, unstayed or unvacated for a period of 90 days after
the date of entry thereof;
(vii) A petition against the Servicer in a
proceeding under applicable bankruptcy laws or other insolvency laws,
as now or hereafter in effect, shall be filed and shall not be stayed,
withdrawn or dismissed within 60 days thereafter, or if, under the
provisions of any law providing for reorganization or winding-up of
debtors which may apply to the Servicer, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the
Servicer, or any substantial part of its property, and such
jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of 60 days;
(viii) Any assignment by the Servicer to a delegate
of its duties or rights hereunder, except as specifically permitted
hereunder, or any attempt to make such an assignment; or
(ix) a Servicer Trigger Event (as defined in the
Insurance Agreement) shall occur and be continuing;
then, and in each and every case, so long as an Event of Servicing Termination
shall not have been remedied within any applicable period set forth above, as
applicable, the Trustee shall, at the direction of the Certificate Insurer or
may, with the consent of the Certificate Insurer, by notice (the "Servicer
Termination Notice") then given in writing to the Servicer, terminate all, but
not less than all, of the rights and obligations of the Servicer under this
Agreement; provided, that, in the event any of the events described in Sections
11.01(a)(iv) or 11.01(a)(v) shall have occurred, an Event of Servicing
Termination shall automatically occur, without demand, protest, or notice of
any kind all of which are expressly waived by the Depositor. The Trustee shall
furnish a copy of any Servicer Termination Notice to the Rating Agencies.
(b) On and after the time the Servicer receives a
Servicer Termination Notice pursuant to this Section 11.01, all authority and
power of the Servicer under this Agreement, whether with respect to the
Certificates or the Leases or otherwise, shall pass to and be vested in the
successor Servicer acceptable to the Certificate Insurer and appointed pursuant
to Section 11.02 hereof and, without limitation, such
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successor Servicer is hereby authorized and empowered to execute and deliver,
on behalf of the Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such Servicer
Termination Notice, whether to complete the transfer of the Leases and related
documents or otherwise.
The Servicer agrees to cooperate with the Trustee and the
successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer hereunder, including, without limitation, the transfer
to the successor Servicer for administration by it of all cash amounts that
shall at the time be held by the Servicer for deposit, or have been deposited
by the Servicer, in the Collection Account, the Lockbox Account or the Security
Deposit Account or thereafter received with respect to Leases and in accordance
therewith, the Certificate Insurer shall have the right to access amounts on
deposit in the Lockbox Account. To assist the successor Servicer in enforcing
all rights under Insurance Policies to the extent that they relate to the
Leases, the Servicer, at its own expense, shall transfer its electronic records
relating to such Leases to the successor Servicer in such electronic form as
the successor Servicer may reasonably request and shall transfer the related
Lease Files and all other records, correspondence and documents relating to the
Leases that it may possess to the successor Servicer in the manner and at such
times as the successor Servicer shall reasonably request. In addition to any
other amounts that are then payable to the Servicer under this Agreement, the
Servicer shall be entitled to receive reimbursement for any unreimbursed
Servicer Advances made during the period prior to the delivery of a Servicer
Termination Notice pursuant to this Section 11.01.
Section 11.02. Trustee to Act; Appointment of Successor. (a)
On and after the time the Servicer receives a Servicer Termination Notice
pursuant to Section 11.01, the Back-up Servicer shall without further action be
the successor in all respects to the Servicer in its capacity as Servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the Back-up Servicer shall not be liable for any acts or omissions of the
Servicer or for any breach by either the Servicer or First Sierra of any of
their respective representations and warranties contained herein or in any
related document or agreement. As compensation for acting as Servicer
hereunder, the Back-up Servicer shall be entitled to the Servicer Fees,
Servicing Charges and other compensation (whether payable out of the Collection
Account or otherwise) as the Servicer would have been entitled to
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hereunder if no such Servicer Termination Notice had been given.
(b) Notwithstanding the foregoing, if (x) the Back-up
Servicer is not legally permitted to act as Servicer under any applicable law
and provides to the Depositor, the Certificate Insurer and the Trustee an
Opinion of Counsel to such effect the Trustee shall without further action be
the successor in all respects to the Servicer in its capacity as Servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that (i) the Trustee shall not assume any obligations of the Servicer pursuant
to Article VII and Article IX hereof, (ii) the Trustee shall not be required to
make any Servicer Advance if such Servicer Advance would be prohibited by
applicable law or if the Trustee in the exercise of its sole discretion
determines that such Servicer Advance would not be reimbursed and (iii) the
Trustee shall not be liable for any acts or omissions of the Servicer or for
any breach by either the Servicer or First Sierra of any of its representations
and warranties contained herein or in any related document or agreement. As
compensation for acting as Servicer hereunder, the Trustee shall be entitled to
the Servicer Fees, Servicing Charges and other compensation (whether payable
out of the Collection Account or otherwise) as the Servicer would have been
entitled to hereunder if no such Servicer Termination Notice had been given.
(c) Notwithstanding the above, the Trustee may
appoint, or petition a court of competent jurisdiction to appoint, any
established financial institution reasonably acceptable to the Certificate
Insurer and the Majority Holders, which has a net worth of, or is a member of a
consolidated group of entities which has a net worth of, not less than
$10,000,000 and whose regular business includes the servicing of receivables of
a similar nature to the Leases, as the successor to the Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or
liabilities of the Servicer hereunder. The Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Trustee shall inform the Rating Agencies of
the identity of the successor Servicer.
(d) Notwithstanding the foregoing, if (i) the Trustee
is not legally permitted to act as Servicer under any applicable law and
provides to the Depositor an Opinion of Counsel to such effect or (ii) the
Trustee is unwilling so to act, then the Trustee and the Depositor collectively
shall use their best efforts to identify a successor, other than the Trustee,
to the Servicer which is willing to act as Servicer
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under the terms and conditions specified herein and for a fee equal to or less
than the Servicer Fee. In any event the Trustee shall, pursuant to Section
11.02(b) hereof, act as successor Servicer until a different successor Servicer
is appointed.
Section 11.03. Notification to Certificateholders. The
Servicer shall promptly notify the Trustee in writing of any Event of Servicing
Termination upon actual knowledge thereof by a Servicing Officer. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article XI, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Depositor and the Rating Agencies.
Section 11.04. Waiver of Past Defaults. The Certificate
Insurer may, on behalf of the Certificateholders, waive any default by the
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Event of Servicing Termination arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon except
to the extent expressly waived.
Section 11.05. Effects of Termination of Servicer. (a) Upon
the appointment of the successor Servicer, the Servicer shall immediately remit
any Scheduled Payments, Final Lease Payments, Residual Receipts, Defaulted
Residual Receipts or Overdue Payments that it may receive pursuant to any Lease
or otherwise to the successor Servicer for the benefit of the Trust after such
date of appointment.
(b) After the delivery of a Servicer Termination
Notice, the former Servicer shall have no further obligations with respect to
the management or servicing of the Transferred Property or the enforcement,
custody or collection of the Leases, and the successor Servicer shall have all
of such obligations, except that the former Servicer will transmit or cause to
be transmitted directly to the successor Servicer for the benefit of the Trust,
promptly upon receipt and in the same form in which received, any amounts held
by the former Servicer (properly endorsed where required for the successor
Servicer to collect them) received as payments upon or otherwise in connection
with the Leases. The former Servicer's indemnification obligations pursuant to
Section 9.04 hereof will survive the termination of the Servicer hereunder but
will not extend to any acts or omissions of a successor Servicer.
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(c) Notwithstanding Section 10.05(b) hereof, the
Servicer hereby agrees that in the event that it no longer continues to perform
as Servicer hereunder, the Servicer will instruct First Sierra pursuant to the
Sale Agreement to exercise any rights under any Lease or guaranty thereof or
Insurance Policy for the benefit of the Trustee, the Trust and the
Certificateholders upon the request of the Trustee.
(d) An Event of Servicing Termination shall not affect
the rights and duties of the parties hereunder (including, but not limited to,
the obligations and indemnities of the Servicer pursuant to Article VII,
Sections 9.01 and 11.08 hereof) other than those relating to the management,
servicing, custody or collection of the Leases.
Section 11.06. Events of Back-up Servicing Termination.
(a) If any one or more of the following events (each
an "Event of Back-up Servicing Termination") shall occur and be continuing:
(i) Any failure on the part of the Back-up Servicer duly to
observe or perform in any material respect any other covenants or agreements of
the Back-up Servicer set forth in this Agreement (other than as a result of the
failure by the Servicer to provide the Back-up Servicer with the computer tape
or the Monthly Statement is accordance with the provisions of their Agreement),
which failure or breach (A) materially and adversely affects the rights of the
Depositor, the Trustee, the Certificate Insurer or the Certificateholders and
(B), if such failure is curable, continues unremedied for a period of thirty
(30) days after the earlier to occur of (1) knowledge of such failure or breach
by a Responsible Officer and (2) the date on which the written notice of such
failure or breach, requiring the situation giving rise to such breach or
non-conformity to be remedied, shall have been given to the Back-up Servicer by
the Servicer, the Certificate Insurer or the Trustee; or,
(ii) After the receipt of an effective Servicer Termination
Notice by the Trustee and the passing and vesting of the authority, power,
rights and responsibilities described in Section 11.02(a) above in the Back-up
Servicer, an Event of Servicing Termination described in Section 11.01(a)
hereof with the Back-up Servicer then being considered the Servicer;
(iii) The Back-up Servicer shall consent to the appointment of
a custodian, receiver, trustee or liquidator (or other similar official) of
itself, or of a substantial part of its property, or shall admit in writing its
inability to pay its debts generally as they come due, a court of competent
jurisdiction shall determine that the Back-up
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Servicer is generally not paying its debts as they come due or the Back-up
Servicer shall make a general assignment for the benefit of creditors;
(iv) The Back-up Servicer shall file a voluntary petition in
bankruptcy or a voluntary petition or an answer seeking reorganization in a
proceeding under any bankruptcy laws (as now or hereafter in effect) or an
answer admitting the material allegation of a petition filed against the
Back-up Servicer in any such proceeding, or the Back-up Servicer shall, by
voluntary petition, answer or consent, seek relief under the provisions of any
now existing or future bankruptcy or other similar law providing for the
reorganization or winding up of debtors, or providing for an agreement,
composition, extension or adjustment with its creditors; or
(v) Any representation or warranty made by the Back-up
Servicer in this Agreement proves to have been incorrect in any material
respect when made, which has a material adverse effect on the Certificate
Insurer and which continues to have a material adverse effect or be incorrect
in any material respect for a period of 30 days after the Back-up Servicer has
knowledge of such inaccuracy or written notice of such inaccuracy requiring it
to be remedied has been given by the Certificate Insurer or the Trustee;
then, and in each and every such case, so long as such Event of Back-up
Servicing Termination shall not have been remedied within the applicable grace
period set forth above, the Trustee shall, at the direction of the Certificate
Insurer, or may, with the consent of the Certificate Insurer, by notice (the
"Back-up Servicer Termination Notice") then given in writing to the Back-up
Servicer, terminate all, but not less than all, of the rights and obligations
of the Back-up Servicer under this Agreement. Such notice shall state the
effective date of the termination, which shall not be prior to the acceptance
of the appointment by the successor Back-up Servicer.
(b) If a Back-up Servicer Termination Notice is received by
the Back-up Servicer while it is performing under Section 5.12(a) above, the
Back-up Servicer agrees to cooperate with the Depositor, the Trustee, the
Certificate Insurer, the successor Servicer or the successor Back-up Servicer
in effecting the termination of the Back-up Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the successor
Servicer or the successor Back-up Servicer of all data then in the possession
of the Back-up Servicer; all at the Back-up Servicer's expense.
(c) If a Back-up Servicer Termination Notice is received by
the Back-up Servicer while it is performing under
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Section 5.12(b) above, the Back-up Servicer agrees to perform the obligations
of the outgoing Servicer in accordance with this Agreement.
Section 11.07. Waiver of Defaults.
The Trustee with the prior written consent of the Certificate
Insurer, or the Certificate Insurer may waive any events permitting removal of
the Back-up Servicer under Section 11.06 hereof. Upon any waiver of a past
default, such default shall cease to exist, and any Event of Back-up Servicing
Termination arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived.
ARTICLE XII.
THE TRUSTEE
Section 12.01. Duties of Trustee. (a) The Trustee undertakes
to perform such duties and only such duties as are specifically set forth in
this Agreement. If an Event of Servicing Termination of which a Responsible
Officer of the Trustee shall have actual knowledge has occurred and has not
been cured or waived, the Trustee shall exercise such of the rights and powers
vested in it by this Agreement, and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee that are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform as to form to the requirements of this
Agreement. No acceptance of, or reliance on, any such item by the Trustee shall
constitute a representation by the Trustee of the enforceability or sufficiency
of such item.
(c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own grossly negligent action, its
own grossly negligent failure to act or its own willful misconduct; provided,
however, that:
(i) Prior to the occurrence of an Event of
Servicing Termination, and after the curing of all such Events of
Servicing Termination that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this
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Agreement; the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this
Agreement; no implied covenants or obligations shall be read into this
Agreement against the Trustee; and in the absence of bad faith on the
part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee
and, if specifically required to be furnished pursuant to any
provision of this Agreement, conforming to the requirements of this
Agreement;
(ii) The Trustee shall not be liable for an error
of judgment made in good faith by a Responsible Officer of the Trustee
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable
with respect to any action taken, suffered or omitted to be taken by
it in good faith in accordance with this Agreement, pursuant to the
direction of the Certificates evidencing Percentage Interests in the
related Class of not less than 25%, relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising, suffering or omitting to take any trust or
power conferred upon the Trustee, under this Agreement; and
(iv) The Trustee shall not be charged with
knowledge of any failure by the Servicer to comply with the
obligations of the Servicer referred to in Section 10.01(a)(i) hereof
or any other Event of Servicing Termination or any Early Amortization
Event, Restricting Event or Issuer Restricting Event unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure or event or the Trustee receives written notice of such
failure or event from the Servicer, the Depositor, the Certificate
Insurer or any Certificateholder.
(v) The Trustee shall have no duty to monitor the
performance of the Servicer (as custodian or otherwise), nor shall it
have any liability in connection with the malfeasance or nonfeasance
by the Servicer; provided, however, that the foregoing shall not
diminish or in any way modify any obligation of the Back-up Servicer
set forth herein. The Trustee shall have no liability in connection
with compliance of the Servicer or the Depositor with statutory or
regulatory requirements related to the Leases or the related
Equipment. The Trustee shall not make or be deemed to
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have made any representations or warranties with respect to the Leases
or related Equipment or the validity or sufficiency of any assignment
of the Leases to the Trust or the Trustee. The Trustee shall have no
obligation or liability in respect of the maintenance of casualty or
liability insurance in connection with the Leases or the related
Equipment.
(d) The Trustee shall not be required to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if there is reasonable ground for believing that the repayment of such funds or
indemnity satisfactory to it against such risk or liability is not assured to
it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Servicer in accordance with
the terms of this Agreement.
(e) On each Determination Date, the Trustee shall give
notice, by telecopy, to a Servicing Officer of the Servicer and the Certificate
Insurer if the total amount then on deposit in the Collection Account is less
than the amount indicated in the Monthly Statement.
(f) The Trustee shall immediately notify the
Certificate Insurer of: (a) any proposed change herein or supplement hereto;
(b) the occurrence of any Early Amortization Event, Event of Servicing
Termination or Event of Back-up Servicing Termination actually known to a
Responsible Officer of the Trustee; (c) any proposed change of the Trustee
hereunder; (d) any matter to be put to the Certificateholders for election
hereunder; (e) any proposed exercise by the Certificateholders of any option,
vote, right, power or the like hereunder; and (f) any other matter, notice of
which is required hereunder to be given to any of the Certificateholders or to
the Trustee.
Section 12.02. Eligible Investments. The Servicer shall direct
the Trustee to invest in Eligible Investments, as further specified from time
to time by written notice to the Trustee executed by a Servicing Officer, any
cash amounts deposited in the Collection Account and the Security Deposit
Account pursuant to the terms of this Agreement, immediately upon deposit of
any such cash amounts; provided, however, that each such Eligible Investment
(i) shall mature no later than the Business Day immediately preceding the
Payment Date in respect of the Collection Period during which such deposit was
made and (ii) shall not be sold or disposed of prior to its
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maturity. The Trustee shall not be liable or responsible for the selection of
or losses on any investments made by it pursuant to and in compliance with such
instructions of the Servicer pursuant to this Section 12.02. The Trustee shall
have no obligation to initiate any investments in the absence of such written
direction.
Section 12.03. Trustee's Assignment of Leases. If in any
enforcement suit or legal proceeding it is held, or in connection with the
collection of a Defaulted Lease the Servicer or its assigns reasonably
anticipate, that the Servicer or its assigns may not or will not be able to
enforce a Lease on the ground that neither the Servicer nor its assigns are a
real party in interest or a holder entitled to enforce the Lease, then the
Trustee shall, at the Servicer's or its assigns' expense, take such steps as
the Trustee deems necessary to enforce the Lease, including (i) bringing suit
in the Trustee's name or the names of the Certificateholders and the
Certificate Insurer and (ii) executing and delivering all such instruments or
documents as shall be required to transfer title to a Lease to the Servicer or
its assigns or otherwise enforce such Lease.
Section 12.04. Certain Matters Affecting the Trustee. Except
as otherwise provided in Section 12.01:
(i) The Trustee may conclusively rely and shall
be fully protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel or advice shall constitute full and complete
authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such Opinion of Counsel or advice;
(iii) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement,
or to institute, conduct or defend any litigation hereunder or in
relation hereto, at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement
unless such Certificateholders shall have offered to the Trustee such
security or indemnity satisfactory to it against the costs, expenses,
and liabilities that may be incurred therein or thereby that are
reasonable in the opinion of the Trustee; provided,
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however, that nothing contained herein shall relieve the Trustee of
the obligations, upon the occurrence of an Event of Servicing
Termination (that has not been cured), to exercise such of the rights
and powers vested in it by this Agreement and to use the same degree
of skill and care in their exercise as a prudent Person would exercise
under the circumstances in the conduct of such Person's own affairs;
(iv) The Trustee shall not be personally liable
for any action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
(v) Prior to the occurrence of an Event of
Servicing Termination of which a Responsible Officer of the Trustee
shall have actual knowledge and after the curing of all Events of
Servicing Termination that may have occurred, the Trustee shall not be
bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing to do so by the Certificate
Insurer or by the Holders of Applicable Certificates evidencing
Percentage Interests of not less than 25%; provided, however, that if
the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require indemnity satisfactory to it
against such cost, expense or liability as a condition to so
proceeding. The reasonable expense of every such examination shall be
paid by the requesting party or, if paid by the Trustee, shall be
reimbursed by the Servicer upon demand. Nothing in this clause (v)
shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the
Lessees; and
(vi) The Trustee may execute any of the trusts or
powers or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian. The Trustee shall not be
responsible for the misconduct, negligence or for the supervision of
any of the Trustee's agents or attorneys appointed with due care by
the Trustee hereunder or that of First Sierra, the Servicer or the
Depositor.
Section 12.05. Trustee Not Liable for Certificates or Leases.
The Certificates do not represent an obligation
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issued by the Trustee or any Affiliate thereof. The promise to pay the
Certificates according to their terms and the terms of this Agreement set forth
in the Certificates and in Section 2.05 hereof provides recourse to the Trust
Property only. The Trustee does not assume any responsibility for the accuracy
of the statements herein or in the Certificates (other than the certificate of
authentication on the Certificates). The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of the Certificates (other
than the certificate of authentication on the Certificates) or of any Lease or
related document. The Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity or enforceability of
any security interest in any Equipment or any Lease, to the perfection or
priority thereof, or to the efficacy of the Trust or any portion thereof to pay
any Certificate, the existence or validity of any Lease, the validity of the
assignment of any Lease or the related Transferred Property to the Trust or of
any intervening assignment, the review of any Lease, any Lease File or the
Computer Tape (it being understood that neither the Trustee nor any of its
agents have reviewed or intend to review such matters, the sole responsibility
for such review being vested in the Depositor), the completeness of any Lease
File, the receipt by it or its custodian of any Lease, the performance or
enforcement of any Lease, subject to Section 5.01(b) hereof, the compliance by
the Depositor with any covenant or the breach by First Sierra or the Depositor
of any warranty or representation made hereunder, under the Sale Agreement or
in any related document or the accuracy of any such warranty or representation,
any investment of monies in the Collection Account or the Security Deposit
Account (except to the extent that the Trustee, in its individual capacity, is
an obligor with respect to any such investment) or any loss resulting
therefrom, the acts or omissions of the Servicer, or any Lessee, any action of
the Servicer taken in the name of the Trustee, any action by the Trustee taken
at the instruction of the Servicer or the preparation and filing of tax returns
for the Trust. No recourse shall be had for any claim based on any provision of
this Agreement, the Certificates or any Lease or assignment thereof against
Bankers Trust Company in its individual capacity, and Bankers Trust Company
shall not have any personal obligation, liability or duty whatsoever to any
Certificateholder or any other Person with respect to any such claim, and any
such claim shall be asserted solely against the Trust or any indemnitor who
shall furnish indemnity as provided herein, except for such liability as is
determined to have resulted from its own gross negligence or willful
misconduct. The Trustee shall not be accountable for the use or application by
First Sierra or the Depositor of any of the Certificates or of the proceeds of
such Certificates or for the use or application of any funds paid to the
Servicer in respect of the Leases.
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Section 12.06. Trustee May Own Certificates. The Trustee in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights as it would have if it were not Trustee,
subject to the definition of the term "Certificateholder" in Annex A hereto.
Section 12.07. Trustee's Fees and Expenses. (a) The Servicer
on behalf of the Holder of the Trust Certificate agrees:
(i) to pay to the Trustee, pursuant to Section
6.06(b)(vi) or 6.06(c)(vi), as applicable, on each Payment Date
reasonable compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(ii) except to the extent otherwise expressly
provided herein, to reimburse the Trustee, pursuant to Section
6.06(b)(vii) or 6.06(c)(vii), as applicable, upon its request for all
reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Agreement
(including the reasonable compensation and expenses and disbursements
of any of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its gross negligence
or willful misconduct; provided, that for purposes of this clause
(ii), such expenses, disbursements and advances shall be limited to an
aggregate amount of $75,000; and
(iii) to reimburse the Trustee, pursuant to Section
6.06(b)(xii) or 6.06(c)(xv), as applicable, for all reasonable
expenses, disbursements and advances that would have been paid
pursuant to Section 12.07(a)(ii) but for the $75,000 limitation.
(b) The Servicer's obligations under this Section
12.07 shall survive the termination of this Agreement or the earlier
resignation or removal of the Trustee. The Trustee shall not be entitled to any
other or additional compensation or reimbursement, except as expressly provided
herein or as otherwise agreed from time to time.
(c) Subject to Section 12.09, the failure by the
Servicer to pay to the Trustee any compensation or other expenses shall not
relieve the Trustee of its obligations hereunder.
(d) In the event the Trustee performs services or
incurs expenses in the context of a proceeding described in Sections
11.01(a)(iv), 11.01(a)(v) or 11.01(a)(vii), the fees for such services and such
expenses shall be considered
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expenses of administration for the purposes of any bankruptcy laws or laws
relating to creditors rights generally.
Section 12.08. Eligibility Requirements for Trustee. The
Trustee hereunder shall at all times be a corporation acceptable to the
Certificate Insurer having its principal office in a State, organized and doing
business under the laws of any State or the United States of America,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or State authority; provided, however, that no entity
shall qualify as Trustee hereunder to the extent that such qualification would,
in itself, affect any then current rating of the Class A Certificate or the
Class B Certificates by the Rating Agencies. If such corporation publishes
reports of condition at least annually, pursuant to law or the requirements of
the aforesaid supervising or examining authority, then for the purpose of this
Section 12.08, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. Any successor Trustee's deposit ratings shall
be at least "investment grade" by the Rating Agencies. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 12.08, the Trustee shall resign immediately in the manner and with the
effect specified in Section 12.09 hereof.
Section 12.09. Resignation or Removal of Trustee. (a) The
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer, the Depositor, the
Certificate Insurer and each Certificateholder which resignation will not
become effective until such time as a successor Trustee has been appointed in
accordance with the provisions of this Section 12.09. Upon receiving such
notice of resignation, the Servicer shall promptly appoint a successor Trustee
acceptable to the Certificate Insurer by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be
eligible in accordance with the provisions of Section 12.08 and shall fail to
resign after written request therefor by the Servicer, the Certificate Insurer,
the Holders of Applicable Certificates evidencing Percentage Interests of more
than 25%, or if at any time the Trustee shall be legally unable to act, or
shall be adjudged a bankrupt or insolvent, or a receiver of
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the Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation, or liquidation, then the Servicer may
with the consent of the Certificate Insurer and shall at the direction of the
Certificate Insurer, or Holders of Applicable Certificates evidencing
Percentage Interests of more than 25% of the related Class may with the consent
of the Certificate Insurer remove the Trustee. Notwithstanding anything in this
Agreement to the contrary, the Certificate Insurer shall have the right to
remove the Trustee for "cause." For purposes of this section, "cause" shall
mean (i) the gross negligence or willful misconduct of the Trustee in the
performance of its duties under this Agreement or the Insurance Agreement or
(ii) the failure or unwillingness of the Trustee to perform its duties under
this Agreement or the Insurance Agreement; provided, however, the Certificate
Insurer may not remove the Trustee for "cause" pursuant to clause (ii) of the
immediately preceding sentence unless is has (A) consulted with the Trustee in
good faith and provided notice to the Trustee regarding any actions or
omissions of the Trustee under this Agreement or the Insurance Agreement which
the Certificate Insurer believes constitutes a failure or unwillingness of the
Trustee to perform its duties under this Agreement or the Insurance Agreement
and (B) provided the Trustee with the opportunity to remedy such failure or
unwillingness within 5 Business Days (or such longer period to which the
Certificate Insurer may reasonably consent) following the receipt by the
Trustee of notice thereof. In the event that the Trustee is removed by the
Certificate Insurer pursuant to this Section, the removal and substitution
procedures set forth in Sections 12.09 and 12.10 hereof shall be followed. If
the Certificate Insurer, Servicer or Certificateholders remove the Trustee, the
Servicer or such Certificateholders shall promptly appoint a successor Trustee
(acceptable to the Certificate Insurer) by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor Trustee.
(c) Any resignation or removal of the Trustee and
appointment of a successor Trustee pursuant to this Section 12.09 shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 12.10 hereof. Notice of the resignation or removal of the
Trustee shall be given in writing to the Rating Agencies. In the event no
successor Trustee has been appointed within 30 days of the resignation or
removal of the Trustee, the Trustee may petition a court of competent
jurisdiction to appoint a successor Trustee.
Section 12.10. Successor Trustee. (a) Any successor Trustee
appointed as provided in Section 12.09 hereof shall execute, acknowledge and
deliver to the Servicer,
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the Depositor and predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with like effect as if
originally named as Trustee. The predecessor Trustee shall deliver to the
successor Trustee all documents and statements held by it hereunder. The
Servicer, the Depositor and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations. The predecessor Trustee shall not be
liable for the acts or omissions of any successor Trustee hereunder.
(b) No successor Trustee shall accept appointment as
provided in this Section 12.10 unless at the time of such acceptance such
successor Trustee shall be acceptable to the Certificate Insurer and eligible
as the Trustee under the provisions of Section 12.08 hereof, and as a successor
Servicer under the provisions of Section 11.02 hereof.
(c) Upon acceptance of appointment by a successor
Trustee as provided in this Section 12.10, the Servicer shall mail notice of
the succession of such Trustee hereunder to the Certificate Insurer and all
Certificateholders at their addresses as shown in the Certificate Register. If
the Servicer fails to mail such notice within 10 days after acceptance of
appointment by such successor Trustee, then the successor Trustee shall cause
such notice to be mailed at the expense of the Servicer.
Section 12.11. Merger or Consolidation of Trustee. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion,
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation shall be eligible
under the provisions of Section 12.08 hereof, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 12.12. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust or any Equipment may at the time be located, the Servicer,
the Depositor and the Trustee, acting jointly, shall
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with the consent of the Certificate Insurer, or the Certificate Insurer shall
have the power from time to time, and shall execute and deliver all instruments
to appoint one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Certificateholders and the
Certificate Insurer, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 12.12, such powers, duties,
obligations, rights and trusts as the Servicer, the Depositor and the Trustee
may consider necessary or desirable; provided, however, that if there is a
conflict between the Depositor, Trustee and the Certificate Insurer regarding
the appointment of a co-trustee or separate trustee, the Certificate Insurer
shall prevail. If the Servicer shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, or in the case an Event
of Servicing Termination shall have occurred and be continuing, the Trustee and
Depositor, acting jointly, shall have the power to make such appointment;
provided, however, that if the Depositor shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility
as a successor Trustee under Section 12.08 hereof, and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 12.12 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust
Property or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee
but solely at the direction of the Trustee;
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(ii) No trustee hereunder shall be personally
liable by reason of any act or omission of any other trustee
hereunder; and
(iii) The Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Trustee shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article XII. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee and a copy thereof given to the Servicer and the Depositor.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, then all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
(e) The Servicer shall be responsible for the payment
of any fees or expenses of any separate trustee or co-trustee.
Section 12.13. Trustee May Enforce Claims Without Possession
of Certificate. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders in respect of which such
judgment has been recovered.
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Section 12.14. Suits for Enforcement. In case an Event of
Servicing Termination as defined in Section 11.01 hereof or other default by
the Servicer hereunder shall occur and be continuing, the Trustee, in its
discretion, may, subject to the provisions of Section 11.04 hereof, proceed to
protect and enforce its rights and the rights of the Certificateholders and the
Certificate Insurer under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy, as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders and the Certificate Insurer.
Section 12.15. Representations and Warranties of Trustee. The
Trustee represents and warrants for the benefit of the Certificateholders and
the Certificate Insurer that:
(a) Organization and Good Standing. The Trustee is a
banking corporation duly organized, validly existing and in good standing under
the laws of the state of New York.
(b) Authorization. The Trustee has the power,
authority and legal right to execute, deliver and perform this Agreement, and
the execution, delivery and performance of this Agreement have been duly
authorized by the Trustee by all necessary corporate action.
(c) Binding Obligations. This Agreement, assuming due
authorization, execution and delivery by all other parties thereto, constitutes
the legal, valid and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws (whether statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and the rights of trust companies in
particular and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought, whether in a proceeding at law or in equity.
Section 12.16. Tax Returns. In the event the Trust shall be
required to file tax returns, the Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust and shall remit such
returns to the Trustee for signature at least five days before such returns are
due to be filed. The Trustee, upon request, will furnish the Servicer with all
such information known to the Trustee as
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may be reasonably required in connection with the preparation of all tax
returns of the Trust, and shall, upon request, execute such returns. In no
event shall the Trustee in its individual capacity be liable for any
liabilities, costs or expenses of the Trust, the Certificateholders, Depositor
or the Servicer arising under any tax law or regulation, including, without
limitation, federal, state or local income or excise taxes or any other tax
imposed on or measured by income (or any interest or penalty with respect
thereto or arising from any failure to comply therewith).
ARTICLE XIII.
TERMINATION
Section 13.01. Termination of the Trust. The respective
obligations and responsibilities of the Depositor, First Sierra, the Servicer,
the Trustee, the Depositor and the Trust created hereby shall terminate (i) at
the option of the Holder of the Trust Certificate, at any time which is 123
days after the payment to Certificateholders of all amounts required to be paid
to them pursuant to this Agreement, reducing the Class A Certificate Principal
Balance, the Class B-1 Certificate Principal Balance, the Class B-2 Certificate
Principal Balance and the Trust Certificate Principal Balance to zero or (ii)
after the 120th day following the earliest to occur of the Expected Final
Payment Date or the occurrence of an Early Amortization Event described in
Section 10.01(c) or (d), if on such 120th day, the Class A Certificate
Principal Balance and the Class B Certificate Principal Balance have not been
reduced to zero; provided that all amounts then owing to the Certificate
Insurer and the Trustee pursuant to the Transaction Documents have been paid to
such parties; and provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants living on the date of this Agreement of Joseph P.
Kennedy, late Ambassador to the Court of St. James. Notwithstanding the
foregoing, the representations and warranties and indemnification obligations
of First Sierra and the Servicer hereunder and under the Sale Agreement shall
survive the termination of the Trust and of this Agreement. Notwithstanding the
provisions of the immediately preceding clause (ii), in the event on or prior
to the 90th day following the occurrence of the Early Amortization Events
described in Section 10.01(c) or 10.01(d), the Trustee receives written
instructions from the Certificate Insurer (so long as the Class A Certificates
are outstanding) that the Certificate Insurer disapproves of the termination of
the Trust, the Trust shall be reconstituted with the successor appointed by the
Certificate Insurer acting as the holder of the general partner interest. If
authorization to continue the Trust is not received, the Trustee shall adopt a
plan of
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liquidation that provides for the appointment of a conservator, who shall be
acceptable to the Certificate Insurer, to make collections on the Leases and
the other assets comprising the Trust Estate under this Agreement, for
distribution in accordance with this Agreement. Otherwise, the Trustee, only
with the consent of the Certificate Insurer, shall promptly sell the assets of
the Trust in a commercially reasonable manner and on commercially reasonable
terms. The proceeds of such a sale shall be treated as collections under this
Agreement. Upon termination of the Trust, the Trustee shall release any
remaining Trust Property to the Holders of the Trust Certificate but not if the
Class A Certificate Principal Balance, the Class B-1 Certificate Principal
Balance and the Class B-2 Certificate Principal Balance have not been reduced
to zero or any amounts are owing to the Certificate Insurer or the Trustee.
Section 13.02. Optional Removal of All Transferred Property;
Final Disposition of Funds. (a) On any Payment Date following any Calculation
Date as of which the sum of (1) the Class A Certificate Principal Balance, (2)
the Class B-1 Certificate Principal Balance and (3) the Class B-2 Certificate
Principal Balance is less than ten percent (10.00%) of the sum of (x) the
Initial Class A Certificate Principal Amount, (y) the Initial Class B-1
Certificate Principal Amount and (z) the Initial Class B-2 Certificate
Principal Amount (such date, an "Optional Removal Date"), the Holders of the
Trust Certificate shall have the option with the consent of the Certificate
Insurer to cause the retirement of the Certificates by depositing with the
Trustee the sum of (i) the Class A Certificate Principal Balance, the Class B-1
Certificate Principal Balance and the Class B-2 Certificate Principal Balance
as of such Payment Date (after giving effect to the payment of any principal on
such Payment Date), (ii) the Class A Certificate Interest, the Class B-1
Certificate Interest and the Class B-2 Certificate Interest due on such Payment
Date, (iii) the amount, if any, of all Class A Overdue Principal, all Class B-1
Overdue Principal, all Class B-2 Overdue Principal, all Class A Overdue
Interest, all Class B-1 Overdue Interest and all Class B-2 Overdue Interest and
(iv) all amounts owed to the Certificate Insurer. Upon receipt of such amounts
and all amounts then owed to the Trustee the Trustee shall (x) make the final
payment in full to the Certificateholders, (y) pay all amounts owed to the
Certificate Insurer and (z) release any remaining Trust Property to the Holders
of the Trust Certificate.
(b) Notice of any termination pursuant to this Section
13.02 shall be given promptly by the Trustee, by letter to Certificateholders
and the Certificate Insurer mailed not later than the 10th day of the month
immediately preceding the month of such final Payment Date specifying (i) the
Payment Date upon which final payment of the
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Certificates will be made, (ii) the scheduled amount of any such final payment,
(iii) that interest shall cease to accrue on the Class A Certificates and Class
B Certificates on such final Payment Date and (iv) the address for presentation
of the Certificates for final payment. On such final Payment Date, the Trustee
shall cause to be distributed to Certificateholders an amount equal to (x) the
amount otherwise distributable to the Certificateholders on such Payment Date
but for such purchase pursuant to this Section 13.02 and (y) each Class A and
Class B Certificateholder's pro rata share (based on the aggregate related
Certificate Percentage) of the Class A Certificate Principal Balance, Class B-1
Certificate Principal Balance and the Class B-2 Certificate Principal Balance
deposited by the Holders of the Trust Certificate into the Collection Account
pursuant to this Section 13.02. After such Payment Date, interest on the Class
A and Class B Certificates shall cease to accrue.
(c) The final payment on any Certificate shall only be
made upon the presentation of such Certificate to the Trustee at the office
specified in the notice described in paragraph (b) above.
In the event that any amount due to any Certificateholder
remains unclaimed, the Servicer shall, at its expense, cause to be published
once, in the eastern edition of The Wall Street Journal, notice that such money
remains unclaimed. If, within two years after such publication, such amount
remains unclaimed, the Servicer shall be entitled to all unclaimed funds and
other assets which remain subject hereto, and the Trustee upon written
direction from the Servicer shall transfer such funds and shall be discharged
of any responsibility for such funds and, the Certificateholders shall look to
the Servicer for payment.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
Section 14.01. Amendment. (a) This Agreement may be amended
from time to time by the Servicer, the Depositor and the Trustee, without the
consent of any of the Certificateholders but with the consent of the
Certificate Insurer, to cure any ambiguity herein; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel acceptable to the
Trustee adversely affect in any respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to
time by the Servicer, the Depositor and the Trustee with the consent of the
Certificate Insurer and the Holders of Certificates of each Class evidencing at
least 50% in
105
<PAGE> 113
Percentage Interest in such Class for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment shall (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Leases or distributions that are required to be made on any
Certificate without the consent of the Holder of such Certificate or (ii)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the Holders of all Certificates then outstanding.
(c) Prior to the effectiveness of any amendment under
Section 14.01(a) or (b), the Rating Agencies shall have confirmed the
respective rating of the Certificates.
(d) Promptly after the execution of any such
amendment, the Trustee shall furnish a written copy of the text of such
amendment (and any consent required with respect thereto) to each
Certificateholder and the Rating Agencies.
(e) Approval of the particular form of any proposed
amendment or consent shall not be necessary for the consent of the
Certificateholders under Section 14.01(b), but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by the
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(f) The Trustee and the Certificate Insurer shall be
entitled to receive an officer's certificate and an Opinion of Counsel to the
effect that all conditions precedent to the amendment of this Agreement have
been satisfied. The Trustee may, but shall not be obligated to, execute and
deliver any such amendment which affects that Trustee's rights, powers,
immunities or indemnifications hereunder.
Section 14.02. Limitation on Rights of Certificateholders. (a)
The death or incapacity of any Certificateholder shall not operate to terminate
this Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(b) No Certificateholder shall have any right by
virtue or by availing itself of any provisions of this Agreement to institute
any suit, action or proceeding in equity or at law upon or under or with
respect to this
106
<PAGE> 114
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates of the Applicable Class
evidencing an aggregate Percentage Interest of not less than 25% in such class
shall have made written request upon the Trustee to institute such action, suit
or proceeding in the name of the Certificateholders and shall have offered to
the Trustee such indemnity as may be satisfactory to it against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee,
for 30 days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding.
(c) The Majority Holders may direct the time, method
and place of conducting any proceeding for any remedy with respect to the
Certificates or exercising any trust or power conferred on the Trustee with
respect to such Certificates; provided, however, that:
(1) such direction shall not be in conflict with
any rule or law or with this Agreement;
(2) the Trustee shall have been provided with
indemnity satisfactory to it; and
(3) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction; provided, however, that the Trustee need not take
any action which it determines might involve it in liability
or may be unjustly prejudicial to the Certificateholders not
so directing.
(d) It is understood and intended, and expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trustee, that no one or more Holders of Certificates shall have any right in
any manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of the Certificates, to obtain or seek to obtain priority
over or preference to any other Holder of the same class of Certificates or to
enforce any right under this Agreement, except in the manner herein provided
and for the equal, ratable and common benefit of all Certificateholders of the
same class. For the protection and enforcement of the provisions of this
Section 14.02, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Section 14.03. Counterparts. For the purpose of facilitating
the execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any
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<PAGE> 115
number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same
instrument.
SECTION 14.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS
OF ANY STATE.
Section 14.05. Notices. All demands, notices, instructions,
directions and communications (other than periodic communications of a routine
nature made in connection with the dissemination of information regarding the
Transferred Property, the Servicer and the Trust required to be delivered
hereunder, which shall be delivered or mailed by first class mail) hereunder
shall be in writing, personally delivered or mailed by overnight courier, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Servicer, at Texas Commerce Tower, 70th Floor, 600 Travis Street, Houston,
Texas 77002, Attention: Sandy Ho, telephone (713) 221-8822, telecopy (713)
221-1818, (b) in the case of the Depositor, at 1061 East Indiantown Road, Suite
204, Jupiter, Florida 33477, Attention: First Sierra Receivables II, Inc.,
telephone (561) 745-9292, telecopy (561) 745-9594, (c) in the case of the
Trustee, at Four Albany Street, 10th Floor, New York, New York 10006,
Attention: Corporate Trust and Agency Group Structured Finance Team, telephone
212-250-5326, telecopy 212-250-6439, (d) in the case of S&P, at 26 Broadway,
15th Floor, New York, NY 10004, Attention: Asset Backed Surveillance, telephone
(212) 208-1278, telecopy (212) 208-8208, (e) in the case of Moody's, at 99
Church Street, New York, NY 10007-2701, telephone (212) 553-1402, telecopy
(212) 533-3856, (f) in the case of the Certificate Insurer, at 113 King Street,
Armonk, NY 10504, Attention: Insured Portfolio Management - SF, telephone (914)
273-4545, telecopy (914) 765-3810 and (g) in the case of DCR, 55 East Monroe
Street, Chicago, Illinois 60603, Attention: Asset Backed Monitoring, telecopy
(312) 263-2852. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given on the fifth Business Day following mailing,
whether or not the Certificateholder receives such notice.
Section 14.06. Severability of Provisions. If any one or more
of the covenants, agreements, provisions, or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
108
<PAGE> 116
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or of
the Certificates or the rights of the Holders thereof.
Section 14.07. Third Party Beneficiary. The parties hereto
acknowledge and agree that the Certificate Insurer is an express third party
beneficiary of this Agreement.
Section 14.08. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 9.02 hereof, this
Agreement may not be assigned by the Servicer except with prior written consent
of the Depositor, the Certificate Insurer and of the Holders of the
Certificates of the Applicable Class evidencing Percentage Interests of not
less than 66-2/3%. Notice of any such assignment received by a Responsible
Officer of the Trustee shall be given to the Rating Agencies by the Trustee.
Section 14.09. Binding Effect. This Agreement shall inure to
the benefit of, and shall be binding upon the Servicer, the Depositor, the
Trustee and the Certificateholders and their respective successors and
permitted assigns, subject, however, to the limitations contained in this
Agreement. This Agreement shall not inure to the benefit of any Person other
than the Depositor, the Servicer, the Trustee, the Certificate Insurer and the
Certificateholders.
Section 14.10. Survival of Agreement. All covenants,
agreements, representations and warranties made herein and in the other
documents delivered pursuant hereto shall survive the sale of the Transferred
Property and the issuance of the Certificates and shall continue in full force
and effect until terminated pursuant to Section 13.01 hereof.
Section 14.11. Captions. The captions or headings in this
Agreement are for convenience only and in no way define, limit or describe the
scope or intent of any provisions or sections of this Agreement.
Section 14.12. Exhibits. The exhibits to this Agreement are
hereby incorporated herein and made a part hereof and are an integral part of
this Agreement.
Section 14.13. Calculations. Except as otherwise provided in
this Agreement, all interest rate calculations under this Agreement, including
those with respect to the Leases, will be made on the basis of a 360-day year
and twelve 30-day months and will be carried out to at least seven decimal
places.
109
<PAGE> 117
Section 14.14. No Proceedings. The Servicer, the Back-up
Servicer and the Trustee each hereby agrees that it will not directly or
indirectly institute, or cause to be instituted, against the Depositor or the
Trust any bankruptcy or insolvency proceeding so long as there shall not have
elapsed one year plus one day since the maturity date of the latest maturing
securities of the Depositor.
110
<PAGE> 118
IN WITNESS WHEREOF, the Servicer, the Back-Up Servicer, the
Depositor and the Trustee have caused this Agreement to be duly executed by
their respective officers, all as of the day and year first above written.
FIRST SIERRA FINANCIAL, INC.
as Servicer
By:
------------------------------
Name: Thomas Depping
Title: President
BANKERS TRUST COMPANY,
as Back-up Servicer
By:
------------------------------
Name: Linda A. Rakolta
Title: Vice President
FIRST SIERRA RECEIVABLES II,
INC.
as Depositor
By:
------------------------------
Name: Sandy M. Ho
Title: Senior Vice President
BANKERS TRUST COMPANY, not in
its individual capacity but solely
as Trustee
By:
-----------------------------
Name: Linda A. Rakolta
Title: Vice President
111
<PAGE> 119
EXHIBIT A
TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
Bankers Trust Company, in its capacity as Trustee (the
"Trustee") under that certain Pooling and Servicing Agreement (the
"Agreement"), dated as of November 1, 1996, by and among First Sierra, as
Servicer, First Sierra Receivables II, Inc., as Depositor ("Depositor") and the
Trustee, hereby acknowledges receipt of the Lease Files with respect to each
Lease on the List of Initial Leases.
The List of Initial Leases relating to the First Sierra
Equipment Lease Trust 1996-2 is attached to this Receipt.
BANKERS TRUST COMPANY
as Trustee
By:
---------------------
Name:
Title:
Dated: November 15, 1996
<PAGE> 120
EXHIBIT C
FIRST SIERRA RECEIVABLES II SERIES 1996-2
- -------------------------------------------------------------------------------
FIRST SIERRA RECEIVABLES INC.
MONTHLY SERVICER CERTIFICATE
CLASS A INTEREST SCHEDULE
Prior Month Class A Principal Balance
Class A Certificate Rate
One twelfth of Class A Certificate Rate
Class A Certificate Interest
Prior Month Class A Overdue Interest
Class A Interest Due
Class A Interest Paid
Current Month Class A Overdue Interest
CLASS A PRINCIPAL SCHEDULE
Prior Month Class A Principal Balance
Class A Percentage
Base Principal Amount
Class A Base Principal Distribution Amount
Prior Month Class A Overdue Principal
Total A Note Principal Due
Class A Principal Paid
Class A Overdue Principal
Current Month Class A Principal Balance
<PAGE> 121
CLASS B-1 INTEREST SCHEDULE
Prior Month Class B-1 Principal Balance
Class B-1 Certificate Rate
One twelfth of Class B-1 Certificate Rate
Class B-1 Certificate Interest
Prior Month Class B-1 Overdue Interest
Class B-1 Interest Due
Class B-1 Interest Paid
Current Month Class B-1 Overdue Interest
CLASS B-1 PRINCIPAL SCHEDULE
Prior Month Class B-1 Principal Balance
Class B-1 Percentage
Base Principal Amount
Class B-1 Base Principal Distribution Amount
Prior Month Class B-1 Overdue Principal
Total B-1 Note Principal Due
Class B-1 Principal Paid
Class B-1 Overdue Principal
Current Month Class B-1 Principal Balance
2
<PAGE> 122
CLASS B-2 INTEREST SCHEDULE
Prior Month Class B-2 Principal Balance
Class B-2 Certificate Rate
One twelfth of Class B-2 Certificate Rate
Class B-2 Certificate Interest
Prior Month Class B-2 Overdue Interest
Class B-2 Interest Due
Class B-2 Interest Paid
Current Month Class B-2 Overdue Interest
CLASS B-2 PRINCIPAL SCHEDULE
Prior Month Class B-2 Principal Balance
Class B-2 Percentage
Base Principal Amount
Class B-2 Base Principal Distribution Amount
Prior Month Class B-2 Overdue Principal
Total B-2 Note Principal Due
Class B-2 Principal Paid
Class B-2 Overdue Principal
Current Month Class B-2 Principal Balance
3
<PAGE> 123
SERVICING FEE SCHEDULE
Prior Month ADCPB
Servicer Fee Rate
One-twelfth
Servicer Fee
Prior Servicer Fee Arrearage
Servicer Fee Paid
Current Servicing Fee Arrearage
BACK-UP SERVICING FEE SCHEDULE
Prior Month ADCPB
Back-Up Servicer Fee Rate
One-twelfth
Back-up Servicer Fee
Prior Back-Up Servicer Fee Arrearage
Total Back-Up Servicer Fee Due
Back-Up Servicer Fee Paid
Current Back-Up Servicing Fee Arrearage
TRUSTEE FEE SCHEDULE
Trustee Fee
Trustee Fee Rate
Prior Trustee Fee Arrearage
Total Trustee Fee Due
Trustee Fee Paid
Current Trustee Fee Arrearage
CERTIFICATE PREMIUM SCHEDULE
Initial Class A Balance
Premium Rate
Prior Premium Arrearage
Premium Amount Due
Premium Amount Paid
Current Premium Arrearage
4
<PAGE> 124
EARLY AMORTIZATION EVENTS
(a) Default in the payment to the Class A Certificateholders or the Class B
Certificateholders of any interest or principal due hereunder in accordance
with the provisions of Section 6.06 when such payment becomes due and
payable and continuance of such default for a period of five business days;
or [10.01(a)]
(b) Default in the performance, or breach, of the any covenant or agreement of
the Depositor in this Agreement (other than a covenant or agreement a
default in whose performance or whose breach is elsewhere in this section
10.01 specifically dealt with), and continuance of such default or breach
for a period of 30 days after there has been given, by registered or
certified mail, to the Depositor by the Service, the Certificate Insurer or
the Trustee, or to he Depositor, the Certificate Insurer and the Trustee by
the Certificateholders of at least 50% in aggregate principal amount of the
outstanding Class A Certificates a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder, or if, in any such case, the Depositor have
consented in writing that any such event shall be an Early Amortization
Event; or [10.01(b)]
(c) Any proceeding shall be instituted against the Depositor (or, if the
Depositor is actively contesting the merits thereof, such proceeding is not
dismissed within 90 days) seeking to adjudicate it a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or any of its
Indebtedness under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property, or any
of the actions sought n such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any substantial
part of its property) shall occur; or [10.01(c)]
(d) The commencement by the Depositor of a voluntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Depositor in an involuntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or state law, or to the consent by it to the filing
of such petition or to the appointment or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Depositor or of any substantial part of its property, or the making
by it of an assignment for the benefit of creditors, or the making by it of
an admission by it in writing of its inability to pay its Debts generally
as they become due, or the taking of corporate action by the Depositor in
furtherance of any such action; or [10.01(d)]
(e) Judgments or orders in respect of money (other than such judgments or
orders in respect of which adequate insurance is maintained for the payment
thereof) against the Depositor shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days or more; or
[10.01(e)]
(f) There is a material breach of any of the representations and warranties of
the Depositor set forth in Section 3.01(a) and continuance of such default
or breach for a period of 30 days after there has been given, by registered
or certified mail, to the Depositor by the Servicer, the Certificate
Insurer or the Trustee, or to the Depositor, the Certificate Insurer and
the Trustee by the Certificateholders of at least 50% in aggregate
principal amount of the outstanding Class A Certificates a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, or if, in any
such case, the Depositor have consented in writing that any such event
shall be an Early Amortization Event; or [10.01(f)]
5
<PAGE> 125
(g) The Trust Certificate Percentage Interest is less than the Subordinated
Amount; or [10.01(g)]
(h) A Gross Charge-Off Event has occurred and is continuing; or [10.01(h)]
(i) A Delinquency Trigger Event has occurred and is continuing; or [10.01(i)]
(j) An Event of Servicing Termination has been declared; or [10.01(j)]
(k) The Certificate Insurer has made an Insured Payment under the policy.
[10.01(k)]
RESTRICTING EVENT CALCULATIONS
<TABLE>
<S> <C>
(a) Event of Servicer Termination (Yes/No)
-----------------
(b) Certificate Insurer makes an Insured Payment
-----------------
(a) Gross Charge-Off Event (Yes/No)
-----------------
(b) Delinquency Trigger Event
-----------------
</TABLE>
EVENTS OF SERVICER TERMINATION
(i) Any failure by the Servicer to make any payment, deposit, transfer or
delivery required to be made hereunder (other than with respect to the
Monthly Statement, as to which the remedy is set forth in section
11.01(a)(ii) hereof) for a period of three Business Days after the
date of such payment, deposit, transfer or delivery is required to be
made (provided that the Servicer shall be granted a two business day
grace period on not more than one occasion during each Collection
Period); or [11.01(a)(i)]
(ii) Any failure by the Servicer to submit a Monthly Statement pursuant to
Section 6.07 hereof that continues unremedied for period of three
business days after the earlier of the date upon which (A) the
Certificate Insurer or a Certificateholder provides written
notification to the Servicer of such failure or (B) the Depositor
becomes aware that the Certificate Insurer and the Certificateholders
have not received a copy of the Monthly Report in accordance with the
provisions hereof; or [11.01(a)(ii)]
(iii) Any failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer
set forth in the Certificates or in this agreement, as the case may,
or any breach of representation or warranty of the Servicer set forth
in Section 3.02 of this Agreement, which failure or breach (A)
materially and adversely affects the rights of the Trustee,
Certificateholders, the Certificate Insurer or the Depositor and (B)
continues unremedied for a period of 30 days after the earlier to
occur of (x) the date on which written notice of such failure or
breach, requiring the situation giving rise to such failure or breach
to be remedied, shall have been given to a Servicing Officer of the
Servicer or a Responsible Officer of the Trustee by the Depositor or
any Holder of Certificates or (y) the date on which any Servicing
Officer is required pursuant to the terms of this Agreement to the
Certificateholders and the Certificate Insurer of any such failure or
breach; or [11.01(a)(iii)]
(iv) The Servicer shall consent to the appointment on a custodian,
receiver, trustee or liquidator (or other similar official) of itself,
or of a substantial part of its property, or shall admit in writing
its inability to pay its debts generally as they come due, a court of
competent jurisdiction shall
6
<PAGE> 126
determine that the Servicer is generally not paying its debts as they
come due or the Servicer shall make a general assignment for the
benefit of creditors; or [11.01(a)(iv)]
(v) The Servicer shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization in a proceeding
under any bankruptcy laws (as now defined hereafter in effect) or an
answer admitting the material allegation of a petition filed against
the Servicer shall, by voluntary petition, answer or consent, seek
relief under the bankruptcy or other similar law providing for the
reorganization or winding up of debtors, or providing for an
agreement, composition, extension or adjustment with its creditors; or
[11.01(a)(v)]
(vi) An order, judgment or decree in excess of $500,000 shall be entered in
any proceeding, and any such order, judgment or decree or appointment
or sequestration shall remain in force, undismissed, unstayed or
unvacated for a period of 90 days after the date of entry thereof; or
[11.01(a)(vi)]
(vii) A petition against the Servicer in a proceeding under applicable
bankruptcy laws or other insolvency laws, as now or hereafter in
effect, shall be filed and shall not be stayed, withdrawn or dismissed
within 60 days thereafter, or if, under the provisions of any of any
law providing for reorganization or winding up of debtors which may
apply to the Servicer, or any substantial part of its property, and
such jurisdiction, custody or control shall remain in force
unrelinquished, unstayed or unterminated for period of 60 days; or
[11.01(a)(vii)]
(viii) Any assignment by the Servicer to a delegation of its duties or rights
hereunder, except as specifically permitted hereunder, or any attempt
to make such an assignment; or [11.01(a)(viii)]
(ix) A Servicer Trigger Event (as defined in the Insurance Agreement) shall
occur and be continuing; or [11.01(a)(ix)]
<TABLE>
<CAPTION>
GROSS CHARGE-OFFS
Gross Gross Monthly
Defaults Recoveries Charge-Offs ADLB Charge-Offs
-------- ---------- ----------- ---- -----------
<S> <C>
2 months prior
1 month prior
Current month
Gross Charge-Off Ratio:
Maximum Charge-Off Ratio:
30+ DELINQUENCIES
Monthly
Delinquencies ADCPB Delinquencies
------------- ----- -------------
<S> <C>
2 months prior
1 month prior
Current month
Delinquency Ratio:
Maximum Delinquency Ratio:
</TABLE>
7
<PAGE> 127
ISSUER RESTRICTING EVENT CALCULATIONS
<TABLE>
<S> <C>
(a) Gross Defaults
--------
(b) Total Delinquencies
--------
GROSS DEFAULTS
Monthly
Gross Defaults ADCPB Charge-Offs
-------------- ----- -----------
Current
i.A Subordinated Percentage
B WAL of Remaining Leases
ii. Two
Trigger (i/ii)
TOTAL DELINQUENCIES
Monthly
Delinquencies ADCPB Delinquencies
------------- ----- -------------
2 months prior
1 month prior
Current month
Delinquency Ratio:
Maximum Delinquency Ratio:
EARLY AMORTIZATION
CHNG (1) Is Subordinate Interest less than 8.86% of ADLB?
----------------
(2) Has a Gross Charge-Off Event Occurred?
----------------
(3) Has a Delinquency Event Occurred?
----------------
Aging/Delinquency Statistics
% of
ADLB Total
</TABLE>
Current
31-60 Days Past Due
61-90 Days Past Due
91+ Days Past Due
Total
8
<PAGE> 128
Certificate Factors
Class A Notes
Class B-1 Notes
Class B-2 Notes
Substitution Limits [Section 7]
Initial ADCPB
Maximum Substitution (10% of Initial)
Maximum Substitution for Defaulted Contracts (5% of Initial)
Prior month ADCPB Substituted
Current month ADCPB Substituted
Cumulative ADCPB Substituted
Prior month ADCPB Substituted for Defaulted Contracts
Current month ADCPB Substituted for Defaulted Contracts
Cumulative ADCPB Substituted for Defaulted Contracts
# Substituted Leases that subsequently default
ADCPB of Substituted Leases that default
9
<PAGE> 129
<TABLE>
<CAPTION>
New Transf.
Security Property
Lockbox Collection Deposit Funding Intra-Month Payment Date
Account Account Account Account Distributions Distributions
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING ACCOUNT BALANCES
LOCKBOX ACCOUNT
Collections Received [5.02(b)(d)]
Payments with respect to Maintenance, Taxes
or Assessments [5.02(c)(h)]
Excluded Amounts [5.02(d)][Definition]
Collections on Deposit due Collection Account
[5.02(d)]
COLLECTION ACCOUNT
Aggregate Amount of Actual Payments
[6.01b(i)]
Add: Servicer Advances [5.03][6.01b(ii)]
Add: Sch. Payments, Final Payments or
Purchase Option from Sec. Deposit Account
[6.01b(iii)]
Add: Reconveyance Amounts by Servicer
[6.01b(iv)]
Add: Any Investment Earnings [6.01b(v)]
Add: Deposits from New Transferred Property
Funding Account [6.01b(vi)]
Add: Amount Payable to Class A Certificate-
holders under 6.04d [6.01b(vii)]
Add: Advance Payments Due and Owing for
Collection Period [6.01c]
Add: Offset Amount as Provided by 5.12
[6.01c]
Less: Amounts transferred to the New Trans-
ferred Property Funding Account [6.01d]
Less: Amounts Servicer Advanced but deems
uncollectible [6.01d]
SECURITY DEPOSIT ACCOUNT
Add: Security Deposits [6.02b]
Less: Amounts to Collection Account [6.02c]
NEW TRANSFERRED PROPERTY FUNDING ACCOUNT
Less: Amount Transferred from Collection
Account in consid. of New Trans. Property
[6.05i1]
Add: Amount transferred to New Transferred
Property Funding Account [6.05ii]
Less: Amount Transferred from Collection
Account in consid. of New Trans. Property
[6.01iii]
ENDING ACCOUNT BALANCES
- ----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 130
AVAILABLE AMOUNT TO CERTIFICATE HOLDERS
DISBURSEMENTS FROM COLLECTION ACCOUNT (PRIOR TO INITIAL AMORTIZATION DATE)
(i) Initial Unpaid Amts. inadvertently dep. in Collection
[6.06b(i)]
(ii) Indemnity payments paid inadvertently dep. in Collection
Account [6.06b(ii)]
(iii) Aggregate of: [6.06b(iii)]
(A) Unreimbursed Servicer Advances from current
collection period
(B) Unreimbursed Servicer Advances from current
collection period
(C) Servicing Charges inadvertently deposited in
Collection Account
(iv) Current and unpaid Back-up Servicing Fees [6.06b(iv)]
(v) Premium Amount due on Payment Date and unpaid Premiums
[6.06b(v)]
(vi) Trustee Fee due on Payment Date and unpaid Trustee Fees
[6.06b(vi)]
(vii) Trustee reimbursable expenses due and unpaid (up to $75,000
in aggregate) [6.06b(vii)]
(viii) Class A Certificate Interest and Overdue Class Interest
[6.06b(viii)]
(ix) Class B-1 Certificate Interest and Overdue Class B-1
Interest [6.06b(iv)]
(x) Class B-2 Certificate Interest and Overdue Class B-2
Interest [6.06b(x)]
(xi) Certificate Insurer Reimbursement Amount, if any, due on
Payment Date [6.06b(xi)]
(xii) Trustee reimbursable expenses due and unpaid (in excess of
$75,000 aggregate limitation) [6.06b(xii)]
(xiii) Any amounts due Servicer under 9.03 [6.06b(xiii)]
(xiv) To the depositor the lesser of Base Principal Amount or
ADCPB new Contracts transferred to the Trust [6.06b(xiv)];
and
If less than the Base Principal Amount, the remainder to
the New Transferred Property Funding Account [6.06b(xiv)]
(xv) To the Holder of the Trust Certificate any remaining
amounts [6.06b(xv)]
11
<PAGE> 131
DISBURSEMENTS FROM COLLECTION ACCOUNT (ON AND AFTER INITIAL AMORTIZATION DATE)
(i) Initial Unpaid Assets inadvertently deposited in Collection
Account [6.06c(i)]
(ii) Indemnity payments paid inadvertently deposited in
Collection Account [6.06c(ii)]
(iii) Aggregate of: [6.06c(iii)]
(A) Unreimbursed Servicer Advances from prior periods
(B) Servicer Fee and unpaid Servicer Fee
(C) Servicing Charges inadvertently deposited in
Collection Account
(iv) Current and unpaid Back-up Servicing Fees [6.06c(iv)]
(v) Premium Amount due on Payment Date and unpaid Premiums
[6.06c(v)]
(vi) Trustee Fee due on Payment Date and unpaid Trustee Fees
[6.06c(vi)]
(vii) Trustee reimbursable expenses due and unpaid (up to $75,000
in aggregate) [6.06c(vii)]
(viii) Class A Certificate Interest and Overdue Class A Interest
[6.06c(viii)]
(ix) Class B-1 Certificate Interest and Overdue Class B-1
Interest [6.06c(ix)]
(x) Class B-2 Certificate Interest and Overdue Class B-2
Interest [6.06c(x)]
(xi) Class A Base Principal Distribution Amount and Overdue
Class A Principal [6.06c(xi)]
(xii) Certificate Insurer Reimbursement Amount, if any, due on
Payment Date [6.06b(xii)]
(xiii) Class B-1 Base Principal Distribution Amount and Overdue
Class B-1 Principal [6.06c(xiii)] provided no restricting
event exists
(xiv) Class B-2 Base Principal Distribution Amount and Overdue
Class B-2 Principal [6.06c(xiv)] provided no restricting
event exists
(xv) Trustee reimbursable expenses due and unpaid (up to $75,000
in aggregate) [6.06c(xv)]
(xvi) Any amounts due Servicer under 9.03 [6.06b(xvi)]
(xvii) Prepayments optionally transferred to collection account
and disbursed in consideration of the transfer of New
Transferred Property not in excess of $5,000,000
[6.06c(xvii)]
(xviii) To the Holder of the Trust Certificate any remaining
amounts [6.06b(xviii)]
12
<PAGE> 132
EXHIBIT D
WIRING INSTRUCTIONS FORM
, 1996
------------
Bankers Trust Company
Re: Lease Backed Certificates, Series 1996-2, Issued by
First Sierra Equipment Lease Trust
Dear Sirs:
In connection with the sale of the above-captioned
Certificate by __________ to __________ ("Transferee") you, as Trustee with
respect to the related Certificates, are instructed to make all remittances to
Transferee as Certificateholder as of ____________, 19__ by wire transfer
pursuant to the instructions set forth on Schedule 1 hereto and you are
directed to send all notices to the appropriate party at the address set forth
on Schedule 1 hereto. You are further instructed to treat the Transferee as
the record holder for purposes of the ________ 199_ payment.
[TRANSFEREE]
By:
------------------------------
Title:
---------------------------
Acknowledged
[TRANSFEROR]
By:
--------------------------------
Title:
-----------------------------
<PAGE> 133
EXHIBIT E
FORM OF CLASS A CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2 6.29% EQUIPMENT LEASE-
BACKED CERTIFICATE, CLASS A
evidencing a Class A Percentage Interest in a Trust, the
property of which includes a pool of equipment, the related
equipment leases and other property appurtenant thereto conveyed
to the Trust by First Sierra Receivables II, Inc. (the
"Depositor").
Principal in respect of this Class A Certificate is payable
monthly as set forth herein, after an initial interest-only
period which is scheduled to end on the November 1997 Payment
Date, but which may end earlier if a Required Amortization Event
occurs earlier. Accordingly, the unpaid principal balance of
the Class A Percentage Interest evidenced hereby may be less
than the initial principal amount set forth below.
This Class A Certificate does not represent any interest in or
obligation of the Depositor, First Sierra Financial, Inc.
("First Sierra"), or any Affiliate of any of them. Neither the
Class A Certificates nor the Leases are insured by any
governmental agency.
<TABLE>
<S> <C> <C>
CUSIP: 33641QAF5
Class A
Certificate $63,381,510 Initial Percentage
No. A-1 Principal Amount Interest: 100%
</TABLE>
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a
SIXTY-THREE MILLION THREE HUNDRED EIGHTY-ONE THOUSAND FIVE HUNDRED TEN DOLLARS
($63,381,510) nonassessable, fully-paid, 100% Class A Percentage Interest in
the Class A
<PAGE> 134
Certificates issued by First Sierra Equipment Trust 1996-2 (the "Trust") formed
by the Depositor. The Trust hereby agrees to pay to such registered holder its
pro rata share (based on the aggregate Class A Percentage Interest held by such
registered Holder) of the amounts which all Holders of the Class A Certificates
are entitled to receive, as hereinafter set forth in this Class A Certificate
and as more fully set forth in the Agreement (defined below), at all times from
the sources and on the terms and conditions hereinafter set forth and as more
fully set forth in the Agreement.
The property of the Trust includes a pool of equipment finance
leases, installment sale contracts and loan contracts (the "Leases"), the
equipment financed or leased thereby, if any, (the "Equipment"), all Scheduled
Payments, Residual Receipts, Defaulted Residual Receipts and other monies due
thereunder after November 1, 1996 (the "Cut-Off Date"), and other property.
The Trust was created pursuant to the Pooling and Servicing Agreement (the
"Agreement"), dated as of November 1, 1996, by and among First Sierra, as
Servicer, the Depositor and Bankers Trust Company, as trustee of the Trust (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Class A Certificate is one of the duly authorized Class A
Certificates designated as "6.29% Equipment Lease Backed Certificates of First
Sierra Equipment Lease Trust 1996-2, Class A" (the "Class A Certificates").
This Class A Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Class A Certificate, by virtue of the acceptance hereof, assents and by
which such Holder is bound.
2
<PAGE> 135
IN WITNESS WHEREOF, the Trust has caused this Class A
Certificate to be duly executed.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
By: BANKERS TRUST COMPANY,
not in its individual capacity,
but solely as Trustee
Dated: November 15, 1996
By:
----------------------------------
3
<PAGE> 136
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates of the Series designated herein, issued
under the within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Trustee
By:
---------------------------------------
4
<PAGE> 137
This Class A Certificate does not purport to summarize the
Agreement and reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Trustee. Copies of the
Agreement and all amendments thereto will be provided to any Class A
Certificateholder, at its expense, upon a written request to the Servicer:
Texas Commerce Tower, 70th Floor, 600 Travis Street, Houston, Texas 77002;
Attention: Sandy Ho, Chief Financial Officer
Under the Agreement, the Trust is obligated to pay, to the
extent that monies are available in the Collection Account for such
distributions, on the 10th day of each month or, if such 10th day is not a
Business Day, the Business Day immediately following (the "Payment Date"),
commencing in December 1996, to the person in whose name this Class A
Certificate is registered and at the address specified in the Certificate
Register at the close of business on the Record Date, an amount from certain
monies deposited in the Collection Account with respect to the related
Collection Period equal to the product of the Class A Percentage Interest
evidenced by this Class A Certificate and an amount equal to the sum of (i) the
Class A Certificate Interest and (ii) on and after the Payment date which is
also the Initial Amortization Date, but not prior thereto, the sum of (A) Class
A Base Principal Distribution Amount and (b) one-half of the residual Receipts
received by the Servicer during the prior Collection Period. The Initial
Amortization Date is the earlier to occur of (x) the Payment Date occurring in
November 1997 and (y) the Payment Date which immediately follows the Early
Amortization Event. The final payment of principal and interest on this Class
A Certificate will not be later than the November 10, 2004 Payment Date.
Payments on this Class A Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof, by wire transfer
of immediately available funds, to the Person entitled thereto, as specified by
such Person in accordance with the terms of the Agreement or by such other
means as the Person entitled thereto and the Trustee shall agree, without the
presentation or surrender of this Class A Certificate or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class A
Certificate, agrees to look solely to the funds in the Collection Account to
the extent available for payment to the Holder hereof as provided in the
Agreement for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Holder hereof for any amounts due under this
Class A Certificate or the Agreement.
5
<PAGE> 138
The Class A Certificates do not represent an obligation of, or
an interest in, the Trustee or any Affiliate thereof. The Class A Certificates
are limited in right of payment to certain collections and recoveries
respecting the Leases, all or more specifically set forth above in the
Agreement. Pursuant to the Agreement, the Trust shall, in addition to the
Class A Certificates, issue Class B Certificates and the Trust Certificate.
THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO THE CLASS B CERTIFICATES AND THE
TRUST CERTIFICATE IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL OF ALL AMOUNTS OF
PRINCIPAL AND INTEREST DUE AND PAYABLE ON THE CLASS A CERTIFICATES ON EACH
PAYMENT DATE.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Servicer and the rights of the Class A
Certificateholders under the Agreement at any time by the Servicer, the
Depositor and the Trustee with, for so long as the Class A Certificates remain
outstanding, the consent of Class A Certificateholders owning Class A
Certificates representing an aggregate Class A Percentage Interest of not less
than 50%. Any such consent by the Holder of this Class A Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this Class
A Certificate and of any Class A Certificate issued upon the transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Class A Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Class A
Certificateholders.
As provided in the Agreement, the transfer of this Class A
Certificate is registrable in the Certificate Register upon surrender of this
Class A Certificate for registration of transfer at the offices or agencies
maintained by the Trustee accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Class A Certificates of authorized denominations evidencing the same aggregate
Class A Percentage Interest in the Trust will be issued to the designated
transferee or transferees.
The Class A Certificates are issuable only as registered Class
A Certificates without coupons in minimum denominations of $1,000 of the
Initial Class A Certificate Principal Amount. As provided in the Agreement and
subject to certain limitations therein set forth, Class A Certificates are
exchangeable for new Class A Certificates of authorized denominations
evidencing the same aggregate Class A Percentage Interest, as requested by the
Class A Certificateholder surrendering the same.
6
<PAGE> 139
The Holder of the Trust Certificate will have the option,
subject to certain conditions set forth in the Agreement, including the deposit
of the sum specified in the Agreement, to remove all, but not less than all, of
the property in the Trust, and thereby cause early retirement of the
Certificates as of any Payment Date following the date on which the aggregate
Class A Certificate Principal Balance and the Class B Certificate Principal
Balance is less than 10% of the Initial Class A Certificate Principal Amount
and the Initial Class B Certificate Principal Amount. In the event of such
removal, the entire outstanding Class A Certificate Principal Balance and the
Class B Certificate Principal Balance, together with accrued interest thereon
at the related Certificate Rate, will be required to be paid to the Class A
Certificateholders and the Class B Certificateholders on such Payment Date.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection therewith.
The Servicer, the Depositor and the Trustee and any agent of
any of the foregoing may treat the person in whose name this Class A
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
7
<PAGE> 140
EXHIBIT F
CLASS B-1 CERTIFICATE
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (B) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT SUBJECT, IN THE CASE OF CLAUSES (B) OR (C)
ABOVE, TO COMPLIANCE BY THE HOLDER AND THE TRANSFEREE WITH THE PROVISIONS OF
THE POOLING AND SERVICING AGREEMENT APPLICABLE TO SUCH TRANSFER.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
7.01% EQUIPMENT LEASE-BACKED CERTIFICATE, CLASS B-1
evidencing a Class B-1 Percentage Interest in a Trust, the property of
which includes a pool of equipment, the related equipment leases and
other property appurtenant thereto conveyed to the Trust by First
Sierra Receivables II, Inc. (the "Depositor").
Principal in respect of this Class B-1 Certificate is payable monthly
as set forth herein, after an initial interest-only period which is
scheduled to end on the November 1997 Payment Date, but which may end
earlier if a Required Amortization Event occurs earlier. Accordingly,
the unpaid principal balance of the Class B-1 Percentage Interest
evidenced hereby may be less than the initial principal amount set
forth below.
This Class B-1 Certificate does not represent any interest in or
obligation of the Depositor, First Sierra Financial, Inc. ("First
Sierra"), or any Affiliate of any of them. Neither the Class B-1
Certificates nor the Leases are insured by any governmental agency.
<TABLE>
<S> <C> <C>
CUSIP: 33641QAD0
Class B-1
Certificate $2,160,733 Initial Percentage
No. B-1 Principal Amount Interest: 100%
</TABLE>
<PAGE> 141
THIS CERTIFIES THAT __________ is the registered owner of a
TWO MILLION, ONE HUNDRED SIXTY THOUSAND, SEVEN HUNDRED THIRTY-THREE DOLLARS
($2,160,733) nonassessable, fully-paid, 100% Class B-1 Percentage Interest in
the Class B-1 Certificates issued by First Sierra Equipment Trust 1996-2 (the
"Trust") formed by the Depositor. The Trust hereby agrees to pay to such
registered holder its pro rata share (based on the aggregate Class B-1
Percentage Interest held by such registered Holder) of the amounts which all
Holders of the Class B-1 Certificates are entitled to receive, as hereinafter
set forth in this Class B-1 Certificate and as more fully set forth in the
Agreement (defined below), at all times from the sources and on the terms and
conditions hereinafter set forth and as more fully set forth in the Agreement.
The property of the Trust includes a pool of equipment finance
leases, installment sale contracts and loan contracts (the "Leases"), the
equipment financed or leased thereby, if any, (the "Equipment"), all Scheduled
Payments, Residual Receipts, Defaulted Residual Receipts and other monies due
thereunder after November 1, 1996 (the "Cut-Off Date"), and other property.
The Trust was created pursuant to the Pooling and Servicing Agreement (the
"Agreement"), dated as of November 1, 1996, by and among First Sierra, as
Servicer, the Depositor and Bankers Trust Company, as trustee of the Trust (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Class B-1 Certificate is one of the duly authorized Class
B-1 Certificates designated as "7.01% Equipment Lease Backed Certificates of
First Sierra Equipment Lease Trust 1996-2, Class B-1" (the "Class B-1
Certificates"). This Class B-1 Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Class B-1 Certificate, by virtue of the acceptance hereof,
assents and by which such Holder is bound.
2
<PAGE> 142
IN WITNESS WHEREOF, the Trust has caused this Class B-1
Certificate to be duly executed.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
By: BANKERS TRUST COMPANY,
not in its individual capacity,
but solely as Trustee
Dated: November 15, 1996
By:
--------------------------------
3
<PAGE> 143
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-1 Certificates of the Series designated herein,
issued under the within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
-------------------------------
4
<PAGE> 144
This Class B-1 Certificate does not purport to summarize the
Agreement and reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Trustee. Copies of the
Agreement and all amendments thereto will be provided to any Class B-1
Certificateholder, at its expense, upon a written request to the Servicer:
Texas Commerce Tower, 70th Floor, 600 Travis Street, Houston, Texas 77002;
Attention: Sandy Ho, Chief Financial Officer.
Under the Agreement, the Trust is obligated to pay, to the
extent that monies are available in the Collection Account for such
distributions, on the 10th day of each month or, if such 10th day is not a
Business Day, the Business Day immediately following (the "Payment Date"),
commencing in December 1996, to the person in whose name this Class B-1
Certificate is registered and at the address specified in the Certificate
Register at the close of business on the Record Date, an amount from certain
monies deposited in the Collection Account with respect to the related
Collection Period equal to the product of the Class B-1 Percentage Interest
evidenced by this Class B-1 Certificate and an amount equal to the sum of (i)
the Class B-1 Certificate Interest and (ii) on and after the Payment Date which
is also the Initial Amortization Date, but not prior thereto, the sum of (A)
Class B-1 Base Principal Distribution Amount and (B) one-half of the Residual
Receipts received by the Servicer during the prior Collection Period. The
Initial Amortization Date is the earlier to occur of (x) the Payment Date
occurring in November 1997 and (y) the Payment Date which immediately follows
the Early Amortization Event. The final payment of principal and interest on
this Class B-1 Certificate will not be later than the November 10, 2004 Payment
Date.
Payments on this Class B-1 Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof, by wire transfer
of immediately available funds, to the Person entitled thereto, as specified by
such Person in accordance with the terms of the Agreement or by such other
means as the Person entitled thereto and the Trustee shall agree, without the
presentation or surrender of this Class B-1 Certificate or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class B-1
Certificate, agrees to look solely to the funds in the Collection Account to
the extent available for payment to the Holder hereof as provided in the
Agreement for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Holder hereof for any amounts due under this
Class B-1 Certificate or the Agreement.
5
<PAGE> 145
The Class B-1 Certificates do not represent an obligation of,
or an interest in, the Trustee or any Affiliate thereof. The Class B-1
Certificates are limited in right of payment to certain collections and
recoveries respecting the Leases, all or more specifically set forth above in
the Agreement. Pursuant to the Agreement, the Trust shall, in addition to the
Class B-1 Certificates, issue Class A Certificates, the Class B-2 Certificates
and the Trust Certificate. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO THE
CLASS B-1 CERTIFICATES IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL OF ALL
AMOUNTS OF PRINCIPAL AND INTEREST DUE AND PAYABLE ON THE CLASS A CERTIFICATES
ON EACH PAYMENT DATE.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer and the rights of the Class B-1
Certificateholders under the Agreement at any time by the Servicer, the
Depositor and the Trustee with, for so long as the Class B-1 Certificates
remain outstanding, the consent of Class B-1 Certificateholders owning Class
B-1 Certificates representing an aggregate Class B-1 Percentage Interest of not
less than 50%. Any such consent by the Holder of this Class B-1 Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Class B-1 Certificate and of any Class B-1 Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Class B-1 Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Class B-1 Certificateholders.
As provided in the Agreement, the transfer of this Class B-1
Certificate is registrable in the Certificate Register upon surrender of this
Class B-1 Certificate for registration of transfer at the offices or agencies
maintained by the Trustee accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Class B-1 Certificates of authorized denominations evidencing the same
aggregate Class B-1 Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Class B-1 Certificates are issuable only as registered
Class B-1 Certificates without coupons in minimum denominations of $1,000 of
the Initial Class B-1 Certificate Principal Amount. As provided in the
Agreement and subject to certain limitations therein set forth, Class B-1
Certificates are exchangeable for new Class B-1 Certificates of authorized
denominations evidencing the same aggregate Class B-1 Percentage Interest, as
requested by the Class B-1 Certificateholder surrendering the same.
6
<PAGE> 146
No transfer of any Class B-1 Certificate shall be made unless
such transfer is made pursuant to an effective registration statement or
otherwise in accordance with the requirements of the Securities Act of 1933, as
amended (the "Act"). If such a transfer is to be made in reliance upon an
exemption from the Act other than Rule 144A under the Act, (i) the Trustee
shall require an Opinion of Counsel that such transfer may be made pursuant to
an exemption, describing the applicable exemption and the basis therefor, from
the Act and laws or is being made pursuant to the Act and laws, which Opinion
of Counsel shall not be an expense of the Trustee or the Trust, or (ii) the
Trustee shall require the transferee to execute a certification, substantially
in the form attached as an Exhibit to the Agreement, setting forth the facts
surrounding such transfer. In the event that a transfer is to be made in
reliance on Rule 144A under the Act, the Holder of the Class B-1 Certificate
shall cause its prospective transferee to execute and deliver a certificate
substantially in the form attached as an Exhibit to the Agreement. The
Servicer shall promptly furnish to any Holder, or any prospective purchaser
designated by a Holder, the information required to be delivered to holders and
prospective purchasers of Class B-1 Certificates in connection with resales of
the Class B-1 Certificates to permit compliance with the Rule 144A in
connection with such resales.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection therewith.
The Holder of the Trust Certificate will have the option,
subject to certain conditions set forth in the Agreement, including the deposit
of the sum specified in the Agreement, to remove all, but not less than all, of
the property in the Trust, and thereby cause early retirement of the
Certificates as of any Payment Date following the date on which the aggregate
Class A Certificate Principal Balance, the Class B-1 Certificate Principal
Balance and the Class B-2 Certificate Principal Balance is less than 10% of the
Initial Class A Certificate Principal Amount, the Initial Class B-1 Certificate
Principal Amount and the Initial Class B-2 Certificate Principal Amount. In
the event of such removal, the entire outstanding Class A Certificate Principal
Balance, the Class B-1 Certificate Principal Balance and the Class B-2
Certificate Principal Balance, together with accrued interest thereon at the
related Certificate Rate, will be required to be paid to the Class A
Certificateholders and the Class B Certificateholders on such Payment Date.
The Servicer, the Depositor and the Trustee and any agent of
any of the foregoing may treat the person in whose name this Class B-1
Certificate is registered as the owner
7
<PAGE> 147
hereof for all purposes, and none of the foregoing shall be affected by any
notice to the contrary.
8
<PAGE> 148
EXHIBIT G
CLASS B-2 CERTIFICATE
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (B) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT SUBJECT, IN THE CASE OF CLAUSES (B) OR (C)
ABOVE, TO COMPLIANCE BY THE HOLDER AND THE TRANSFEREE WITH THE PROVISIONS OF
THE POOLING AND SERVICING AGREEMENT APPLICABLE TO SUCH TRANSFER.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
8.22% EQUIPMENT LEASE-BACKED CERTIFICATE, CLASS B-2
evidencing a Class B-2 Percentage Interest in a Trust, the property of
which includes a pool of equipment, the related equipment leases and
other property appurtenant thereto conveyed to the Trust by First
Sierra Receivables II, Inc. (the "Depositor").
Principal in respect of this Class B-2 Certificate is payable monthly
as set forth herein, after an initial interest-only period which is
scheduled to end on the November 1997 Payment Date, but which may end
earlier if a required Amortization Event occurs earlier. Accordingly,
the unpaid principal balance of the Class B-2 Percentage Interest
evidenced hereby may be less than the initial principal amount set
forth below.
This Class B-2 Certificate does not represent any interest in or
obligation of the Depositor, First Sierra Financial, Inc. ("First
Sierra"), or any Affiliate of any of them. Neither the Class B-2
Certificates nor the Leases are insured by any governmental agency.
<TABLE>
<S> <C> <C>
CUSIP: 33641QAE8
Class B-2
Certificate $1,800,611 Initial Percentage
No. B-2 Principal Amount Interest: 100%
</TABLE>
<PAGE> 149
THIS CERTIFIES THAT _________________________ is the
registered owner of a ONE MILLION, EIGHT HUNDRED THOUSAND, SIX HUNDRED ELEVEN
DOLLARS ($1,800,611) nonassessable, fully-paid, 100% Class B-2 Percentage
Interest in the Class B-2 Certificates issued by First Sierra Equipment Trust
1996-2 (the "Trust") formed by First Sierra. The Trust hereby agrees to pay to
such registered holder its pro rata share (based on the aggregate Class B-2
Percentage Interest held by such registered Holder) of the amounts which all
Holders of the Class B-2 Certificates are entitled to receive, as hereinafter
set forth in this Class B-2 Certificate and as more fully set forth in the
Agreement (defined below), at all times from the sources and on the terms and
conditions hereinafter set forth and as more fully set forth in the Agreement.
The property of the Trust includes a pool of equipment finance
leases, installment sale contracts and loan contracts (the "Leases"), the
equipment financed or leased thereby, if any, (the "Equipment"), all Scheduled
Payments, Residual Receipts, Defaulted Residual Receipts and other monies due
thereunder after November 1, 1996 (the "Cut-Off Date"), and other property.
The Trust was created pursuant to the Pooling and Servicing Agreement (the
"Agreement"), dated as of November 1, 1996, by and among First Sierra, as
Servicer, the Depositor and Bankers Trust Company, as trustee of the Trust (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Class B-2 Certificate is one of the duly authorized Class
B-2 Certificates designated as "8.22% Equipment Lease Backed Certificates of
First Sierra Equipment Lease Trust 1996-2, Class B" (the "Class B-2
Certificates"). This Class B-2 Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Class B-2 Certificate, by virtue of the acceptance hereof,
assents and by which such Holder is bound.
2
<PAGE> 150
IN WITNESS WHEREOF, the Trust has caused this Class B-2
Certificate to be duly executed.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
By: BANKERS TRUST COMPANY,
not in its individual capacity,
but solely as Trustee
Dated: November 15, 1996
By:
-----------------------------------
3
<PAGE> 151
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-2 Certificates of the Series designated herein,
issued under the within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
--------------------------------
4
<PAGE> 152
This Class B-2 Certificate does not purport to summarize the
Agreement and reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Trustee. Copies of the
Agreement and all amendments thereto will be provided to any Class B-2
Certificateholder, at its expense, upon a written request to the Servicer:
Texas Commerce Tower, 70th Floor, 600 Travis Street, Houston, Texas 77002;
Attention: Sandy Ho, Chief Financial Officer.
Under the Agreement, the Trust is obligated to pay, to the
extent that monies are available in the Collection Account for such
distributions, on the 10th day of each month or, if such 10th day is not a
Business Day, the Business Day immediately following (the "Payment Date"),
commencing in December 1996, to the person in whose name this Class B-2
Certificate is registered and at the address specified in the Certificate
Register at the close of business on the Record Date, an amount from certain
monies deposited in the Collection Account with respect to the related
Collection Period equal to the product of the Class B-2 Percentage Interest
evidenced by this Class B-2 Certificate and an amount equal to the sum of (i)
the Class B-2 Certificate Interest and (ii) on and after the Payment Date which
is also the Initial Amortization Date, but not prior thereto, the sum of (A)
Class B-2 Base Principal Distribution Amount and (B) one-half of the Residual
Receipts received by the Servicer during the prior Collection Period. The
Initial Amortization Date is the earlier to occur of (x) the Payment Date
occurring in November 1997 and (y) the Payment Date which immediately follows
the Early Amortization Event. The final payment of principal and interest on
this Class B-2 Certificate will not be later than the November 10, 2004 Payment
Date.
Payments on this Class B-2 Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof, by wire transfer
of immediately available funds, to the Person entitled thereto, as specified by
such Person in accordance with the terms of the Agreement or by such other
means as the Person entitled thereto and the Trustee shall agree, without the
presentation or surrender of this Class B-2 Certificate or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class B-2
Certificate, agrees to look solely to the funds in the Collection Account to
the extent available for payment to the Holder hereof as provided in the
Agreement for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Holder hereof for any amounts due under this
Class B-2 Certificate or the Agreement.
5
<PAGE> 153
The Class B-2 Certificates do not represent an obligation of,
or an interest in, the Trustee or any Affiliate thereof. The Class B-2
Certificates are limited in right of payment to certain collections and
recoveries respecting the Leases, all or more specifically set forth above in
the Agreement. Pursuant to the Agreement, the Trust shall, in addition to the
Class B-2 Certificates, issue Class A Certificates, the Class B-1 Certificates
and the Trust Certificate. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO THE
CLASS B-2 CERTIFICATES IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL OF ALL
AMOUNTS OF PRINCIPAL AND INTEREST DUE AND PAYABLE ON THE CLASS A CERTIFICATES
AND THE CLASS B-1 CERTIFICATES ON EACH PAYMENT DATE.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer and the rights of the Class B-2
Certificateholders under the Agreement at any time by the Servicer, the
Depositor and the Trustee with, for so long as the Class B-2 Certificates
remain outstanding, the consent of Class B-2 Certificateholders owning Class
B-2 Certificates representing an aggregate Class B-2 Percentage Interest of not
less than 50%. Any such consent by the Holder of this Class B-2 Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Class B-2 Certificate and of any Class B-2 Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Class B-2 Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Class B-2 Certificateholders.
As provided in the Agreement, the transfer of this Class B-2
Certificate is registrable in the Certificate Register upon surrender of this
Class B-2 Certificate for registration of transfer at the offices or agencies
maintained by the Trustee accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Class B-2 Certificates of authorized denominations evidencing the same
aggregate Class B-2 Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Class B-2 Certificates are issuable only as registered
Class B-2 Certificates without coupons in minimum denominations of $1,000 of
the Initial Class B-2 Certificate Principal Amount. As provided in the
Agreement and subject to certain limitations therein set forth, Class B-2
Certificates are exchangeable for new Class B-2 Certificates of authorized
denominations evidencing the same aggregate Class B-2
6
<PAGE> 154
Percentage Interest, as requested by the Class B-2 Certificateholder
surrendering the same.
No transfer of any Class B-2 Certificate shall be made unless
such transfer is made pursuant to an effective registration statement or
otherwise in accordance with the requirements of the Securities Act of 1933, as
amended (the "Act"). If such a transfer is to be made in reliance upon an
exemption from the Act other than Rule 144A under the Act, (i) the Trustee
shall require an Opinion of Counsel that such transfer may be made pursuant to
an exemption, describing the applicable exemption and the basis therefor, from
the Act and laws or is being made pursuant to the Act and laws, which Opinion
of Counsel shall not be an expense of the Trustee or the Trust, or (ii) the
Trustee shall require the transferee to execute a certification, substantially
in the form attached as an Exhibit to the Agreement, setting forth the facts
surrounding such transfer. In the event that a transfer is to be made in
reliance on Rule 144A under the Act, the Holder of the Class B-2 Certificate
shall cause its prospective transferee to execute and deliver a certificate
substantially in the form attached as an Exhibit to the Agreement. The
Servicer shall promptly furnish to any Holder, or any prospective purchaser
designated by a Holder, the information required to be delivered to holders and
prospective purchasers of Class B-2 Certificates in connection with resales of
the Class B-2 Certificates to permit compliance with the Rule 144A in
connection with such resales.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection therewith.
The Holder of the Trust Certificate will have the option,
subject to certain conditions set forth in the Agreement, including the deposit
of the sum specified in the Agreement, to remove all, but not less than all, of
the property in the Trust, and thereby cause early retirement of the
Certificates as of any Payment Date following the date on which the aggregate
Class A Certificate Principal Balance, Class B-1 Certificate Principal Balance
and the Class B-2 Certificate Principal Balance is less than 10% of the Initial
Class A Certificate Principal Amount and the Initial Class B-2 Certificate
Principal Amount. In the event of such removal, the entire outstanding Class A
Certificate Principal Balance and the Class B-2 Certificate Principal Balance,
together with accrued interest thereon at the related Certificate Rate, will be
required to be paid to the Class A Certificateholders and the Class B-2
Certificateholders on such Payment Date.
The Servicer, the Depositor and the Trustee and any agent of
any of the foregoing may treat the person in whose
7
<PAGE> 155
name this Class B-2 Certificate is registered as the owner hereof for all
purposes, and none of the foregoing shall be affected by any notice to the
contrary.
8
<PAGE> 156
EXHIBIT H
TRUST CERTIFICATE
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (B) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT SUBJECT, IN THE CASE OF CLAUSES (B) OR (C)
ABOVE, TO COMPLIANCE BY THE HOLDER AND THE TRANSFEREE WITH THE PROVISIONS OF
THE POOLING AND SERVICING AGREEMENT APPLICABLE TO SUCH TRANSFER.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
TRUST CERTIFICATE
evidencing a Trust Certificate Percentage Interest in a Trust, the
property of which includes a pool of equipment, the related equipment
leases and other property appurtenant thereto conveyed to the Trust by
First Sierra Receivables II, Inc. (the "Depositor").
Principal in respect of this Trust Certificate is payable monthly as
set forth herein.
This Trust Certificate does not represent any interest in or
obligation of the Depositor, First Sierra Financial, Inc. ("First
Sierra"), or any Affiliate of any of them. Neither the Trust
Certificate nor the Leases are insured by any governmental agency.
<TABLE>
<S> <C>
Trust Certificate
Certificate Percentage
No. 1 Interest: 100%
</TABLE>
<PAGE> 157
THIS CERTIFIES THAT First Sierra Receivables II, Inc. is the
registered owner of a nonassessable, fully-paid, 100% Trust Certificate
Percentage Interest in the Trust Certificate issued by First Sierra Equipment
Trust 1996-2 (the "Trust") formed by the Depositor. The Trust hereby agrees to
pay to such registered holder its pro rata share (based on the aggregate Trust
Certificate Percentage Interest held by such registered Holder) of the amounts
which all Holders of the Trust Certificates are entitled to receive, as
hereinafter set forth in this Trust Certificate and as more fully set forth in
the Agreement (as defined below), at all times from the sources and on the
terms and conditions hereinafter set forth and as more fully set forth in the
Agreement.
The property of the Trust includes a pool of equipment finance
leases, installment sale contracts and loan contracts (the "Leases"), the
equipment financed or leased thereby, if any, (the "Equipment"), all Scheduled
Payments, Residual Receipts, Defaulted Residual Receipts and other monies due
thereunder after November 1, 1996 (the "Cut-Off Date"), and other property.
The Trust was created pursuant to the Pooling and Servicing Agreement (the
"Agreement"), dated as of November 1, 1996, by and among First Sierra, as the
Servicer, the Depositor and Bankers Trust Company, as trustee of the Trust (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Trust Certificate is the duly authorized Trust
Certificate designated as "Trust Certificate of First Sierra Equipment Lease
Trust 1996-2" (the "Trust Certificate"). This Trust Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Trust Certificate, by virtue of the
acceptance hereof, assents and by which such Holder is bound.
2
<PAGE> 158
IN WITNESS WHEREOF, the Trust has caused this Trust
Certificate to be duly executed.
FIRST SIERRA EQUIPMENT LEASE TRUST 1996-2
By: BANKERS TRUST COMPANY, not in its
individual capacity,
but solely as Trustee
Dated: NOVEMBER 15, 1996
By:
--------------------------------
3
<PAGE> 159
CERTIFICATE OF AUTHENTICATION
This is the Trust Certificate of the Series designated herein, issued under the
within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST COMPANY,
not in its individual
capacity but solely as Trustee
By:
--------------------------------
4
<PAGE> 160
This Trust Certificate does not purport to summarize the
Agreement and reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Trustee. Copies of the
Agreement and all amendments thereto will be provided to any Holder of this
Trust Certificate, at its expense, upon a written request to the Servicer:
Texas Commerce Tower, 70th Floor, 600 Travis Street, Houston, Texas 77002;
Attention: Sandy Ho, Chief Financial Officer.
Under the Agreement, the Trust is obligated to pay, to the
extent that monies are available in the Collection Account for such
distributions, on the 10th day of each month or, if such 10th day is not a
Business Day, the Business Day immediately following (the "Payment Date"),
commencing in December 1996, to the person in whose name this Trust Certificate
is registered and at the address specified in the Certificate Register at the
close of business on the Record Date, an amount from certain monies deposited
in the Collection Account with respect to the related Collection Period equal
to the product of the Trust Certificate Percentage Interest evidenced by this
Trust Certificate and the amount distributable to all Holders of the Trust
Certificate as set forth in the Agreement. The final payment on this Trust
Certificate will not be later than the November 10, 2004 Payment Date.
Payments on this Trust Certificate will be made by the Trustee
by check mailed, or upon request of the Holder hereof, by wire transfer of
immediately available funds, to the Person entitled thereto, as specified by
such Person in accordance with the terms of the Agreement or by such other
means as the Person entitled thereto and the Trustee shall agree, without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Trust
Certificate, agrees to look solely to the funds in the Collection Account to
the extent available for payment to the Holder hereof as provided in the
Agreement for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Holder hereof for any amounts due under this
Trust Certificate or the Agreement.
The Trust Certificate does not represent an obligation of, or
an interest in, the Trustee or any Affiliate thereof. The Trust Certificate is
limited in right of payment to certain collections and recoveries respecting
the Leases, all or more specifically set forth above in the Agreement.
Pursuant to the Agreement, the Trust shall, in addition to the
5
<PAGE> 161
Trust Certificate, issue Class A Certificates and Class B Certificates. THE
RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO THE TRUST CERTIFICATE IS SUBORDINATE
TO THE PRIOR PAYMENT IN FULL OF ALL AMOUNTS OF PRINCIPAL AND INTEREST DUE AND
PAYABLE ON THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES ON EACH
PAYMENT DATE.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Servicer and the rights of Holder of the
Trust Certificate under the Agreement at any time by the Servicer, the
Depositor and the Trustee with, for so long as the Trust Certificates remain
outstanding, the consent of Holder of the Trust Certificate. Any such consent
by the Holder of this Trust Certificate shall be conclusive and binding on such
Holder and upon all future Holders of this Trust Certificate and of any Trust
Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Trust
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holder of the Trust
Certificate.
As provided in the Agreement, the transfer of this Trust
Certificate is registrable in the Certificate Register upon surrender of this
Trust Certificate for registration of transfer at the offices or agencies
maintained by the Trustee accompanied by a written instrument of transfer in
form satisfactory to the Trustee duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and thereupon one or more new
Trust Certificates of authorized denominations evidencing the same aggregate
Trust Certificate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Holder of the Trust Certificate will have the option,
subject to certain conditions set forth in the Agreement, including the deposit
of the sum specified in the Agreement, to remove all, but not less than all, of
the property in the Trust, and thereby cause early retirement of the
Certificates as of any Payment Date following the date on which the aggregate
Class A Certificate Principal Balance and the Class B Certificate Principal
Balance is less than 10% of the Initial Class A Certificate Principal Amount
and the Initial Class B Certificate Principal Amount. In the event of such
removal, the entire outstanding Class A Certificate Principal Balance and the
Class B Certificate Principal Balance, together with accrued interest thereon
at the related Certificate Rate, will be required to be paid to the Class A
Certificateholders and the Class B Certificateholders on such Payment Date.
6
<PAGE> 162
No transfer of any Trust Certificate shall be made unless such
transfer is made pursuant to an effective registration statement or otherwise
in accordance with the requirements of the Securities Act of 1933, as amended
(the "Act"). If such a transfer is to be made in reliance upon an exemption
from the Act other than Rule 144A under the Act, (i) the Trustee shall require
an Opinion of Counsel that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from the Act and
laws or is being made pursuant to the Act and laws, which Opinion of Counsel
shall not be an expense of the Trustee or the Trust, or (ii) the Trustee shall
require the transferee to execute a certification, substantially in the form
attached as an Exhibit to the Agreement, setting forth the facts surrounding
such transfer. In the event that a transfer is to be made in reliance on Rule
144A under the Act, the Holder of the Trust Certificate shall cause its
prospective transferee to execute and deliver a certificate substantially in
the form attached as an Exhibit to the Agreement. The Servicer shall promptly
furnish to any Holder, or any prospective purchaser designated by a Holder, the
information required to be delivered to holders and prospective purchasers of
Trust Certificates in connection with resales of the Trust Certificate to
permit compliance with the Rule 144A in connection with such resales.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection therewith.
The Servicer, the Depositor, the Trustee and any agent of any
of the foregoing may treat the person in whose name this Trust Certificate is
registered as the owner hereof for all purposes, and none of the foregoing
shall be affected by any notice to the contrary.
7
<PAGE> 163
EXHIBIT I
FORM OF TRANSFEREE CERTIFICATION
(NON-144A)
First Sierra Financial, Inc.
Texas Commerce Tower, 70th Fl.
600 Travis Street
Houston, Texas 77002
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: First Sierra Equipment Lease Trust 1996-2,
[Class B/Trust] Lease-Backed Certificate,
Series 1996-2, No. __, issued under that
certain Pooling and Servicing Agreement,
dated as of November 1, 1996, among First
Sierra Financial, Inc., as servicer (the
"Servicer"), First Sierra Receivables II,
Inc., as depositor (the "Depositor") and
Bankers Trust Company, as trustee (the
"Trustee")
Dear Sirs:
________________________________________ as registered holder
("Seller") intends to transfer the captioned Certificate to
____________________________ ("Purchaser"), for registration in the name of
___________________________.
1. In connection with such transfer and in accordance with
Article VIII of the captioned Agreement, the Seller hereby certifies the
following facts: Neither the Seller nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Certificate,
any interest in the Certificate or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the
Certificate, any interest in the Certificate or any other similar security
with, any person in any manner, or made any general solicitation by means of
general advertising or in any other manner, or taken any other action which
would constitute a distribution of the Certificate under the Securities Act of
1933, as amended (the "1933 Act"), or which would render the disposition of the
Certificate a violation of Section 5 of the 1933 Act or require registration
pursuant thereto.
<PAGE> 164
2. The Purchaser warrants and represents to, and covenants
with, the Seller, the Trustee and the Servicer pursuant to Article VIII of the
Pooling and Servicing Agreement as follows:
a. The Purchaser understands that the Certificate
has not been registered under the 1933 Act or the securities laws of
any state.
b. The Purchaser is acquiring the certificate for
investment for its own account only and not for any other person.
c. The Purchaser considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Certificate.
d. The Purchaser has been furnished with all
information regarding the Certificate that it has requested from the
Contributor, the Trustee or the Servicer.
e. Neither the Purchaser nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise disposed
of the Certificate, any interest in the Certificate or any other
similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Certificate, any interest
in the Certificate or any other similar security from, or otherwise
approached or negotiated with respect to the Certificate, any interest
in the Certificate or any other similar security with, any person in
any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, that
would constitute a distribution of the Certificate under the 1933 Act
or that would render the disposition of the Certificate a violation of
Section 5 of the 1933 Act or require registration pursuant thereto,
nor will it act, nor has it authorized or will it authorize any person
to act, in such manner with respect to the Certificate.
3. The Purchaser warrants and represents to, and covenants
with, the Servicer, the Depositor and the Trustee that the Purchaser is not an
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Plan"), or a
plan within the meaning of Section 4975(e)(1) of the Internal Revenue Code of
1986 ("Code") (also a "Plan"), and the Purchaser is not directly or indirectly
purchasing the certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.
2
<PAGE> 165
4. This document may be executed in one or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties have caused this
document to be executed by their duly authorized officers as of the date set
forth below.
- ---------------------------- -----------------------------
Seller Purchaser
By: By:
------------------------- --------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
---------------- ---------------------
Date: Date:
----------------------- ------------------------
3
<PAGE> 166
EXHIBIT J
FORM OF TRANSFEREE CERTIFICATION
(144A QIB)
First Sierra Financial, Inc.
Texas Commerce Tower, 70th Fl.
600 Travis Street
Houston, Texas 77002
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: First Sierra Equipment Lease Trust 1996-2, [Class
B/Trust] Lease-Backed Certificates, No. __, issued
under that certain Pooling and Servicing Agreement,
dated as of November 1, 1996, by and among First
Sierra Financial, Inc., as servicer (the "Servicer"),
First Sierra Receivables II, Inc., as depositor (the
"Depositor") and Bankers Trust Company, as trustee
(the "Trustee")
Dear Sirs:
__________________________________ as registered holder
("Seller") intends to transfer the captioned Certificate to ___________________
____________________________________________ ("Purchaser"), for registration in
the name of ______________ ___________________.
1. In connection with such transfer and in accordance with
Article VIII of the captioned Agreement, the Seller hereby certifies the
following facts: Neither the Seller nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Certificate,
any interest in the Certificate or any other similar security, offer to buy or
accept a transfer, pledge or other disposition of the Certificate, any interest
in the Certificate or any other similar security with, any person in any
manner, or made any general solicitation by means of general advertising or in
any other manner, or taken any other action which would constitute a
distribution of the Certificate under the Securities Act of 1933, as amended
(the "1933 Act"), or which would render the disposition of the Certificate a
violation of Section 5 of the 1933 Act or require registration pursuant
thereto.
2. The Purchaser warrants and represents to, and covenants
with, the Depositor, the Trustee and the Servicer
<PAGE> 167
pursuant to Article VIII of the Pooling and Servicing Agreement as follows:
a. The Purchaser understands that the Certificate has not
been registered under the 1933 Act or the securities laws of any state.
b. The Purchaser is acquiring the Certificate for investment
for its own account only and not for any other person.
c. The Purchaser considers itself a substantial,
sophisticated institutional investor having such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of investment in the Certificate.
d. The Purchaser has been furnished with all information
regarding the Certificate that it has requested from the Contributor, the
Trustee or the Servicer.
e. The Purchaser is a "qualified institutional buyer" as that
term is defined in Rule 144A under the 1933 Act ("Rule 144") and has completed
either of the forms of certification to that effect attached hereto as Annex 1
or Annex 2. The Purchaser is aware that the sale to it is being made in
reliance on Rule 144A. The Purchaser is acquiring the Certificate for its own
account or for the account of a qualified institutional buyer, understands that
the Certificate may be resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional buyer to whom notice is
given that the resale, pledge or transfer is being made in reliance on Rule
144A, or (ii) pursuant to another exemption from registration under the 1933
Act.
3. The Purchaser warrants and represents to, and covenants
with, the Servicer, the Depositor, and the Trustee that the Purchaser is not an
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Plan"), or a
plan within the meaning of Section 4975(e)(1) of the Internal Revenue Code of
1986 ("Code") (also a "Plan"), and the Purchaser is not directly or indirectly
purchasing the Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.
4. This document may be executed in one or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same document.
2
<PAGE> 168
FIRST SIERRA RECEIVABLES II SERIES 1996-1
IN WITNESS WHEREOF, each of the parties have caused this
document to be executed by their duly authorized officers as of the date set
forth below.
- ---------------------------- ------------------------------
Seller Purchaser
By: By:
------------------------- ---------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
----------------------- -------------------------
Date: Date:
------------------------ -------------------------
3
<PAGE> 169
ANNEX 1 TO TRANSFEREE CERTIFICATION
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Purchasers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to the parties
addressed in the Transferee Certificate to which this certification relates
with respect to the Certificate described therein:
1. As indicated below, the undersigned is the President,
Chief Financial Officer, Senior Vice President or other executive officer of
the Purchaser.
2. In connection with purchases by the Purchaser, the
Purchaser is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Purchaser
owned and/or invested on a discretionary basis more than $100,000,000(1) in
securities (except for the excluded securities referred to below) as of the end
of the Purchaser's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Purchaser satisfies the criteria in the
category marked below.
___ Corporation, etc. The Purchaser is a corporation (other than
a bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code.
___ Bank. The Purchaser (a) is a national bank or banking
institution organized under the laws of any State, territory
or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
- -----------------------------
(1) The Purchaser must own and/or invest on a discretionary
basis at least $100,000,000 in securities unless the Purchaser is a
dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, and, in that case, the Purchaser must own
and/or invest on a discretionary basis at least $10,000,000 in
securities.
<PAGE> 170
___ Savings and Loan. The Purchaser (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
___ Broker-dealer. The Purchaser is a dealer registered pursuant
to Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Purchaser is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State,
territory or the District of Columbia.
___ State or Local Plan. The Purchaser is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA Plan. The Purchaser is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Security Act of 1974.
___ Investment Advisor. The Purchaser is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Purchaser, (ii) securities
that are part of an unsold allotment to or subscription by the Purchaser, if
the Purchaser is a dealer, (iii) bank deposit notes and certificates of
deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities
owned but subject to a repurchase agreement and (vii) currency, interest rate
and commodity swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Purchaser, the
Purchaser used the cost of such securities to the Purchaser and did not include
any of the securities referred to in the preceding paragraph. Further, in
determining such aggregate amount, the Purchaser may have included securities
owned by subsidiaries of the Purchaser, but only if such subsidiaries are
2
<PAGE> 171
consolidated with the Purchaser in its financial statements prepared in
accordance with generally accepted, accounting principles and if the
investments of such subsidiaries are managed under the Purchaser's direction.
However, such securities were not included if the Purchaser is a
majority-owned, consolidated subsidiary of another enterprise and the Purchaser
is not itself a reporting company under the Securities Exchange Act of 1934.
5. The Purchaser acknowledges that it is familiar with Rule
144A and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made
herein because one or more sales to the Purchaser may be in reliance on Rule
144A.
<TABLE>
<S> <C> <C>
_____ ______ Will the Purchaser be purchasing the
Yes No Certificate only for the Purchaser's own
account?
</TABLE>
6. If the answer to the foregoing question is "no", the
Purchaser agrees that, in connection with any purchase of securities sold to
the Purchaser for the account of a third party (including any separate account)
in reliance on Rule 144A, the Purchaser will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Purchaser agrees that the Purchaser
will not purchase securities for a third party unless the Purchaser has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
7. The Purchaser will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Purchaser's purchase of the
Certificate will constitute a reaffirmation of this certification as of the
date of such purchase.
-------------------------------
Print Name of Purchaser
By:
---------------------------
Name:
Title:
Date:
-------------------------
3
<PAGE> 172
ANNEX 2 TO TRANSFEREE CERTIFICATION
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Purchasers That Are Registered Investment Companies]
The undersigned hereby certifies as follows to the parties
addressed in the Transferee Certificate to which this certification relates
with respect the Certificate described therein:
1. As indicated below, the undersigned is the President,
Chief Financial Officer or Senior Vice President of the Purchaser or, if the
Purchaser is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because Purchaser is part
of a Family of Investment Companies (as defined below), is such an officer of
the Adviser.
2. In connection with purchases by Purchaser, the Purchaser
is a "qualified institutional buyer" as defined in SEC Rule 144A because (i)
the Purchaser is an investment company registered under the Investment Company
Act of 1940, and (ii) as marked below, the Purchaser alone, or the Purchaser's
Family of Investment Companies, owned at least $100,000,000 in securities
(other than the excluded securities referred to below) as of the end of the
Purchaser's most recent fiscal year. For purposes of determining the amount of
securities owned by the Purchaser or the Purchaser's Family of Investment
Companies, the cost of such securities was used.
____ The Purchaser owned $______________________ in securities
(other than the excluded securities referred to below) as of
the end of the Purchaser's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
____ The Purchaser is part of a Family of Investment Companies
which owned in the aggregate $____________ in securities
(other than the excluded securities referred to below) as of
the end of the Purchaser's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same party or because one
investment adviser is a majority owned subsidiary of the other).
<PAGE> 173
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Purchaser or are part of the
Purchaser's Family of Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv) repurchase agreements,
(v) securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
5. The Purchaser is familiar with Rule 144A and understands
that the seller to it and the other parties related to the Certificates are
relying and will continue to rely on the statements made herein because one or
more sales to the Purchaser will be in reliance on Rule 144A. In addition, the
Purchaser will only purchase for the Purchaser's own account.
6. The undersigned will notify the parties addressed in the
Transferee Certificate to which this certification relates of any changes in
the information and conclusion herein. Until such notice, the Purchaser's
purchase of the Certificate will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
---------------------------------------
Print Name of Purchaser or Adviser
By
-------------------------------------
Name:
Title:
IF AN ADVISER:
---------------------------------------
Print Name of Purchaser
Date:
----------------------------------
2
<PAGE> 174
EXHIBIT K
FORM OF TRANSFEREE CERTIFICATION
(INVESTMENT COMPANY)
First Sierra Financial, Inc.
Texas Commerce Tower, 70th Fl.
600 Travis Street
Houston, Texas 77002
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: First Sierra Equipment Lease Trust 1996-2, [Class
B/Trust] Lease-Backed Certificate, Series 1996-2, No.
__, issued under that certain Pooling and Servicing
Agreement, dated as of November 1, 1996, among First
Sierra Financial, Inc., as servicer (the "Servicer"),
First Sierra Receivables II, Inc., as depositor (the
"Depositor") and Bankers Trust Company, as trustee
(the "Trustee")
Dear Sirs:
_________________________________________ as registered holder
("Seller") intends to transfer the captioned Certificate to __________________
_____________________________ ("Purchaser"), for registration in the name of
_____________________________.
1. Seller certifies to the Trustee that it is an
investment company registered under the Investment Company Act of 1940, as
amended.
Attached hereto is a true and correct copy of the Qualified
Institutional Buyer's Certificate of the Purchaser. We have required no
further information with respect to the Purchaser's status as "qualified
institutional buyer" other than the following:
2. The Purchaser warrants and represents to, and covenants
with, the Servicer, the Depositor, and the Trustee that the Purchaser is not an
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Plan"), or a
plan within the meaning of Section 4975(e)(1) of the Internal Revenue Code of
1986 ("Code") (also a "Plan"), and the
<PAGE> 175
Purchaser is not directly or indirectly purchasing the Certificate on behalf
of, as investment manager of, as named fiduciary of, as trustee of, or with
assets of a Plan.
IN WITNESS WHEREOF, each of the parties have caused this
document to be executed by their duly authorized officers as of the date set
forth below.
- ---------------------------- --------------------------
Seller Purchaser
By By:
------------------------- ------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
---------------------- ---------------------
Date: Date:
----------------------- ----------------------
2
<PAGE> 176
Addendum 1
RULE 144A
QUALIFIED INSTITUTIONAL BUYER CERTIFICATE
Dear Sirs:
In connection with our purchase(s) from or through you (or
others) of privately offered debt or equity securities ("Rule 144A Eligible
Securities") pursuant to Rule l44A under the Securities Act of 1933, we certify
as follows:
1. We are a "qualified institutional buyer" as defined
in Rule 144A.
2. As of the date set forth below, which date is
subsequent to the close of our most recent fiscal
year on ____________________, we beneficially owned
and/or invested on a discretionary basis an amount of
securities (as determined in accordance with Rule
144A) in excess of $100,000,000.
We represent that we will only purchase Rule 144A Eligible
Securities for our own account or for the account of other qualified
institutional buyers.
You, any issuer of Rule 144A Eligible Securities, trustee,
paying or fiscal agent, and other participants in any transaction in Rule 144A
Eligible Securities purchased by us may rely upon this certificate, and we will
advise you promptly should we cease to be a qualified institutional buyer.
This certificate has been executed on our behalf by one of our
executive officers.
-----------------------------------
Name of Company
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Date:
-----------------------------
<PAGE> 177
EXHIBIT L
FORM OF INSTRUMENT OF TRANSFER
THIS ASSIGNMENT dated as of the __ day of _________, ____, by
and between __________ ("Assignor") and __________("Assignee"), provides:
That for and in consideration of the sum of TEN DOLLARS
($10.00) and other valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties hereby agree as follows:
A. Assignor hereby grants, transfers and assigns to
Assignee all of the right, title and interest of Assignor, as
Certificateholder, in, to and under that certain Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of April 1, 1996
among First Sierra Financial, Inc., as servicer (the "Servicer"), First Sierra
Receivables II, Inc., as depositor (the "Depositor") and Bankers Trust Company,
as trustee (the "Trustee") and that certain [Class B/Trust] Certificate, No. _,
Series 1996-1 (the "Certificate") issued thereunder by the Trustee.
B. For the purpose of inducing Assignee to purchase the
Certificate from Assignor, Assignor warrants and represents that:
a. Assignor is the lawful owner of the Certificate
with the full right to transfer the Certificate free from any and all claims
and encumbrances whatsoever;
b. The Assignor has not received notice, and has no
knowledge of any offsets, counterclaims or other defenses available to the
Servicer with respect to the Pooling and Servicing Agreement or the
Certificate; and
c. The Assignor has no knowledge of and has not
received notice of any amendments to the Pooling and Servicing Agreement or the
Certificate.
C. By execution hereof Assignee agrees to be bound, as
Certificateholder, by all of the terms, covenants and conditions of the Pooling
and Servicing Agreement and the Certificate and from and after the date hereof
Assignee assumes for the benefit of each of the Depositor, the Servicer, the
Transferor, the Trustee and the Assignor all of Assignor's obligations as
Certificateholder thereunder.
D. This Assignment may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed
<PAGE> 178
to be an original; such counterparts, together, shall constitute one and the
same agreement.
WITNESS the following signatures.
[ASSIGNOR] [ASSIGNEE]
By By
----------------------------- ----------------------------
Its Its
---------------------------- ----------------------------
Taxpayer Taxpayer
Identification No. Identification No.
------------- ------------
2
<PAGE> 179
Annex A - Defined Terms
"Account" means any of the Collection Account, the Security
Deposit Account and the New Transferred Property Funding Account.
"Actual Payment" means, with respect to a Collection Period
and a Lease, all Scheduled Payments, Prepayments, proceeds from any Lease
subject to a Casualty Loss, Final Lease Payments, Residual Receipts and
Defaulted Residual Receipts received by the Servicer from or on behalf of a
Lessee with respect to such Lease during such Collection Period. Actual
Payments do not include Initial Unpaid Amounts, Reconveyance Amounts, Advance
Payments and Servicer Advances.
"Addition Date" means the date upon which an Additional Lease
is added to the Conveyed Assets pursuant to Section 2.01(d) of the Sale
Agreement and the Trust Property pursuant to the Pooling and Servicing
Agreement.
"Additional Equipment" means the Equipment leased to a Lessee
pursuant to an Additional Lease.
"Additional Lease" means a Lease that is added to the Conveyed
Assets pursuant to Section 2.01(d) of the Sale Agreement and the Trust Property
pursuant to the Pooling and Servicing Agreement.
"Additional Lease Cut-Off Date" means, with respect to an
Additional Lease, the close of business on the first day in the calendar month
in which the related Addition Date occurs.
"Additional Lease Schedule" has the meaning specified in
Section 2.02(d) of the Sale Agreement.
"Advance Payment" means, with respect to a Lease and a
Collection Period, any Scheduled Payment, Final Lease Payment, Purchase Option
Payment or portion of either made by or on behalf of a Lessee and received by
the Servicer during such Collection Period, which Scheduled Payment, Final
Lease Payment, Purchase Option Payment or portion of either does not become due
until a subsequent Collection Period.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means
the power to
<PAGE> 180
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Discounted Contract Principal Balance" means at any
time of determination, an amount equal to the sum of the Discounted Contract
Principal Balances of all Leases.
"Applicable Certificates" means, for so long as the Class A
Certificate Principal Balance is greater than zero, the Class A Certificates.
Following reduction of the Class A Certificate Principal Balance to zero, and
for so long as the Class B-1 Certificate Principal Balance is greater than
zero, the Class B-1 Certificates. Following reduction of the Class B-1
Certificate Principal Balance to zero, and for so long as the Class B-2
Certificate Principal Balance is greater than zero, the Class B-2 Certificates.
Following reduction of the Class B-2 Certificate Balance to zero, the Trust
Certificates.
"Applicant" has the meaning specified in Section 8.06 of the
Pooling and Servicing Agreement.
"Assignment" means, the assignment substantially in the form
of Exhibit B to the Sale Agreement and delivered by First Sierra to the Company
pursuant to Section 2.01(d) of the Sale Agreement.
"Available Distribution Amount" has the meaning specified in
Section 6.04(a) of the Pooling and Servicing Agreement.
"Available Funds" means, with respect to a Payment Date, all
amounts held in the Collection Account on the related Determination Date other
than any such amounts which relate to amounts due during the Collection Period
in which such Payment Date or any subsequent Payment Date occurs.
"Available Funds Shortfall" has the meaning specified in
Section 6.04(b) of the Pooling and Servicing Agreement.
"Back-up Servicer" means Bankers Trust Company.
"Back-up Servicer Fee" means, the fee payable to the Servicer
on each Payment Date in consideration for the Back-up Servicer's performance of
its duties under the Pooling and Servicing Agreement, in an amount equal to the
product of (a) one-twelfth of the Back-up Servicer Fee Rate and (b) the
Aggregate Discounted Contract Principal Balances as of the prior Calculation
Date.
2
<PAGE> 181
"Back-up Servicer Fee Rate" means 0.02% per annum.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as
amended, as codified under Title 11 of the United States Code, and the
Bankruptcy Rules promulgated thereunder, as the same may be in effect from time
to time.
"Base Principal Amount" means, with respect to any Payment
Date other than the Payment Date which is also the Initial Amortization Date,
an amount equal to the excess of (a) the Aggregate Discounted Contract
Principal Balances of the Leases as of the close of business on the last day of
the second preceding Collection Period over (b) the Aggregate Discounted
Contract Principal Balances of the Leases as of the close of business on the
last day of the immediately preceding Collection Period. With respect to the
Payment Date which is also the Initial Amortization Date an amount equal to the
excess of (i) the Aggregate Discounted Contract Principal Balances of the
Leases as of the close of business on the Cut-Off Date over (ii) the Aggregate
Discounted Contract Principal Balances of the Leases as of the close of
business on the last day of the immediately preceding Collection Period.
"Business Day" means, any day other than a Saturday, a Sunday
or a day on which banking institutions in Jupiter, Florida, New York, New York,
Houston, Texas, or in the city and State where the Trustee's or the Servicer's
principal offices are located, are authorized or obligated by law, executive
order or governmental decree to be closed; provided, however, that the Servicer
shall, from time to time, deliver written notice to the other parties hereto of
any differences in Business Days between the States of Texas (or any other
state where the Servicer has its principal office) and New York.
"Calculation Date" means, with respect to a Collection Period,
the close of business on the last day of such Collection Period, or if such day
is not a Business Day, the immediately preceding Business Day.
"Casualty Loss" means, with respect to a Lease, any loss,
theft, condemnation, governmental taking, destruction, or damage beyond repair
of any item of Equipment subject thereto which results, in accordance with the
terms of the Lease, in a reduction in the number or amount of any future
Scheduled Payments due thereunder or in the termination of the Lessee's
obligation to make future Scheduled Payments thereunder.
"Certificates" means the Class A Certificates, the Class B
Certificates and the Trust Certificates.
3
<PAGE> 182
"Certificateholder or Holder" means the Person in whose name a
Certificate is registered in the Certificate Register.
"Certificate Insurance Policy" means the Certificate Guaranty
Insurance Policy, Policy Number 22420.
"Certificate Insurer" means MBIA Insurance Corporation or any
successor thereto, as issuer of the Certificate Insurance Policy.
"Certificate Insurer Default" means any period during which
the Certificate Insurer has failed (and continues to fail) to honor a proper
claim made under the Certificate Insurance Policy.
"Certificate of Title" means, with respect to a Vehicle, the
certificate of title naming the related Source as titleholder of such Vehicle
with a notation thereon evidencing the security interest of Bankers Trust
Company, as custodian or trustee, in such Vehicle.
"Certificate Register" has the meaning specified in Section
8.03(a) of the Pooling and Servicing Agreement.
"Class" means all of the Class A Certificates, all of the
Class B-1 Certificates, or all of the Class B-2 Certificates, as applicable.
"Class A Base Principal Distribution Amount" means (a) With
respect to any Payment Date prior to the Class B-1 Termination Date or Class
B-2 Termination Date, the product of (i) the Class A Percentage and (ii) the
Base Principal Amount for such Payment Date;
(b) With respect to the Class B-1 Termination Date or the
Class B-2 Termination Date, as the case may be, the amount described in clause
(a) above plus the portion of the Class B-1 Base Principal Distribution Amount
or the Class B-2 Base Principal Distribution Amount, as applicable, not applied
as a reduction of the Class B-1 Certificate Principal Balance or the Class B-2
Certificate Principal Balance, respectively, on such date (net of any portion
of the Class B-1 Base Principal Amount applied as a reduction of Class B-1
Certificate Principal Balance or any portion of the Class B-2 Base Principal
Amount applied as a reduction of the Class B-2 Certificate Principal Balance,
as the case may be); and
(c) With respect to any Payment Date following the Class B-1
Termination Date, or the Class B-2 Termination Date, as the case may be, the
Base Principal Amount for such Payment Date (net of any portion of the Class
B-1 Base Principal Amount applied as a reduction of Class B-1 Certificate
4
<PAGE> 183
Principal Balance or any portion of the Class B-2 Base Principal Amount applied
as a reduction of the Class B-2 Certificate Principal Balance as the case may
be).
"Class A Certificate" means any one of the Class A
Certificates executed and authenticated by the Trustee, substantially in the
form of Exhibit E to the Pooling and Servicing Agreement.
"Class A Certificate Factor" means the seven digit decimal
number that the Servicer will compute or cause to be computed for each
Collection Period and will make available to the Trustee and the Certificate
Insurer on the related Determination Date representing the ratio of (a) the
Class A Certificate Principal Balance which will be outstanding on the next
Payment Date (after taking into account all distributions to be made on such
Payment Date) to (b) the Initial Class A Certificate Principal Amount.
"Class A Certificateholder" means the Person in whose name a
Class A Certificate is registered in the Certificate Register.
"Class A Certificate Interest" means, with respect to any
Payment Date, the interest accrued on the Class A Certificates during the
related Interest Accrual Period, equal to the product of (a) one-twelfth of the
Class A Certificate Rate and (b) the aggregate Class A Certificate Principal
Balance outstanding immediately prior to such Payment Date.
"Class A Certificate Principal Balance" means, at any time,
the Initial Class A Certificate Principal Amount minus all payments theretofore
received by the Class A Certificateholders on account of principal.
"Class A Insured Distribution Amount" means, for any Payment
Date (other than the Maturity Date), the sum of (i) Class A Certificate
Interest, (ii) Class A Overdue Interest for the related Interest Accrual Period
and (iii) the excess, if any, of (a) the Class A Certificate Principal Balance
over (b) the Aggregate Discounted Contract Principal Balance of all leases
other than Defaulted Leases; and for the Maturity Date, the sum of (i) Class A
Certificate Interest, (ii) Class A Overdue Interest for the related Interest
Accrual Period and (iii) the Class A Certificate Principal Balance then
outstanding.
"Class A Certificate Rate" means 6.29% per annum.
"Class A Overdue Interest" means, with respect to any Payment
Date, the difference between (a) the sum of
5
<PAGE> 184
(i) the excess, if any, of the Class A Certificate
Interest due on the immediately preceding Payment Date over the Class
A Certificate Interest paid on such immediately preceding Payment
Date;
(ii) without duplication of the amount described in clause
(i), the amount of the Class A Overdue Interest due and unpaid as of
the immediately preceding Date; and
(iii) the product of (A) the sum of clauses (i) and (ii)
and (B) one-twelfth of the sum of the Class A Certificate Rate plus
1%,
and (b) any Class A Overdue Interest paid in the current period.
"Class A Overdue Principal" means, with respect to any Payment
Date, the difference, if any, equal to (a) the aggregate of the Class A Base
Principal Distribution Amounts due on all prior Payment Dates and (b) the
aggregate amount of the principal (from whatever source) actually distributed
to Class A Certificateholders on all prior Payment Dates.
"Class A Percentage" means 88%.
"Class A Percentage Interest" means the interest in the Class
A Portion of the Trust that is evidenced by a Class A Certificate and that is
set forth on the face of such Certificate; provided, however, that the Trustee
shall only issue Class A Certificates evidencing in the aggregate Class A
Percentage Interests totalling 100%. To the extent that, for federal income
tax purposes, the Class A Certificates constitute indebtedness, all references
in this Agreement to Holders of Class A Certificates owning a specified
percentage of the outstanding Class A Certificate Principal Balance shall be
construed to mean Holders of Class A Certificates evidencing such specified
percentage of the then outstanding indebtedness.
"Class A Portion" means the aggregate interest in the Trust
evidenced by the Class A Certificates.
"Class B Certificates" means the Class B-1 Certificates and
the Class B-2 Certificates.
"Class B-1 Base Principal Distribution Amount" means, with
respect to any Payment Date, the product of (a) the Class B-1 Percentage and
(b) the Base Principal Amount for such Payment Date.
"Class B-1 Certificate" means any one of the Class B-1
Certificates executed and authenticated by the Trustee,
6
<PAGE> 185
substantially in the form of Exhibit F to the Pooling and Servicing Agreement.
"Class B-1 Certificate Factor" means the seven digit decimal
number that the Servicer will compute or cause to be computed for each
Collection Period and will make available to the Trustee on the related
Determination Date representing the ratio of (a) the Class B-1 Certificate
Principal Balance which will be outstanding on the next Payment Date (after
taking into account all distributions to be made on such Payment Date) to (b)
the Initial Class B-1 Certificate Principal Amount.
"Class B-1 Certificateholder" means the Person in whose name a
Class B-1 Certificate is registered in the Certificate Register.
"Class B-1 Certificate Interest" means, with respect to any
Payment Date, the interest accrued on the Class B-1 Certificates during the
related Interest Accrual Period, equal to the product of (a) one-twelfth of the
Class B-1 Certificate Rate and (b) the aggregate Class B-1 Certificate
Principal Balance outstanding immediately prior to such Payment Date.
"Class B-1 Certificate Principal Balance" means, at any time,
the Initial Class B-1 Certificate Principal Amount minus all payments
theretofore received by the Class B-1 Certificateholders on account of
principal.
"Class B-1 Certificate Rate" means 7.01% per annum.
"Class B-1 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of
(i) the excess, if any, of the Class B-1 Certificate
Interest due on the immediately preceding Payment Date over the Class
B-1 Certificate Interest paid on such immediately preceding Payment
Date;
(ii) without duplication of the amount described in clause
(i), the amount of Class B-1 Overdue Interest due and unpaid as of the
immediately preceding Payment Date; and
(iii) the product of (A) the sum of clauses (i) and (ii)
and (B) one-twelfth of the sum of the Class B-1 Certificate Rate plus
1%,
and (b) any Class B-1 Overdue Interest paid in the current period.
"Class B-1 Overdue Principal" means, with respect to any
Payment Date, the difference, if any, equal to (a) the
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aggregate of the Class B-1 Base Principal Distribution Amounts due on all prior
Payment Dates and (b) the aggregate amount of the principal (from whatever
source) actually distributed to Class B-1 Certificateholders on all prior
Payment Dates.
"Class B-1 Percentage" means 3%.
"Class B-1 Percentage Interest" means the interest in the
Class B-1 Portion of the Trust that is evidenced by a Class B-1 Certificate and
that is set forth on the face of such Certificate; provided, however, that the
Trustee shall only issue Class B-1 Certificates evidencing in the aggregate
Class B-1 Percentage Interests totalling 100%. To the extent that, for federal
income tax purposes, the Class B-1 Certificates constitute indebtedness, all
references in this Agreement to Holders of Class B-1 Certificates owning a
specified percentage of the outstanding Class B-1 Certificate Principal Balance
shall be construed to mean Holders of Class B-1 Certificates evidencing such
specified percentage of the then outstanding indebtedness.
"Class B-1 Portion" means the aggregate interest in the Trust
evidenced by the Class B-1 Certificates.
"Class B-1 Termination Date" means the Payment Date on which
the Class B-1 Certificate Principal Balance is reduced to zero.
"Class B-2 Base Principal Distribution Amount" means, with
respect to any Payment Date, the product of (a) the Class B-2 Percentage and
(b) the Base Principal Amount for such Payment Date.
"Class B-2 Certificate" means any one of the Class B-2
Certificates executed and authenticated by the Trustee, substantially in the
form of Exhibit G to the Pooling and Servicing Agreement.
"Class B-2 Certificate Factor" means the seven digit decimal
number that the Servicer will compute or cause to be computed for each
Collection Period and will make available to the Trustee on the related
Determination Date representing the ratio of (a) the Class B-2 Certificate
Principal Balance which will be outstanding on the next Payment Date (after
taking into account all distributions to be made on such Payment Date) to (b)
the Initial Class B-2 Certificate Principal Amount.
"Class B-2 Certificateholder" means the Person in whose name a
Class B-2 Certificate is registered in the Certificate Register.
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"Class B-2 Certificate Interest" means, with respect to any
Payment Date, the interest accrued on the Class B-2 Certificates during the
related Interest Accrual Period, equal to the product of (a) one-twelfth of the
Class B-2 Certificate Rate and (b) the aggregate Class B-2 Certificate
Principal Balance outstanding immediately prior to such Payment Date.
"Class B-2 Certificate Principal Balance" means, at any time,
the Initial Class B-2 Certificate Principal Amount minus all payments
theretofore received by the Class B-2 Certificateholders on account of
principal.
"Class B-2 Certificate Rate" means 8.22% per annum.
"Class B-2 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of
(i) the excess, if any, of the Class B-2 Certificate
Interest due on the immediately preceding Payment Date over the Class
B-2 Certificate Interest paid on such immediately preceding Payment
Date;
(ii) without duplication of the amount described in clause
(i), the Class B-2 Overdue Interest due and unpaid as of the
immediately preceding Payment Date; and
(iii) the product of (A) the sum of clauses (i) and (ii)
and (B) one-twelfth of the sum of the Class B-2 Certificate Rate plus
1%,
and (b) any Class B-2 Overdue Interest paid in the current period.
"Class B-2 Overdue Principal" means, with respect to any
Payment Date, the difference, if any, equal to (a) the aggregate of the Class
B-2 Base Principal Distribution Amounts due on all prior Payment Dates and (b)
the aggregate amount of the principal (from whatever source) actually
distributed to Class B-2 Certificateholders on all prior Payment Dates.
"Class B-2 Percentage" means 2.5%.
"Class B-2 Percentage Interest" means the interest in the
Class B-2 Portion of the Trust that is evidenced by a Class B-2 Certificate and
that is set forth on the face of such Certificate; provided, however, that the
Trustee shall only issue Class B-2 Certificates evidencing in the aggregate
Class B-2 Percentage Interests totalling 100%. To the extent that, for federal
income tax purposes, the Class B-2 Certificates constitute indebtedness, all
references in this Agreement to Holders of Class B-2 Certificates owning a
specified percentage of the outstanding Class B-2 Certificate Principal Balance
shall be construed to mean Holders of Class
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B-2 Certificates evidencing such specified percentage of the then outstanding
indebtedness.
"Class B-2 Portion" means the aggregate interest in the Trust
evidenced by the Class B-2 Certificates.
"Class B-2 Termination Date" means the Payment Date on which
the Class B-2 Certificate Principal Balance is reduced to zero.
"Closing Date" means November 15, 1996.
"Code" means the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations adopted thereunder, as the same may be in effect
from time to time and any successor thereto.
"Collection Account" means the Eligible Bank Account
established pursuant to Section 6.01 of the Pooling and Servicing Agreement.
"Collection Period" means with respect to any Payment Date,
the period from the second day of the immediately preceding calendar month to
the first day of the calendar month in which such Payment Date occurs.
"Collections" means all payments received on or with respect
to the Leases or the related Equipment, including, without limitation,
Scheduled Payments, Liquidation Proceeds, Reconveyance Amounts, Insurance
Proceeds, Early Termination Lease Proceeds, proceeds from any Lease subject to
a Casualty Loss, Expired Lease Proceeds (to the extent of any amounts then due
from a related Source under the related Source Agreement), and Prepayments and
amounts received in respect of the Leases or related Equipment pursuant to any
Source Agreements (including amounts received under any recourse agreements),
all as related to amounts attributable to the Equipment and the Leases for such
Collection Period, but excluding any Excluded Amounts.
"Company" means First Sierra Receivables II, Inc., a Delaware
corporation.
"Computer Tape" means, collectively, the computer tapes
generated by the Servicer which provide information relating to the Leases and
which were, or will be, used by the Servicer in selecting the Leases conveyed
by First Sierra to the Depositor pursuant to the Sale Agreement.
"Conveyance Date" means, with respect to the Initial Leases,
the Cut-Off Date, and with respect to Additional Leases or Substitute Leases,
the Addition Date or the Transfer Date, respectively.
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"Conveyed Assets" means, with respect to the Sale Agreement
(a) all of First Sierra's right, title and interest in and to, but not its
obligations under the Original Equipment and the Additional Equipment relating
to Additional Leases and Substitute Leases (except for any licensed products
that may accompany the Equipment) and any new unit or units of Equipment
substituted for any existing unit or units of Equipment, including all proceeds
upon any sale or other disposition of the Equipment, (b) all of First Sierra's
right, title and interest in and to, but not its obligations under, the Initial
Leases, the Additional Leases and Substitute Leases, and all amendments,
additions and supplements including schedules, summary schedules and
subschedules made or hereafter made with respect thereto, (c) all monies due or
to become due in payment of the Leases on or after the related Conveyance Date,
including all Scheduled Payments thereunder (whether or not due), any
Prepayments, any payments in respect of a casualty or early termination, any
Residual Receipts, and any Liquidation Proceeds received with respect thereto,
but excluding any Excluded Amounts, (d) the Lease Files, (e) all Insurance
Proceeds relating to the foregoing and First Sierra's rights and interests in
the Insurance Policies relating to the foregoing, (f) all Source Agreements and
Source Agreement Rights to the extent they relate to any Lease and any
Equipment covered by the Leases, and (g) all proceeds and income of the
foregoing or relating thereto.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of this Agreement is specified in
Section 14.05 of the Pooling and Servicing Agreement.
"Covered Lease" means any Lease for which the related Lessee
deposited a Security Deposit with the Source at the origination of such Lease.
"Credit and Collection Policies and Procedures" means the
credit and collection policies and procedures of the Servicer.
"Credit File" means, with respect to each Lease, the following
documents: (a) copies of the Lease, any UCC financing statements and any other
original documents related to the Lease, (b) the application of the related
Lessee, (c) documentation evidencing the information with respect to such Lease
input into the Lease Management System and (d) any other information required
by the Servicer pursuant to its customary policies and procedures or the
Certificate Insurer.
"Cut-Off Date" means, with respect to the Initial Leases, the
close of business on November 1, 1996 and with respect to each Additional
Lease, the related Additional Lease
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Cut-Off Date, and with respect to each Substitute Lease, the related Substitute
Lease Cut-Off Date.
"DCR" means Duff & Phelps Credit Rating Co.
"Defaulted Lease" means a Lease as to which (i) the Servicer
has determined in its sole discretion, but in accordance with the Servicing
Standard and its customary servicing procedures that such Lease is not
collectible, or (ii) all or part of a Scheduled Payment thereunder is more than
160 days delinquent; (iii) the Servicer elected not to make a Servicer Advance
or for which the Servicer has determined that a prior Servicer Advance is not
recoverable and (iv) that was repurchased by a Source pursuant to a Source
Agreement.
"Defaulted Residual Receipts" means all proceeds of the sale
of Equipment related to Defaulted Leases and any amounts collected related to
the failure of such Lessee to pay any required amounts under the related Lease
or to return the Equipment, in each case as reduced by (a) any unreimbursed
Servicer Advances with respect to such Lease or such Equipment and (b) any
reasonably incurred out-of-pocket expenses incurred by the Servicer in
enforcing such Lease or in liquidating such Equipment, including any applicable
taxes and any attorneys' fees.
"Delinquency Trigger Event" means the event that exists on any
Payment Date on which the average of the Delinquency Trigger Ratios for such
Payment Date and the two immediately preceding Payment Dates exceeds 7%.
"Delinquency Trigger Ratio" means, with respect to any Payment
Date, the quotient, expressed as a percentage of (a) the sum of the Discounted
Contract Principal Balance of all Leases as to which all or a portion of a
Scheduled Payment remained unpaid for more than 30 days from its due date,
determined as of the end of the immediately preceding calendar month, divided
by (b) the Aggregate Discounted Contract Principal Balance of all Leases as of
the last day of the immediately preceding calendar month (including any
contracts which were repossessed or substituted).
"Delinquent Lease" means, as of any date of determination, a
Lease (a) as to which the Scheduled Payment was not received when due by the
Servicer as of the close of business on the last day of the month in which such
payment was due and (b) which is not a Defaulted Lease.
"Depositor" means First Sierra Receivables II, Inc., a
Delaware corporation.
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"Depository" means The Depository Trust Company, 55 Water
Street, New York, New York 10041 and any successor Depository hereafter named.
"Determination Date" means, with respect to a Collection
Period, a date which is the seventh day of the calendar month in the month
immediately succeeding the month in which such Collection Period ends, or if
such day is not a Business Day, the immediately preceding Business Day;
provided, however, that in no event shall such Determination Date be later than
three Business Days prior to the Payment Date for such Collection Period.
"Direct Participant" means any broker-dealer, bank or other
financial institution for which the Depository holds Class A Certificates from
time to time as a securities depositary.
"Discount Rate" means, as of any date 7.10%. The Discount
Rate equals the sum of (a) the weighted average sum of the Class A Certificate
Rate, the Class B-1 Certificate Rate and the Class B-2 Certificate Rate
computed as of the Closing Date, (b) the Servicing Fee Rate, (c) the Premium
Rate times the Class A Percentage, (d) the Trustee Fee Rate and (e) the Back-up
Servicing Fee Rate.
"Discounted Contract Principal Balance" means, with respect to
any Lease, at any time of determination, the sum of (a) the present value of
all of the remaining Scheduled Payments becoming due under such Lease after
such date of determination, discounted monthly at the Discount Rate in the
manner described below and (b) the aggregate amount of all Scheduled Payments
(due after the applicable Cut-Off Date) then due and payable under such Lease
which have not been received by the Servicer (or with respect to the
calculation of the Base Principal Amount for which a Servicer Advance has been
made in accordance with the provisions of the Pooling and Servicing Agreement);
provided, however, that except to the extent expressly provided in the Pooling
and Servicing Agreement, the Discounted Contract Principal Balance of any
Defaulted Lease, Early Termination Lease, or Expired Lease or Lease purchased
by First Sierra pursuant to the Sale Agreement, or the Depositor or the
Servicer pursuant to the Pooling and Servicing Agreement shall be equal to
zero.
In connection with all calculations required to be made
pursuant to the Transaction Documents with respect to the determination of
Discounted Contract Principal Balances, for any date of determination the
"Discounted Contract Principal Balance" for each Lease shall be calculated
assuming:
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(i) all payments are due on the last day of such
calculation period which shall be the 30 day period
following such date of determination;
(ii) payments are discounted on a monthly basis using a 30
day month and a 360 day year; and
(iii) payments are discounted to the last day of the
calculation period in which the date of determination
falls.
"Early Amortization Event" has the meaning specified in
Section 10.01 of the Pooling and Servicing Agreement.
"Early Termination Lease" means any Lease that has terminated
prior to its scheduled expiration date, other than a Defaulted Lease.
"Early Termination Lease Proceeds" means any and all cash
proceeds or rents realized from the sale or re-lease of Equipment under an
Early Termination Lease (net of remarketing expenses).
"Eligible Bank Account" means a segregated account, which may
be an account maintained with the Trustee, which is either (a) maintained with
a depository institution or trust company whose long term unsecured debt
obligations are rated at least BBB+ by DCR and Baa1 by Moody's and whose
short-term unsecured obligations are rated at least A-1 by S&P; provided, that
if DCR does not rate such entity then the ratings of S&P and Moody's shall
suffice, or (b) a segregated trust account or similar account maintained with a
federally or state chartered depository institution subject to regulations
regarding fiduciary funds on deposit substantially similar to 12 C.F.R. Section
9.10(b).
"Eligible Investments" means any of the following, in each
case as determined at the time of the investment or contractual commitment to
invest therein (to the extent such investments would not require the
registration of the Trust as an investment company pursuant to the Investment
Company Act):
(a) negotiable instruments or securities
represented by instruments in bearer or registered or book-entry
form which evidence:
(i) obligations which have the benefit
of the full faith and credit of the United
States of America, including depository
receipts issued by a bank as custodian with
respect to any such instrument or security
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held by the custodian for the benefit
of the holder of such depository receipt,
(ii) demand deposits or time deposits in,
or bankers' acceptances issued by, any
depositary institution or trust company
incorporated under the laws of the United
States of America or any state thereof and
subject to supervision and examination by
Federal or state banking or depositary
institution authorities; provided that at the
time of the Trustee's investment or contractual
commitment to invest therein, the certificates
of deposit or short-term deposits (if any) or
long-term unsecured debt obligations (other
than such obligations whose rating is based on
collateral or on the credit of a Person other
than such institution or trust company) of such
depositary institution or trust company has a
credit rating in the highest rating category
from each Rating Agency,
(iii) certificates of deposit having a
rating in the highest rating category by the
Rating Agencies, or
(iv) investments in money market funds
which are (or which are composed of instruments
or other investments which are) rated in the
highest rating category by the Rating Agencies
(including funds for which the Trustee or any
of its Affiliates is investment manager or
advisor);
(b) demand deposits in the name of the Trustee
in any depositary institution or trust company referred to in
clause (a)(ii) above;
(c) commercial paper (having original or
remaining maturities of no more than 270 days) having a credit
rating in the highest rating category by the Rating Agencies;
(d) Eurodollar time deposits that are
obligations of institutions whose time deposits carry a credit
rating in the highest rating category by the Rating Agencies;
(e) repurchase agreements involving any
Eligible Investment described in any of clauses (a)(i), (a)(iii)
or (d) above, so long as the other party to the repurchase
agreement has its long-term unsecured debt
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obligations rated in the highest rating category by the Rating
Agencies and so long as the Certificate Insurer has approved of
such repurchase agreement in writing; and
(f) any other investment with respect to which
the Rating Agency Condition has been satisfied and to which MBIA
has consented in writing.
Any Eligible Investment must mature no later than the Business
Day prior to the next Payment Date.
"Eligible Lease" means any Lease that is not a Defaulted Lease
and with respect to which all of the representations and warranties set forth
in Section 3.01 of the Sale Agreement were true as of the date made.
"Equipment" means the equipment leased to a Lessee pursuant to
any Lease.
"ERISA" means The Employee Retirement Income Security Act of
1974, as amended.
"Event of Back-up Servicing Termination" has the meaning
specified in Section 11.06 of the Pooling and Servicing Agreement.
"Event of Servicing Termination" has the meaning specified in
Section 11.01 of the Pooling and Servicing Agreement.
"Excess Amounts" means, with respect to any Lease, any payment
required to be paid by the related Lessee pursuant to such Lease at the
maturity of such Lease in excess of the Final Lease Payment with respect to
such Lease.
"Excess Cash" means, the amount that would otherwise be
payable to the holder of the Trust Certificate if the Trust Certificate
Principal Balance on such Payment Date is below 6.50% of the Aggregate
Discounted Contract Principal Balance from Available Funds and Residual
Receipts then remaining in the Collection Account and from the amount then
remaining in the New Transferred Property Funding Account, up to an amount
equal to the Aggregate Discounted Contract Principal Balance of the Leases
available to be transferred to the Trust.
"Excluded Amounts" means any payments received from a Lessee
or Source in connection with any application fees, tax processing fees, wire
transfer fees, express mail fees, insurance premiums, late charges, taxes, fees
or other charges imposed by any Governmental Authority, any indemnity payments
made by a Lessee for the benefit of the lessor under the related Lease or any
payments collected from a Lessee or received from a Source relating to
servicing and/or
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maintenance payments pursuant to the related Lease or maintenance agreement, as
applicable or any other non-rental charges reimbursable to the Servicer in
accordance with the Servicer's customary policies and procedures plus any
collections as to which the Servicer has made an unreimbursed Servicer Advance
in accordance with the provisions of the Pooling and Servicing Agreement.
"Expired Lease" means any Lease that has terminated on its
scheduled expiration date.
"Expected Final Payment Date" means the June 10, 2002 Payment
Date.
"Expired Lease Proceeds" means any and all cash proceeds or
rents realized from the sale or re-lease of Equipment under an Expired Lease.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System and any successor thereto.
"Filing Locations" means the jurisdictions in which any
Equipment is located under Leases as of the applicable Cut-Off Date.
"Filing Requirements" means (a) a UCC-1 financing statement
with respect to the assignment of all Leases to the Trust pursuant to the
Pooling and Servicing Agreement, (b) a UCC-1 Financing Statement naming the
related Lessee, as debtor, the related Source, as secured party, the Trustee as
assignee and the related Equipment as collateral with respect to Leases as to
which the related Equipment (other than Vehicles) had an original cost of
$75,000 or more and (c) with respect to each Lease which is a true lease, a
UCC-1 with respect to the related Equipment in the applicable Filing Location,
naming the Source as debtor, First Sierra as secured party and the Trustee as
assignee.
"Final Lease Payment" means, with respect to any Lease, any
payment set forth in such Lease other than the regular Scheduled Payment which
is required to be paid by the related Lessee at the maturity of such Lease.
"Financing Statements" means a form UCC-1 financing statement.
"First Sierra" means First Sierra Financial, Inc., a Delaware
corporation.
"First Sierra Group" means, as of any relevant date, the
affiliated group within the meaning of section 1504 of the Code of which First
Sierra, or any successor thereto, is the common parent, or of which the Company
is a member, and shall
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mean any group eligible to file consolidated, combined or unitary returns for
state, local or foreign tax purposes which includes the Company, regardless of
the identity of the common parent.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar function of comparable stature and authority within the
accounting profession), or in such other statements by such other entity as may
be in general use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality or public body, (c) any court or
administrative tribunal or (d) with respect to any Person, any arbitration
tribunal or other non-governmental authority to the jurisdiction of which such
Person has consented.
"Gross Charge-Off Event" means the event that exists on any
Payment Date on which the average of the Gross Charge-Off Ratio for such
Payment Date and the two immediately preceding Payment Dates exceeds 2.5%.
"Gross Charge-Off Ratio" means, with respect to any Payment
Date, 12 times the quotient, expressed as a percentage of (a) the Aggregate
Discounted Contract Principal Balance of all Leases that become Defaulted
Leases during the immediately preceding calendar month less all recoveries
received during the immediately preceding calendar month, including, but not
limited to, Source buybacks, Source reserve fund payments, liquidation proceeds
and residual proceeds, divided by (b) the Aggregate Discounted Contract
Principal Balance of all Leases as of the end of the immediately preceding
calendar month. For the purposes of the calculation of the Gross Charge-Off
Ratio, the Discounted Contract Principal Balance of any Lease which is a
Defaulted Lease shall not be zero, but shall instead be calculated as provided
in the definition of Discounted Contract Principal Balance without reference to
the last clause of such definition.
"Gross Defaults" means, with respect to any Payment Date, the
product of (a) a fraction (i) the numerator of which is the sum of the Monthly
Gross Defaults with respect to the three immediately preceding calendar months
and (ii) the
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denominator of which is the Three-Month Average Discounted Contract Principal
Balance and (b) 4.
"Income Taxes" means any federal, state, local or foreign
taxes based upon, measured by, or imposed upon gross or net income, gross or
net receipts, capital, net worth, or the privilege of doing business, and any
minimum taxes or withholding taxes based upon any of the foregoing, including
any penalties, interest or additions to tax imposed with respect thereto.
"Indebtedness" means, as to any Person, (a) all indebtedness
of such Person for borrowed money, (b) all leases of equipment of such Person
as lessee, (c) to the extent not included in clause (b), above, all capital
leases of such Person as lessee, (d) any obligation of such Person for the
deferred purchase price of Property or services (other than trade or other
accounts payable in the ordinary course of business and not more than ninety
(90) days past due), (e) any obligation of such Person that is secured by a
Lien on assets of such Person, whether or not that Person has assumed such
obligation or whether or not such obligation is nonrecourse to the credit of
such Person, (f) obligations of such Person arising under acceptance facilities
or under facilities for the discount of accounts receivable of such Person and
(g) any obligation of such Person to reimburse the issuer of any letter of
credit issued for the account of such Person upon which a draw has been made.
"Indemnification Agreement" means the Indemnification
Agreement, dated November 8, 1996, among First Sierra, the Company, the
Certificate Insurer and the Underwriter.
"Independent Public Accountant" means any of (a) Arthur
Andersen & Co., (b) Deloitte & Touche, (c) Coopers & Lybrand, (d) Ernst & Young
(e) KPMG Peat Marwick and (f) Price Waterhouse (and any successors thereof);
provided, that such firm is independent with respect to the Servicer or any
Subservicer, as the case may be, within the meaning of the Securities Act of
1933, as amended.
"Indirect Participant" means any financial institution for
whom any Direct Participant holds an interest in a Class A Certificate.
"Initial Aggregate Discounted Contract Principal Balance"
means the Aggregate Discounted Contract Principal Balance as of the Cut-Off
Date.
"Initial Amortization Date" means the earlier to occur of (a)
the Payment Date in November 1997 and (b) in the event that an Early
Amortization Event occurs on a Payment
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Date, such Payment Date, or otherwise, on the Payment Date which immediately
follows the occurrence of an Early Amortization Event or (c) an Event of
Servicer Termination occurs which is not cured within the time period set forth
in the Pooling and Servicing Agreement.
"Initial Certificate Principal Amount" means the sum of (a)
the Initial Class A Certificate Principal Amount (b) the Initial Class B-1
Certificate Principal Amount and (c) the Initial Class B-2 Certificate
Principal Amount.
"Initial Class A Certificate Principal Amount" means
$63,381,510.
"Initial Class B-1 Certificate Principal Amount" means
$2,160,733.
"Initial Class B-2 Certificate Principal Amount" means
$1,800,611.
"Initial Equipment" means, the Equipment transferred to the
Trust on the Closing Date.
"Initial Leases" means the Leases transferred to the Trust on
the Closing Date.
"Initial Transferred Property" means the property transferred
and assigned by the Depositor to the Trust pursuant to Section 2.01 of the
Pooling and Servicing Agreement, except for the Initial Unpaid Amounts relating
thereto.
"Initial Unpaid Amount" means, with respect to a Lease, the
excess of (a) the aggregate amount of all Scheduled Payments due prior to the
related Cut-Off Date over (b) the aggregate of all Scheduled Payments made
prior to the related Cut-Off Date with respect to such Lease.
"Insurance Agreement" means the Insurance Agreement, dated as
of November 1, 1996, among First Sierra, as seller and as servicer, the
Company, the Certificate Insurer and the Trustee.
"Insurance Policy" means with respect to an item of Equipment
and the related Lease, any insurance policy required to be maintained by the
Lessee pursuant to such Lease that covers physical damage to such Equipment and
liability resulting from the use, operation or possession of such Equipment
(including policies procured by or on behalf of First Sierra on behalf of the
Lessee).
"Insurance Proceeds" means, with respect to an item of
Equipment and the related Lease, any amount received during
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a Collection Period pursuant to an Insurance Policy issued with respect to such
Equipment and related Lease.
"Insured Payment" means, (i) on any Payment Date, an amount
equal to the Available Funds Shortfall plus (ii) any Preference Amounts.
"Interest Accrual Period" means, with respect to each Payment
Date, the period commencing on the prior Payment Date.
"Interest-Only Period" means the period of time beginning on
the Closing Date and continuing until, but excluding, the Initial Amortization
Date.
"Investment Company Act" means the Investment Company Act of
1940, as amended (15 U.S.C. 80a-1 et seq.), as the same may be in effect from
time to time, or any successor statute thereto.
"Investment Earnings" means any and all income from the
investment of monies held, from time to time, in the Collection Account, the
Security Deposit Account and the New Transferred Property Funding Account
pursuant to Section 6.03 of the Pooling and Servicing Agreement, net of any
losses on any investments held in such accounts.
"IRS" means the Internal Revenue Service and any successor
thereto.
"Issuer Delinquency Ratio" means, with respect to any calendar
month, a fraction, (a) the numerator of which is the Monthly 90 Day Delinquent
Aggregate Discounted Contract Principal Balance with respect to such calendar
month and (b) the numerator of which the Monthly Aggregate Discounted Contract
Principal Balance with respect to such calendar month.
"Issuer Delinquency Trigger Ratio" means, with respect to any
Payment Date, the fraction, expressed as a percentage, of (i) the numerator of
which is the sum of the Issuer Delinquency Ratios with respect to each of the
three immediately preceding calendar months and (ii) the denominator of which
is three.
"Issuer Restricting Event" means the event that shall be
deemed to occur on a Payment Date if (a) Gross Defaults with respect to such
Payment Date exceeds (b) the quotient of (i) a fraction (A) the numerator of
which is the Subordinated Percentage and (B) the denominator of which is the
weighted average life of the Leases determined as of the end of the immediately
preceding calendar month with respect to any date of determination with respect
to the Interest Only
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Period and, with respect to any date of determination with respect to the
Amortization Period, as of the end of the last day of the Interest Only Period
divided by (ii) two or (c) the Issuer Delinquency Trigger Ratio exceeds 2.5%.
"Late Payment Rate" shall have the meaning specified in the
Insurance Agreement.
"Lease" means each of the agreements evidencing the
indebtedness of the related Lessee conveyed to the Trust, including, as
applicable, schedules, supplements and amendments thereto, under which a Source
leases specified Equipment to a Lessee and which are identified on the List of
Initial Leases delivered on the Closing Date or, with respect to Additional
Leases or Substitute Leases, on the List of Additional Leases delivered on the
related Transfer Date.
"Lease File" means, with respect to each Lease, (1) a
certified copy of the master Lease, (2) the executed original counterpart of
the Lease that constitutes "chattel paper" or an "instrument" for purposes of
Sections 9-105(l)(b) and 9-305 of the UCC, legended to reflect the security
interest of the Trustee, on behalf of the Certificateholders and the
Certificate Insurer, (3) an original certificate, executed by Lessee,
evidencing delivery and acceptance of the Equipment, (4) Lessee's corporate
resolutions and secretary's certificate, (5) a guaranty, if any, (6) copies of
documentation relating to the purchase of the Equipment, (7) documents
evidencing or related to any Insurance Policy (such documents required to be
included therein only with respect to Equipment which had an original cost of
more than $35,000), (8) copies of all UCC financing statements filed with
respect to the Equipment or the Lease in accordance with the Filing
Requirements, (9) a certified copy of the related sale and assignment agreement
between the Source and First Sierra, (10) copies of any additional lease
documents evidencing any changes or modifications of a Lease by the Servicer in
accordance with the terms of the Pooling and Servicing Agreement, (11) with
respect to a Lease relating to a Vehicle (as indicated on the List of Leases),
the original Certificate of Title (or, in the event that the original
Certificate of Title has not been returned from the appropriate titling office,
a copy of any preceding certificates of title, if any, all assignments thereof,
if any, and a copy of the application for the Certificate of Title shall be
included in the Lease File with the original Certificate of Title to be
included therein promptly upon return from the appropriate titling office but,
in any event, within 60 days from the related Conveyance Date), and (12)
reference to the applicable Lease Management Code and any other documents
relating thereto held by First Sierra, as Servicer.
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"Lease Management Code" shall have the meaning set forth in
Section 2.01(c) of the Sale Agreement.
"Lease Management System" means the computerized electronic
lease management system maintained by First Sierra for all Leases and other
agreements similar to the Leases.
"Lease Number" means, with respect to each Lease, its
identifying number.
"Lease Pool" means, at any time, all Leases held as part of
the Trust Property.
"Lessee" means with respect to any Lease, the Person or
Persons obligated to make payments with respect to such Lease, including any
guarantor thereof.
"Lien" means any mortgage, pledge, hypothecation, assignment
for security, security interest, encumbrance, levy, lien or charge of any and,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the
nature of a security interest, and the filing of or agreement to file or
deliver any financing statement (other than a precautionary financing statement
with respect to a lease that is not in the nature of a security interest) under
the UCC or comparable law of any jurisdiction.
"Liquidation Proceeds" means with respect to a Defaulted
Lease, proceeds from the sale or re-lease of the Equipment, proceeds of the
related Insurance Policy, proceeds from any Source Agreements and any other
recoveries with respect to such Defaulted Lease and the related Equipment, net
of remarketing expenses and amounts so received that are required to be
refunded to the Lessee on such Lease.
"List of Additional Leases" means the List of Additional
Leases delivered pursuant to 6.05(a)(iv) of the Pooling and Servicing
Agreement.
"List of Initial Leases" means the List of Initial Leases
delivered pursuant to Section 2.03(a) of the Pooling and Servicing Agreement.
"List of Leases" means the List of Initial Leases and each
List of Additional Leases.
"Lockbox Account" means the lockbox account established
pursuant to the Lockbox Agreement.
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"Lockbox Agreement" means the Lockbox Agreement among First
Sierra, the Company and Texas Commerce Bank, National Association.
"Lockbox Bank" means Texas Commerce Bank, National
Association.
"Majority Holders" means Holders of the Applicable
Certificates that together own Certificates with an aggregate Percentage
Interest in excess of 50%.
"Maturity Date" means the November 10, 2004 Payment Date.
"Monthly Aggregate Discounted Contract Principal Balance"
means with respect to any calendar month, the Aggregate Discounted Contract
Principal Balance of all Leases calculated as of the end of such calendar
month.
"Monthly Gross Defaults" means with respect to any calendar
month, the Aggregate Discounted Contract Principal Balance of each Lease as to
which all or a portion of a Scheduled Payment remained unpaid for 180 days from
its due date, calculated as of the end of the such calendar month.
"Monthly 90 Day Delinquent Aggregate Discounted Contract
Principal Balance" means, with respect to any calendar month, the Aggregated
Discounted Contract Principal Balance of all Leases as to which all or a
portion of a Scheduled Payment remained unpaid for 90 days from its due date,
calculated as of the end of the such calendar month.
"Monthly Statement" has the meaning specified in Section
5.07(a) of the Pooling and Servicing Agreement.
"Moody's" means Moody's Investors Service.
"Necessary Consents" means, with respect to any Person, all
necessary consents to the closing of the transactions contemplated by the
Transaction Documents.
"New Transferred Property" means the property transferred and
assigned from the Depositor to the Trust pursuant to Section 6.05(a) of the
Pooling and Servicing Agreement, except for the Initial Unpaid Amounts relating
thereto.
"New Transferred Property Funding Account" means the Eligible
Bank Account established and maintained pursuant to Section 6.02(d) of the
Pooling and Servicing Agreement.
"Offset Amount" has the meaning specified in Section 5.12 of
the Pooling and Servicing Agreement.
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<PAGE> 203
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel employed by the Servicer or other counsel, in each case
acceptable to the Certificate Insurer and the addressees thereof.
"Original Equipment" means any of the Equipment relating to
the Initial Leases.
"Payment Date" means the 10th day of each calendar month, or
if such day is not a Business Day, the immediately following Business Day,
commencing on December 10, 1996.
"Percentage Interest" means, with respect to the Class A
Certificates, the Class A Percentage Interest; with respect to the Class B-1
Certificates, the Class B-1 Percentage Interest; with respect to the Class B-2
Certificates, the Class B-2 Percentage Interest; or with respect to the Trust
Certificate, the Trust Certificate Percentage Interest.
"Permitted Liens" means:
(a) Liens granted in favor of the Company under the Sale
Agreement or the Sale Agreement or the Trustee on behalf of the
Certificateholders and the Certificate Insurer pursuant to the Pooling and
Servicing Agreement;
(b) Liens constituting the rights of Lessees under
Leases.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit
corporation, firm, joint stock company, estate, entity or Governmental
Authority.
"Pool Factor" means the seven digit decimal number that the
Servicer will compute or cause to be computed for each Collection Period and
will make available on the related Determination Date representing the ratio of
(a) the Aggregate Discounted Contract Principal Balance of the Leases as of the
immediately preceding Calculation Date to (b) the aggregate Discounted Contract
Principal Balance as of the most recent Cut-Off Date.
"Pooling and Servicing Agreement" means, the Pooling and
Servicing Agreement, dated as of November 1, 1996 among the Company, as
Depositor, First Sierra, as Servicer, and Bankers Trust Company, as Trustee.
"Preference Amount" has the meaning specified in the
Certificate Insurance Policy.
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<PAGE> 204
"Premium Amount" means for any Payment Date, the product to
(i) one twelfth times the Premium Rate times (ii) the Class A Certificate
Principal Balance.
"Premium Rate" shall have the meaning assigned thereto in the
Insurance Agreement.
"Prepayment" means, with respect to a Collection Period and a
Lease (except a Defaulted Lease), the amount received by the Servicer during
such Collection Period from or on behalf of a Lessee with respect to such Lease
in excess of the sum of (a) the Scheduled Payment and any Final Lease Payment
due, or any Purchase Option Payment made during such Collection Period, plus
(b) the aggregate of any overdue Scheduled Payments, Initial Unpaid Amounts and
unpaid Servicing Charges for such Lease, so long as such amount is designated
by the Lessee as a prepayment and the Servicer has consented to such
prepayment. Neither Residual Receipts nor Defaulted Residual Receipts are
"Prepayments." The term "Reconveyance Amount" and the provisions relating to
payment of Reconveyance Amounts shall govern the prepayment in full of any
Lease during the period from the Cut-Off Date to and excluding the Closing
Date.
"Prepayment Amount" means, with respect to a Payment Date and
a Lease, an amount, without duplication, equal to the sum of (a) the Discounted
Contract Principal Balance as of close of business on the second preceding
Collection Period (without any deduction for any Security Deposit paid by a
Lessee, unless such Security Deposit has been deposited in the Collection
Account pursuant to Section 5.12 of the Pooling and Servicing Agreement); (b)
the product of (i) such Lease's Discounted Contract Principal Balance as of the
immediately preceding Payment Date and (ii) one-twelfth of the Discount Rate;
(c) any Scheduled Payments theretofore due and not paid by a Lessee; and (d)
any Final Lease Payment or Purchase Option Payment due or to become due under
the Lease.
"Purchase Option Payment" means, with respect to a Lease, any
payment set forth in such Lease payable by the Lessee (including any Security
Deposit applied in respect thereof) upon the exercise of a purchase option for
the Equipment relating to such Lease, whether or not the Lessee actually
exercises such purchase option, or with respect to any Lease which does not set
forth a purchase option, any payment made by a Lessee to purchase the Equipment
relating to such Lease at the end of the term of such Lease.
"Rating Agency Condition" means written confirmation from each
Rating Agency that the use of such investment will not result in the reduction
or withdrawal of the rating assigned by such Rating Agency to the Certificates.
26
<PAGE> 205
"Rating Agencies" means DCR, Moody's and S&P.
"Receivables Transfer Agreement" means the Receivables
Transfer Agreement dated as of November 1, 1996, between First Sierra and First
Sierra Receivables, Inc.
"Reconveyance Amount" means, with respect to any Lease, the
sum, without duplication, of (a) the Discounted Contract Principal Balance as
of the second preceding Collection Period (without any deduction for any
Security Deposit paid by a Lessee, unless such Security Deposit has been
deposited in the Collection Account pursuant to Section 5.12 of the Pooling and
Servicing Agreement); (b) the product of (i) such Lease's Discounted Contract
Principal Balance as of the immediately preceding Payment Date and (ii)
one-twelfth of the Discount Rate; (c) any Scheduled Payments theretofore due
and not paid by a Lessee; and (d) any Final Lease Payment or Purchase Option
Payment due or to become due under the Lease.
"Record Date" means, with respect to any Payment Date other
than the December 10, 1996 Payment Date, the last day of the immediately
preceding Collection Period. With respect to the December 10, 1996 Payment
Date, the Record Date shall be the Closing Date.
"Registration Statement" shall mean the Registration Statement
filed with the SEC under the Securities Act (Reg. No. 333-12199) in the form in
which it was declared effective.
"Regulations G, T, U and X" means, collectively, Regulations
G, T, U and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220,
221 and 224, respectively) and any other regulation in substance substituted
therefor.
"Reimbursement Amount" means as of any Payment Date, the sum
of (x)(i) all Insured Payments previously received by the Trustee by the
Certificate Insurer and not previously repaid to the Certificate Insurer
pursuant to Section 6.06(b)(xi) or 6.06(c)(xii) hereof plus (ii) interest
accrued on each such Insured Payment not previously repaid calculated at the
Late Payment Rate from the date the Trustee received the related Insured
Payment to, but not including, such Payment Date and (y)(i) any amounts then
due and owing to the Certificate Insurer under the Insurance Agreement plus
(ii) interest on such amounts at the Late Payment Rate.
"Representation Letter" means letters to, or agreements with,
the Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
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<PAGE> 206
"Repurchase Lease" means any Lease that has been repurchased
by the Depositor pursuant to Section 7.01 of the Pooling and Servicing
Agreement.
"Required Capital Contribution" means the capital contribution
described in Section 2.01(a) of the Sale Agreement.
"Residual Receipts" means, all Purchase Option Payments,
Excess Amounts to the extent such proceeds exceed any Scheduled Payments and
Final Lease Payments remaining unpaid.
"Responsible Officer" means when used with respect to the
Trustee or the Back-up Servicer, any officer assigned to the Corporate Trust
Office, including any Vice President, Assistant Vice President, Secretary,
Assistant Secretary, Managing Director, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers, and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Restricting Event" means the event that shall be deemed to
occur on a Payment Date on which (a) an Event of Servicing Termination has
occurred under the Pooling and Servicing Agreement and is not cured within the
grace period set forth in the Pooling and Servicing Agreement, (b) the
Certificate Insurer makes an Insured Payment, (c) a Gross Charge-Off Event
exists or (d) a Delinquency Trigger Event exists.
"Sale Agreement" means, the Sale and Contribution Agreement,
dated as of November 1, 1996, between First Sierra and the Depositor.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw Hill Inc.
"Scheduled Payments" means with respect to a Payment Date and
a Lease, the periodic payment (exclusive of any amounts in respect of insurance
or taxes and reflecting any adjustment for any partial Prepayment and further
reflecting the effect of any permitted modification to such Lease) set forth in
such Lease due from the Lessee in the related Collection Period.
"SEC" means the Securities and Exchange Commission and any
successor thereto.
"Securities Act" means, the Securities Act of 1933, as
amended.
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<PAGE> 207
"Security Deposit" means any refundable deposit collected
from, or on behalf of, a Lessee as a security deposit at the time of
origination of a Lease.
"Security Deposit Account" means the Eligible Bank Account
established and maintained pursuant to Section 6.03 of the Pooling and
Servicing Agreement.
"Servicer" means the Person performing the duties of the
Servicer hereunder, initially First Sierra Financial, Inc.
"Servicer Advance" means any amount paid by the Servicer with
respect to a Delinquent Lease pursuant to Section 5.03 of the Pooling and
Servicing Agreement.
"Servicer Fee" means the fee payable to the Servicer on each
Payment Date in consideration for the Servicer's performance of its duties
pursuant to Article V of the Pooling and Servicing Agreement in an amount equal
to the product of (a) one-twelfth of the Servicer Fee Rate and (b) the
Aggregate Discounted Contract Principal Balances as of the prior Calculation
Date.
"Servicer Fee Rate" means 0.50% percent per annum.
"Servicer Termination Notice" means the notice described in
Section 11.01 of the Pooling and Servicing Agreement.
"Servicing Charges" means the sum of (a) any late payment
charges paid by a Lessee on a Delinquent Lease after application of any such
charges to amounts then due under such Lease and (b) any other incidental
charges or fees received from a Lessee.
"Servicing Officer" means any representative of the Servicer
involved in, or responsible for, the administration and servicing of the Leases
whose name appears on a list of servicing officers furnished to Company, the
Certificate Insurer and the Trustee by the Servicer, as such list may from time
to time be amended.
"Servicing Standard" has the meaning specified in Section
5.01(a) of the Pooling and Servicing Agreement.
"Source" means the lessor from whom First Sierra acquired the
Leases.
"Source Agreement" means an agreement between First Sierra and
a Source pursuant to which First Sierra acquired all right, title and interest
of the Source in and to a Lease
29
<PAGE> 208
and a security interest in the Source's right, title and interest in and to the
related Equipment.
"Source Agreement Rights" means any and all rights of First
Sierra under the Source Agreement with respect to such Source Agreement to the
extent such Source Agreement relates to any Lease and any Equipment covered by
the Leases.
"State" means any state of the United States of America and,
in addition, the District of Columbia and Puerto Rico.
"Subordinated Amount" means, as of any Payment Date, the
excess, if any, of (a) the Aggregate Discounted Contract Principal Balance of
the Leases as of the immediately preceding Calculation Date over (b) the Class
A Certificate Principal Balance as of such Payment Date, and after taking into
account all payments to be made on such Payment Date.
"Subordinated Percentage" means, with respect to each Payment
Date, a fraction (a) the numerator of which is the sum of (i) the Class B-2
Certificate Principal Balance as of the end of the immediately preceding
calendar month and (ii) the Trust Certificate Principal Balance as of the end
of the immediately preceding calendar month and (b) the denominator of which is
the sum of (i) Monthly Aggregate Discounted Contract Principal Balance with
respect to the immediately preceding calendar month, (ii) the Aggregate
Discounted Contract Principal Balances as of the day prior to such Payment Date
of all Additional Leases to be conveyed to the Trust on such Payment Date and
(iii) the amount on deposit in the New Transferred Property Funding Account or
retained in the Collection Account as of such Payment Date (and after taking
into account any deposits or withdrawals therein on such Payment Date).
"Substitute Lease" has the meaning specified in Section
7.02(a) of the Pooling and Servicing Agreement.
"Substitute Lease Cut-Off Date" means, with respect to a
Substitute Lease, the close of business on the first day of the calendar month
in which the related Transfer Date occurs.
"Tape" means the data base with respect to the Leases used to
calculate the information in the Monthly Servicer Reports.
"Tax Sharing Agreement" means any tax allocation agreement or
arrangement with respect to the First Sierra Group, including any arrangement
for payments by or to member of the First Sierra Group with respect to its
liability for taxes (including taxes excluded from the definition of Income
30
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Taxes hereunder) of the First Sierra Group or arising from its contribution to
taxable income or loss of the First Sierra Group.
"Three-Month Average Aggregate Discounted Contract Principal
Balance" means, with respect to any Payment Date a fraction, (a) the numerator
of which is the sum of the Monthly Aggregate Discounted Contract Principal
Balance for each of the three immediately preceding calendar months and (b) the
denominator of which is three.
"Total Capitalization" has the meaning specified in the
Insurance Agreement.
"Transaction Documents" means the Sale Agreement, the
Receivables Transfer Agreement, the Lockbox Agreement, the Pooling and
Servicing Agreement, the Insurance Agreement and the Indemnification Agreement.
"Transfer Date" means any date on which the Trust acquires New
Transferred Property pursuant to Section 6.05(a) of the Pooling and Servicing
Agreement or a Substitute Lease pursuant to Section 7.02 of the Pooling and
Servicing Agreement.
"Transferred Property" means the property conveyed,
transferred and assigned by the Transferor to the Trust pursuant to Section
2.01 and 6.05(a) of the Pooling and Servicing Agreement, except for the Initial
Unpaid Amounts relating thereto.
"True Lease Equipment" means the Equipment leased under the
Leases that are treated as "true leases" for federal income tax purposes.
"Trust" means the trust created by the Pooling and Servicing
Agreement, the estate of which consists of the Trust Property.
"Trust Certificate" means the Trust Certificates executed and
authenticated by the Trustee, substantially in the form of Exhibit H to the
Pooling and Servicing Agreement.
"Trust Certificate Percentage" means, as of any Payment Date
the percentage equivalent of a fraction (a) the numeration of which is the
Trust Certificate Principal Balance and (b) the denominator of which is the
Aggregate Discounted Contract Principal Balance as of the end of the
immediately preceding Collection Period.
"Trust Certificate Percentage Interest" means the interest in
the Trust Certificate Portion of the Trust that is evidenced by a Trust
Certificate and that is set forth on the
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<PAGE> 210
face of such Certificate; provided, however, that the Trustee shall only issue
Trust Certificates evidencing in the aggregate Trust Certificate Percentage
Interests totalling 100%.
"Trust Certificate Portion" means the aggregate interest in
the Trust evidenced by the Trust Certificates.
"Trust Certificate Principal Balance" means, as of any Payment
Date, the positive difference, if any, between (a) the sum of (i) the aggregate
Discounted Contract Principal Balances of all Leases as of the immediately
preceding Calculation Date (ii) the aggregate Discounted Contract Principal
Balances as of the related Cut-Off Date of all Additional Leases to be conveyed
to the Trust on such Payment Date and (iii) the amount on deposit in the New
Transferred Property Funding Account as of such Payment Date (and after taking
into account any deposits or withdrawals therein on such Payment Date) and (b)
the sum of (i) the outstanding Class A Certificate Principal Balance, (ii) the
outstanding Class B-1 Certificate Principal Balance and (iii) the outstanding
Class B-2 Certificate Principal Balance as of such Payment Date, after taking
into account any distribution of the Base Principal Amount, Residual Receipts
and Defaulted Residual Receipts on such Payment Date.
"Trust Operating Expenses" means, with respect to any Payment
Date, an amount equal to the amounts owing to the Servicer, the Back-up
Servicer, the Certificate Insurer and the Trustee pursuant to Section 6.06 of
the Pooling and Servicing Agreement and payable out of Available Funds in
priority to amounts owing the Certificateholder.
"Trust Property" means the Transferred Property, and funds
from time to time deposited in the Collection Account, the Security Deposit
Account and the New Transferred Property Funding Account.
"Trustee" means the institution executing the Pooling and
Servicing Agreement as Trustee, or its successor in interest, and any successor
Trustee appointed as provided herein, or any successor to the Trustee's
corporate trust business (or a substantial portion thereof) and initially shall
mean Bankers Trust Company, a New York banking corporation.
"Trustee Fee" means, with respect to each Payment Date, an
amount equal to $291.67.
"Trustee Fee Rate" means, for the purposes of calculating the
Discount Rate, 0.01%.
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<PAGE> 211
"UCC" means the Uniform Commercial Code as in effect in the
applicable jurisdiction.
"Underwriter" means First Union Capital Markets Corp., a North
Carolina corporation.
"Unscheduled Principal Payments" means, with respect to any
Payment Date, the aggregate amounts received during the immediately preceding
Collection Period pursuant to any Source Agreement in respect of Leases or the
related Equipment (excluding Excluded Amounts).
"Vehicles" means automobiles and light, medium and heavy duty
trucks.
"Warranty Event" has the meaning provided in Section 3.03 of
the Sale and Contribution Agreement.
"Weighted Average Certificate Rate" means the sum of (a) the
product of (i) the Class A Certificate Rate and (ii) a fraction, (A) the
numerator of which is the Initial Class A Certificate Principal Amount and (B)
the denominator of which is the Initial Certificate Principal Amount, plus (b)
the product of (i) the Class B-1 Certificate Amount and (ii) a fraction, (A)
the numerator of which is the Initial Class B-1 Certificate Principal Amount
and (B) the denominator of which is the Initial Certificate Principal Amount,
plus (c) the product of (i) the Class B-2 Certificate Rate and (ii) a fraction,
(A) the numerator of which is the Initial Class B-2 Certificate Principal
Balance and (B) the denominator of which is the Initial Certificate Principal
Amount.
33
<PAGE> 1
EXHIBIT 10.1
------------
<PAGE> 2
================================================================================
SALE AND CONTRIBUTION AGREEMENT
-------------------
between
FIRST SIERRA FINANCIAL, INC.
and
FIRST SIERRA RECEIVABLES II, INC.
--------------------
Dated as of
November 1, 1996
================================================================================
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II TRANSFER OF CONVEYED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Acquisition; Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02 Custody of Lease Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03 Intention of the Parties; Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.01 Representations and Warranties of First Sierra . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.02 Representations and Warranties of Company . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.03 Purchase of Leases and Equipment by First Sierra . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV COVENANTS OF FIRST SIERRA AND COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.01 First Sierra Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.02 Company Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.03 Transfer of Conveyed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.01 Conditions to Company Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.02 Conditions to First Sierra's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.02 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.04 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.05 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
SECTION 7.07 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.09 Binding Effect: Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.10 Merger and Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.13 No Bankruptcy Petition Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.14 General Interpretive Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.15 Conspicuous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SCHEDULES & EXHIBITS
Schedule 1 LIST OF LEASES
Exhibit A FORMS OF LEASES
Exhibit B FORM OF ASSIGNMENT
</TABLE>
ii
<PAGE> 5
SALE AND CONTRIBUTION AGREEMENT
THIS SALE AND CONTRIBUTION AGREEMENT (this "Agreement"), dated
as of November 1, 1996, is entered into between FIRST SIERRA FINANCIAL, INC.
("First Sierra"), a Delaware corporation located at Texas Commerce Tower, 70th
Floor, 600 Travis Street, Houston, Texas 77002, and FIRST SIERRA RECEIVABLES
II, INC. (the "Company"), a Delaware corporation, located at 1061 East
Indiantown Road, Suite 204, Jupiter, Florida 33477.
WITNESSETH:
WHEREAS, First Sierra in the ordinary course of its business
acquires equipment leases in the United States; and
WHEREAS, First Sierra desires to convey, transfer, contribute
and assign the Leases and all of its right, title and interest in the Equipment
and the Security Deposits and certain of its rights under the Source Agreements
(as such capitalized terms are defined below) to Company upon the terms and
conditions hereinafter set forth; and
WHEREAS, First Sierra and Company agree that all
representations, warranties, covenants and agreements made by First Sierra and
Company herein shall be for the benefit of the Certificateholders, the
Certificate Insurer and any Trustee (as defined below).
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Whenever used in this Agreement,
capitalized terms used and not defined herein shall have the meanings set forth
in Annex A hereto.
SECTION 1.02 Other Definitional Provisions.
(a) Terms used in Related Documents. Each term defined
in this Agreement will have the meaning assigned to such term in this Agreement
when used in any certificate or other document made or delivered pursuant to
this Agreement, unless such term is otherwise defined therein.
(b) Accounting Terms. As used in this Agreement,
accounting terms which are not defined pursuant to Section 1.01 have the
respective meanings given to
<PAGE> 6
them under generally accepted accounting principles, as in effect on the date
of this Agreement. To the extent that the definitions of accounting terms in
this Agreement are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement
will control.
(c) "Hereof," etc. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement will refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement, unless otherwise specified.
(d) Number and Gender. Each defined term used in this
Agreement has a comparable meaning when used in its plural or singular form.
Each gender-specific term used in this Agreement has a comparable meaning
whether used in a masculine, feminine or gender-neutral form.
(e) Including. Whenever the term "including" (whether or
not that term is followed by the phrase "but not limited to" or "without
limitation" or words of similar effect) is used in this Agreement in connection
with a listing of items within a particular classification, that listing will
be interpreted to be illustrative only and will not be interpreted as a
limitation on, or exclusive listing of, the items within that classification.
ARTICLE II
TRANSFER OF CONVEYED ASSETS
SECTION 2.01 Acquisition; Capital Contribution.
(a) In exchange for an amount in cash equal to
$67,200,409.66, First Sierra hereby conveys to the Company all of First
Sierra's right, title and interest in, to and under the Conveyed Assets,
whether now existing or hereinafter arising, without recourse (except as
provided in Section 2.01(d) and 3.03). In connection with such conveyance,
First Sierra hereby makes a capital contribution to Company in the amount by
which the fair market value of the Conveyed Assets exceeds the cash
consideration received by First Sierra in connection therewith.
(b) In connection with such contribution and conveyance,
First Sierra agrees to record and file, at its own expense, financing
statements (and thereafter will file continuation statements with respect to
such financing statements) with respect to the Conveyed Assets contributed and
to be transferred to Company pursuant to this Agreement, meeting the
requirements of applicable state law in such manner and in such jurisdictions
as are necessary to perfect and to maintain the perfection of, the transfer,
conveyance and contribution of the Conveyed Assets (subject to the following
sentence with respect to the Equipment) from First Sierra to Company and the
transfer, assignment
2
<PAGE> 7
and pledge of the Collateral from Company to the Trustee on behalf of the
Certificateholders and Certificate Insurer pursuant to the Pooling and
Servicing Agreement, and to deliver a file-stamped copy of such financing
statements or other evidence of such filings to Company (and copies to Trustee
and Certificate Insurer) on or prior to each Conveyance Date; provided,
however, that the Lease Files (including each original executed Lease contract
evidencing a Lease) will not be physically delivered to Company but instead
will be held by the Trustee. First Sierra shall record and file, at its own
expense, (i) with respect to true leases, UCC-1 financing statements with
respect to the related Equipment, naming the related Source as debtor, First
Sierra as secured party and the Trustee as assignee or in the event that any
such UCC-1 financing statement does not name the Trustee as assignee, UCC-3
financing statements (in favor of Bankers Trust Company, as custodian or
trustee) assigning First Sierra's interest arising under any financing
statements (and continuation statements with respect to such financing
statements) filed by it or the related Source with respect to any Equipment
subject to such true lease, (ii) with respect to any Equipment (other than
Vehicles) in each state where Equipment owned by the related Source with an
original cost in excess of $75,000 is located, UCC-1 financing statements
naming the related Lessee as debtor, the related Source as secured party, the
Trustee as assignee and the Equipment as collateral, filed in the appropriate
filing offices in the jurisdiction in which the Equipment was located on the
date on which the Lease was originated, meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect
and to maintain the perfection of the security interest of the Trustee on
behalf of the Certificateholders and Certificate Insurer in such Equipment and
(iii) with respect to the Leases, UCC-1 financing statements naming each Source
as the debtor, First Sierra as secured party, Bankers Trust Company as assignee
and the related Leases and Equipment as collateral, meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect and to maintain the security interest of the Trustee on behalf of
the Certificateholders and the Certificate Insurer in such Leases.
(c) In connection with such contribution and conveyance,
First Sierra shall, at its own expense on or prior to the Closing Date, and
with respect to Additional Leases and Substitute Leases, as soon as possible,
but in no event later than two (2) Business Days after the related Conveyance
Date (i) cause the Lease Management System to be marked with a specified code
(the "Lease Management Code") to show that the Conveyed Assets have been
contributed and transferred to Company in accordance with this Agreement and
transferred to the Trustee on behalf of the Certificateholders pursuant to the
Pooling and Servicing Agreement, (ii) prepare and hold in its capacity as
Servicer on behalf of the Company and the Trustee on behalf of the
Certificateholders the List of Leases on or prior to the Closing Date and (iii)
deposit all Security Deposits into the Security Deposit Account. Pursuant to
Section 2.01(d), First Sierra from time to time may make capital contributions
of Additional Leases or Substitute Leases to Company at any time by delivering
a supplemented List of Leases to Company on each Conveyance Date containing for
each Additional or Substitute Lease transferred on such Conveyance Date the
information set forth in the definition of List of Leases. Upon delivery of
any
3
<PAGE> 8
such supplement to the List of Leases, the List of Leases shall be deemed
amended to incorporate therein the information contained in such supplement.
(d) From time to time after the date hereof, Company may
request to purchase from First Sierra, Additional Leases. If First Sierra so
agrees to sell any Additional Leases, the purchase price thereof shall be an
amount agreed to by First Sierra and Company and shall be no less than the
aggregate Discounted Contract Principal Balance of each such Additional Lease
as then determined. In connection with a sale of Additional Leases, First
Sierra hereby makes a capital contribution to Company in the amount of any
difference between the fair market value of such Additional Leases and the cash
consideration received by First Sierra in connection therewith. The date on
which any such sale or contribution of any Additional Leases to Company takes
place is herein referred to as an "Addition Date". The cash portion of the
purchase price for any Additional Leases will be payable by Company on the
related Addition Date. On each Addition Date, First Sierra will deliver to
Company an executed Assignment substantially in the form of Exhibit B attached
hereto together with a schedule identifying each lease included in the
Additional Leases (an "Additional Lease Schedule"). Except for the obligations
of First Sierra pursuant to Section 3.03, the sale and contribution of the
Additional Leases will be without recourse to First Sierra.
SECTION 2.02 Custody of Lease Files. In connection with the
contribution, assignment, transfer and conveyance of the Leases to Company
pursuant to this Agreement, First Sierra, as Servicer under the Pooling and
Servicing Agreement and agent of the Trustee will retain the Credit Files and
any related evidence of insurance and payments; provided, however, that First
Sierra will physically convey Lease Files, including, without limitation, the
original executed contracts evidencing the Leases, to the Trustee.
SECTION 2.03 Intention of the Parties; Grant of Security
Interest. It is the intention of the parties hereto that each transfer of
Conveyed Assets to be made pursuant to the terms hereof shall constitute a sale
or capital contribution of such Lease by First Sierra to the Company and not a
loan. In the event, however, that a court of competent jurisdiction were to
hold that any such transfer constitutes a loan and not a sale or capital
contribution, it is the intention of the parties hereto that First Sierra shall
be deemed to have granted to the Company as of the date hereof a first priority
perfected security interest in all of First Sierra's right, title and interest
in, to and under each Conveyed Asset, and all proceeds thereof.
4
<PAGE> 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of First Sierra.
First Sierra hereby makes the following representations and warranties for the
benefit of the Trustee, the Certificateholders, the Certificate Insurer and the
Company. Such representations and warranties are made as of the Closing Date
with respect to the Initial Leases, and as of each Addition Date, with respect
to the related Additional Leases or as of each Transfer Date with respect to
Substitute Leases transferred to Company on such date, unless otherwise
indicated, but shall survive each contribution, assignment, transfer and
conveyance of the respective Conveyed Assets to Company and its successors and
assigns.
(a) As to the Conveyed Assets:
(i) Each Lease is for the Equipment identified
therein and no Equipment (other than Vehicles) is of a type which requires
issuance of a certificate of title to evidence ownership thereof or a security
interest therein.
(ii) The information with respect to each Lease
and the Equipment subject to each Lease in the List of Leases is true and
correct and the computer tape from which the selection of the Leases was made,
was made available to the Underwriter by First Sierra prior to the Closing Date
and was complete and accurate as of its date and includes a description of the
same Leases that are described in the List of Leases.
(iii) No provision of any Lease has been waived,
altered or modified in any respect, except by instrument or documents contained
in its Lease File and identified by First Sierra and no modification or
amendment of any Lease would individually or in the aggregate materially and
adversely affect the Depositor or the Trustee's rights thereunder or has
reduced the amount of any Scheduled Payment (or the aggregate Scheduled
Payments) owing thereunder or extended the expiration date thereof.
(iv) Each Lease is a valid and binding payment
obligation of the related Lessee and is enforceable in accordance with its
terms (except as may be limited by applicable insolvency, bankruptcy,
moratorium, reorganization, or other similar laws affecting enforceability of
creditors' rights generally and the availability of equitable remedies) and is
in full force and effect.
(v) Each Lease contains a "hell or high water"
clause under which the Lessee's obligations are non-cancelable and
unconditional and not subject to any right of set-off, defense, abatement,
counterclaim, reduction or recoupment; no Lease is or will be subject to rights
of rescission, set-off, counterclaim or defense, and each Lease provides for
acceleration of the Scheduled Payments upon default by the Lessee.
5
<PAGE> 10
(vi) The Leases do not violate the laws of any
applicable state or of the United States, including, without limitation, usury,
truth-in-lending and equal credit opportunities laws applicable to such Lease.
(vii) Each Lease is net to the lessor of any
maintenance, taxes, insurance or other expenses and each Lease contains
provisions requiring the Lessee to maintain the Equipment, at its sole expense,
at all times during the term of the Lease, in good operating order, repair,
condition and appearance, and protect the Equipment from deterioration (except
for normal wear and tear) and maintain an Insurance Policy with respect to the
Equipment in an amount at least equal to the replacement value thereof (and to
the extent such Equipment had on original cost in excess of $35,000, a copy of
such Insurance Policy shall be included in the Lease File delivered to the
Trustee), and upon the occurrence of a casualty, to pay any difference between
the proceeds of such insurance and the implicit principal balance of such Lease
and to pay all sales, rental, property or similar taxes or fees, fines and
penalties with respect to the Equipment and to assume all risk of loss or
malfunction of the related Equipment.
(viii) As of the Closing Date (or as of the related
Conveyance Date, Addition Date or Transfer Date), all action shall have been
taken by First Sierra to convey all of its right, title and interest in and to
the Leases and the related Equipment to Company.
(ix) Any party executing a Lease on behalf of
First Sierra had the legal capacity and authority to execute such Leases and,
to First Sierra's knowledge, all other parties to the Lease had the legal
capacity to execute such Lease.
(x) The right, title and interest of First Sierra
in and to each Lease and the related Equipment (or any other property conveyed
by First Sierra pursuant to this Agreement) have not been sold, transferred,
assigned or pledged by First Sierra to any other Person (or any such pledge has
been released as evidenced by releases of collateral) and at the time of the
conveyance of such Lease to Company, First Sierra was the sole owner of such
Lease and the rights thereunder in and to the related Equipment and had good
and marketable title to each Lease and had the power to convey such Lease and
assign its interest in the related Equipment free and clear of any Liens. The
manufacturer or supplier or Lessee has been paid in full the purchase price and
any related charges in connection with the acquisition of such Equipment.
(xi) No Lease provides for the substitution,
addition or exchange of any item of Equipment which would result in any
reduction of payments due under such Lease.
(xii) There is not more than one counterpart of
each Lease that constitutes "chattel paper" for purposes of Section 9-105(1)(b)
and 9-308 of the UCC and such counterpart shall be delivered to the Trustee on
the respective Conveyance Date.
6
<PAGE> 11
(xiii) First Sierra has duly fulfilled all material
obligations on its part to be fulfilled under or in connection with each Lease,
including, without limitation, giving any notices or consents necessary to
effect the contribution, assignment, transfer, and conveyance of the Lease from
First Sierra to the Company and has done nothing to materially impair the
rights of Company, the Certificateholders, or the Certificate Insurer in such
Lease or the proceeds with respect thereto.
(xiv) No Lease has been amended after the Cut-Off
Date such that the amount of any Scheduled Payment (or the aggregate Scheduled
Payments) has been reduced or the expiration date thereof has been extended.
(xv) No proceedings or, to the best of First
Sierra's knowledge, investigations, are pending, or have been threatened
asserting the invalidity of any Lease, or seeking any determination or ruling
that might adversely and materially affect the validity or enforceability of
any Lease.
(xvi) All filings (including UCC filings) necessary
to evidence the conveyance of the Leases to Company and to perfect the first
perfected priority security interest of the Company and Trustee in the Leases
and related Equipment (in accordance with the Filing Requirements) have been
made in all appropriate jurisdictions and are in full force and effect.
(xvii) No Lessee is, to First Sierra's knowledge,
subject to bankruptcy or other insolvency proceedings and no Lessee has filed
for bankruptcy within the five years preceding the origination date of such
Lease.
(xviii) Each Lessee's billing address is in the
United States.
(xix) All payments under each Lease are required to
be made in United States dollars.
(xx) No Lease requires the prior written consent
of a Lessee or contains another restriction relating to the transfer or
assignment of such Lease (except such as have been obtained).
(xxi) No Lease permits the prepayment thereof at
the option of the Lessee for an amount that is less than the Prepayment Amount
related to such Lease from time to time.
(xxii) No Lease is the subject of litigation or has
been referred to counsel, and First Sierra has no knowledge of any challenge or
dispute by any Lessee under any Lease.
7
<PAGE> 12
(xxiii) With respect to each Lease for which First
Sierra collects maintenance payments, First Sierra remits such maintenance
payments to the related maintenance providers.
(xxiv) No Lease is a "consumer lease" as defined in
Article 2A of the UCC or a "consumer credit contract" subject to the FTC Rule
(16 C.F.R., Part 433).
(xxv) Each Lease was originated after October 31
1994, and will commence no later than March 1, 1997, and no Lease has a final
payment date later than May 1, 2004.
(xxvi) No Lessee is a government or municipality and
no Lessee is an affiliate of First Sierra.
(xxvii) Each Lease is either a lease "intended as
security" within the meaning of UCC Section 1-201(37) or a "lease" within the
meaning of UCC Section 2A103(1)(j).
(xxviii) As of the Cut-Off Date, each Lease provides
for monthly, quarterly or annual Scheduled Payments; no Lease has more than 10%
of total Scheduled Payments due on its final Scheduled Payment date; the
weighted average life of the remaining Scheduled Payments comprising the
Aggregate Discounted Contract Principal Balance does not exceed 28 months as of
the Closing Date and the weighted average life of the remaining Scheduled
Payments will not exceed 28 as of any Addition Date.
(xxix) In the event of a Casualty Loss, the Source
may require the Lessee, at the Lessee's expense, to (A) replace the Equipment
with like equipment in good repair, acceptable to the Source; or (B) pay the
Discounted Contract Principal Balance and the booked residual value of the
Equipment.
(xxx) No Lease permits the Lessee to utilize any
Security Deposit to offset any Scheduled Payment.
(xxxi) Any guarantees required at the time of
origination of a Lease remain in full force and effect.
(xxxii) No Lease was originated by First Sierra
Graphics.
(xxxiii) Each Lessee, Lease and Source meet First
Sierra's Credit and Collections Policies and Procedures and no Lease was
selected on any adverse basis which would have any material effect on the
Certificateholders or the Certificate Insurer.
(xxxiv) Each Source has entered into a valid sale and
assignment of each Lease originated by such Source to First Sierra.
8
<PAGE> 13
(xxxv) No one Source (including its affiliates) has
originated more than 20% of all Leases except as previously consented to by the
Certificate Insurer.
(xxxvi) Each Lease agreement conforms, in all
material respects, to one of the forms of leases contained in Exhibit A hereto.
(xxxvii) Each Source has agreed pursuant to its Source
Agreement that the reserves established under each Source Agreement may be
utilized to satisfy a default under any of the Leases covered by such Source
Agreement.
(xxxviii) As of the Cut-Off Date no one Lessee
(including its Affiliates) is the Lessee under Leases for which the sum of the
Discounted Contract Principal Balances exceeds $834,418; no more than
$3,651,406 of the Aggregate Discounted Contract Principal Balance is
attributable to Leases with any 10 Lessees (including their respective
affiliates), and the average original equipment cost (based on GAAP) of the
Equipment subject to the Leases shall not exceed $100,000.
(xxxix) The transfer, assignment and contribution to
the Company of the Leases and First Sierra's right, title and interest in and
to any item of Equipment will not violate the terms or provisions of any such
Lease or any other agreement to which First Sierra then is a party or by which
it is bound.
(xl) After giving effect to each assignment,
transfer and contribution contemplated by this Agreement, the Company will be
(A) the sole owner of, and have good and marketable title to, the related Lease
and (B) the holder of a valid perfected first priority security interest in the
related Equipment.
(xli) At the time that any item of the Equipment is
assigned, transferred and contributed pursuant to the terms of this Agreement,
First Sierra will have no knowledge that such Equipment has suffered any loss
or damage except for such Equipment that has been restored to its original
value, ordinary wear and tear excepted.
(xlii) To the best of the First Sierra's knowledge
after due inquiry, (A) there has been no default by First Sierra which is
reasonably likely to have a material adverse effect on any Lease, (B) no event
has occurred and is continuing which with notice, the lapse of time or both
would constitute a default under any Lease and (C) First Sierra has not waived
any of the foregoing.
(xliii) As of the time of each assignment, transfer
and contribution pursuant to the terms hereof (and based upon the Aggregate
Discounted Contract Principal Balance of the Leases as of the Cut-off Date),
(i) the sum of the Aggregate Discounted Contract Principal Balance of all
Leases in any one state will not exceed 14% of the Aggregate Discounted
Contract Principal Balance of all Leases except for California which will not
exceed 25%, (ii) no Leases permit early termination for an amount less than the
Prepayment Amount and (iii) the maximum collateral value of any Additional
9
<PAGE> 14
Lease purchased pursuant to a subsequent funding will not exceed the lesser of
(a) 1.1% of the Aggregate Discounted Contract Principal Balance and (b)
$813,000.
(xliv) As of the applicable Cut-Off Date, no Lessee
will have been released, in whole or in part, from any of its obligations in
respect of any such Lease; no such Lease will have been satisfied, canceled,
extended or subordinated, in whole or in part, or rescinded, and no Equipment
covered by any such Lease will have been released from such Lease, in whole or
in part, nor will any instrument have been executed that would effect any such
satisfaction, release, cancellation, subordination or rescission.
(xlv) No Lease has been originated in or be subject
to the laws of any jurisdiction whose laws would make the assignment and
transfer thereof pursuant to the terms hereof or any transaction contemplated
by the Transaction Documents unlawful.
(xlvi) Each Lease provides that First Sierra has no
obligation to assemble, install, test, adjust or service the Equipment subject
to a Lease.
(xlvii) As of the applicable Conveyance Date, no
Lease has a balloon payment which is more than five times the amount of the
regular Lease Payments or payments of principal and interest on such Lease,
except as has been disclosed to, and approved by, the Certificate Insurer.
(xlviii) To First Sierra's knowledge, no item of
Equipment has been relocated from the jurisdiction set forth in the Lease or,
if First Sierra has knowledge of any such relocation, all UCC filings necessary
to continue the first priority security interest in such Equipment have been
made in a manner consistent with the Filing Requirements.
(xlix) Each Lessee has accepted the related
Equipment and, after reasonable opportunity to inspect and test, has not
notified First Sierra of any defects therein.
(l) The Leases were originated or acquired by
First Sierra in the ordinary course of its business. The origination and
collection practices used by First Sierra with respect to each Lease have been
legal in all respects except where the failure to do so would not result in a
material adverse effect on the Leases.
(li) No Lease has been rewritten or extended other
than with respect to non-credit related matters (i.e., change in day of the
month for payment or change due to damage to Equipment) and any document
evidencing any such change has been included in the related Lease File.
10
<PAGE> 15
(lii) The Aggregated Discounted Contract Principal
Balance of all Leases as of the Cut-Off Date is equal to $72,024,443.60; and no
Lease has a Discounted Contract Principal Balance as of the Cut-Off Date of
more than $318,661.
(liii) As of the Conveyance Date, no item of
Equipment has been repossessed.
(liv) Not more than 5% of the Leases (based upon
the Aggregate Discounted Contract Principal Balance as of the Cut-Off Date) are
true leases as of the Cut-Off Date.
(lv) The Company has the right under each Lease to
exercise appropriate remedies with respect to the related Equipment without
obtaining the consent of any third parties.
(lvi) First Sierra will cause its records to be
marked to reflect the transfer of the Leases to the Company.
(lvii) Either the related Source or First Sierra, as
applicable, purchased each item of Equipment from either (A) the manufacturer
or other supplier following receipt of an invoice from such manufacturer or
supplier or (B) a Lessee following confirmation that such item of Equipment was
on such Lessee's premises.
(lviii) The sale, transfer, assignment and conveyance
contemplated by this Agreement is not subject to and will not result in any
tax, fee or governmental charge payable by First Sierra to any federal, state
or local government ("Transfer Taxes") other than Transfer Taxes which have
been or will be paid by First Sierra as due. In the event that the Company
receives actual notice of any Transfer Taxes arising out of such transfer,
assignment and conveyance, on written demand by the Company, or upon First
Sierra's otherwise being given notice thereof, First Sierra shall pay, and
otherwise indemnify and hold the Company, the Trustee, and the Certificate
Insurer harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Certificateholders, the Trustee,
and the Certificate Insurer shall have no obligation to pay such Transfer
Taxes).
(lix) As of the applicable Conveyance Date, the
parties to each Lease are First Sierra and the Lessee of the related Equipment.
(lx) The equipment type securing any Additional
Lease will be similar in all material respects to the equipment type securing
the Initial Leases and will meet the same distribution as provided by the
Underwriter on the final portfolio at Closing.
(lxi) All Leases are noncancellable by the related
Lessee and do not contain early termination options.
11
<PAGE> 16
(lxii) The Leases provide for a personal guarantee
of Lessee if obtained during the original approval.
(lxiii) All Leases include only the remaining
noncancellable contractual payments purchased and funded by First Sierra, but
not more than the maximum Lease term.
(lxiv) No Lease includes the amount of any security
deposits held by First Sierra or any Source.
(lxv) Each Lease has a remaining term of at least 2
months but not greater than 84 months. With respect to Additional Leases, the
remaining term is no greater than six months prior to the Maturity Date and
each Lease includes only the remaining noncancellable payments purchased and
funded by First Sierra.
(lxvi) Except with respect to Leases for which the
related Equipment is Vehicles, First Sierra has filed UCC-1 financing
statements naming the Trustee as secured party and the Equipment as collateral
with respect to all Leases for which the related Equipment had an original cost
in excess of $75,000.
(lxvii) As of the related Transfer Date, First Sierra
had no actual knowledge that any Lease would not be paid in full.
(lxviii) Each Additional Lease was acquired by First
Sierra from a Source pursuant to First Sierra's Private Label Program and not
more than 1% of the Aggregate Discounted Contract Principal Balance of the
Leases will result from the lease of software.
(lxix) Not more than 3.3% of the Leases (based upon
the Aggregate Discounted Contract Principal Balance as of the Cut-Off Date) are
Leases with respect to which the related Equipment are Vehicles.
(lxx) With respect to each Lease for which the
related Equipment is a Vehicle, First Sierra has filed, prior to the related
Conveyance Date, an application for a Certificate of Title naming the Trustee
as lienholder with the appropriate titling office and has provided the Trustee
with a copy of such application and has taken all steps necessary to perfect
the Trustee's security interest in such Vehicle.
(lxxi) With respect to Leases secured by a Vehicle,
the Certificate of Title for such Vehicle shows, or if a new or replacement
Certificate of Title is being applied for with respect to such Vehicle the
Certificate of Title will show, the Trustee as the sole holder of a security
interest in such Vehicle.
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(lxxii) As of the Closing Date, or the related
Addition Date or Transfer Date, there is no lien or claims against any Vehicle
securing a Lease for delinquent taxes or for work, labor or material affecting
any Vehicle.
(lxxiii) In connection with any Lease secured by a
Vehicle, the related Source required the related Lessee to furnish evidence
that the related Vehicle was covered by a comprehensive and collision insurance
policy naming such Source as loss payee and insuring against loss and damage
due to fire, theft, transportation, collision and other risks generally covered
by comprehensive and collision coverage in an amount equal to the actual cash
value on the related Vehicle.
(lxxiv) With respect to any Lease secured by a
Vehicle, the Lessee is in fact the primary or sole operator of the related
Vehicle.
(lxxv) Each Lease constitutes an Eligible Lease.
(lxxvi) Each Source has agreed to cross-collateralize
any Lease sold to First Sierra with respect to defaults and reserves
established, subject to the terms of the related Source Agreement.
(lxxvii) With respect to each Lease (including,
without limitation, any Additional Lease or Substitute Lease) secured by a
Vehicle, the final maturity of such Lease is not less than 30 months prior to
the Maturity Date.
(lxxviii) With respect to each Lease, the Lease File
for such Lease has been delivered to the Trustee on or prior to (i) the Closing
Date, with respect to the Initial Leases and (ii) the Transfer Date, with
respect to the Additional Leases and Substitute Leases; provided, however, that
with respect to Initial Lease No. 16870, the Lease File shall be delivered to
the Trustee prior to the Payment Date occurring in January 1997.
(b) As to First Sierra:
(i) Organization and Good Standing. First Sierra
is a corporation duly organized, validly existing and in good standing, under
the laws of the State of Delaware, with corporate power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant times,
and now has, power, authority, and legal right to acquire and own the Conveyed
Assets;
(ii) Due Qualification. First Sierra is qualified
as a foreign corporation in any state where it is required to be so qualified
to conduct its business, to enforce the Source Agreements, and to service the
Leases as required by this Agreement and has obtained all necessary licenses,
consents and approvals as required under federal and state law, in each case,
where the failure to be so qualified, licensed, consented to or
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approved could reasonably be expected materially and adversely to affect the
ability of First Sierra to comply with the terms of this Agreement or any other
transaction document to which it is a party;
(iii) Power and Authority. First Sierra has the
corporate power and authority to execute and deliver this Agreement, the Source
Agreements and the Leases and any other transaction document to which it is a
party, and to carry out their respective terms; First Sierra has duly
authorized the contribution and assignment to Company of the Conveyed Assets by
all necessary corporate action; and the execution, delivery, and performance of
this Agreement, the Source Agreements and the Leases and any other transaction
document to which it is a party, has been duly authorized by First Sierra by
all necessary corporate action;
(iv) Due Execution and Delivery. This Agreement
has been duly executed and delivered on behalf of First Sierra;
(v) Valid Contribution: Binding Obligations.
This Agreement constitutes a valid contribution, assignment, transfer and
conveyance to Company of all right, title, and interest of First Sierra in, to
and under the Conveyed Assets and the Conveyed Assets will be held by Company
free and clear of any Lien of any Person claiming, through or under First
Sierra, except for Liens permitted under, or to be created by the Pooling and
Servicing Agreement; and this Agreement, the Source Agreements and the Leases,
when duly executed and delivered, will constitute legal, valid, and binding,
obligations of First Sierra enforceable against First Sierra in accordance with
their respective terms subject as to enforceability to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors'
rights generally and to general principles of equity (regardless of whether
enforcement is sought or a proceeding in equity or at law);
(vi) No Violation. The consummation of the
transactions contemplated by and the fulfillment of the terms of this Agreement
will not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of First Sierra, or any material term
of any indenture, agreement, mortgage, deed of trust, or other instrument to
which First Sierra is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, mortgage, deed of trust, or other
instrument, other than this Agreement, or violate any law or any order,
injunction, writ rule, or regulation applicable to First Sierra of any court or
of any federal or state regulatory body, administrative agency, or other
Governmental Authority having jurisdiction over First Sierra or any of its
properties which would have a material adverse effect on the Conveyed Assets;
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of First Sierra, threatened,
before any court, regulatory body, administrative agency, or other tribunal or
Governmental Authority (A) asserting
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the invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement, or (C) seeking any
determination or ruling that might (in the reasonable judgment of First Sierra)
materially and adversely affect the performance by First Sierra of its
obligations under, or the validity or enforceability of, this Agreement;
(viii) Tax Returns. First Sierra has filed on a
timely basis all tax returns (federal, state and local) required to be filed
and has paid or made adequate provisions for the payment of all taxes,
assessments and other governmental charges due from First Sierra;
(ix) Pensions. Each pension plan or profit
sharing plan to which First Sierra is a party has been fully funded in
accordance with the obligations of First Sierra set forth in such plan;
(x) Valid Business Reasons. First Sierra has
valid business reasons for selling its interests in the Leases rather than
obtaining a loan with the Leases as collateral;
(xi) Insolvency. First Sierra is not insolvent
and will not be rendered insolvent by the transactions contemplated by this
Agreement and has an adequate amount of capital to conduct its business in the
ordinary course and to carry out its obligations hereunder and under each
Transaction Document to which it is a party;
(xii) Principal Place of Business. The principal
place of business and chief executive office of First Sierra are located at the
address of First Sierra set forth in the designated space beneath its signature
line in this Agreement and, there are now no, and during the past four months
there have not been, any other locations where the Originator is located (as
that term is used in the UCC in the state of such location) except that, with
respect to such changes occurring after the date of this Agreement, as shall
have been specifically disclosed to the Servicer and the Trustee in writing;
(xiii) Accounting and Tax Treatment. First Sierra
will treat the contribution of the Conveyed Assets to Company pursuant to
Article II as a contribution of the Conveyed Assets to the capital of Company
for federal income tax purposes, and as a sale for financial reporting and
accounting purposes;
(xiv) Consolidated Return Taxable Income from the
Equipment and the Related Leases. Company and the First Sierra are members of
an affiliated group within the meaning of section 1504 of the Code which has
filed, and will continue to file, a consolidated return for federal income tax
purposes at all times until satisfaction in full of all obligations (i) of
First Sierra hereunder and (ii) of First Sierra and Company under the
Transaction Documents or other document relating to the financing contemplated
hereby. Company shall treat the Leases as owned by it and any True Lease
Equipment as owned by it or a Source for federal, state and local income tax
purposes, and the
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affiliated group of which Company is a member within the meaning of section
1504 of the Code shall treat the Leases as owned by Company and any True Lease
Equipment as owned by Company or a Source for federal income tax purposes and
shall report and include the rental and other income from the Equipment and the
Leases in gross income;
(xv) Legal Name. The legal name of the First
Sierra is as set forth in the signature line of this Agreement and has not
changed its name since its incorporation and since its incorporation First
Sierra did not use, nor does First Sierra now use any trade names, fictitious
names, assumed names or "doing business as" names; and
(xvi) Material Adverse Change. As of September 30,
1996, no event has occurred and is continuing which materially and adversely
affects First Sierra's operations including, without limitation, the ability of
First Sierra to perform the transactions contemplated hereunder.
SECTION 3.02 Representations and Warranties of Company.
Company hereby makes the following representations and warranties for the
benefit of the Certificate Insurer and the Certificateholders and on which
First Sierra relies in investing in Company and contributing the Conveyed
Assets. Such representations and warranties speak as of the Closing Date with
respect to the Initial Leases, each Addition Date with respect to the related
Additional Leases and each Transfer Date with respect to the related Substitute
Leases, but shall survive each contribution, assignment, transfer and
conveyance of the respective Conveyed Assets to Company and its successors and
assigns.
(a) Organization and Good Standing. Company is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware, with full power and authority to own its properties
and to conduct its business as presently conducted;
(b) Due Qualification. Company is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such qualification,
except to the extent that the failure to be so qualified, licensed or approved
would not, in the aggregate, materially and adversely affect the ability of
Company to comply with the terms of this Agreement and the other Transaction
Documents to which it is a party;
(c) Power and Authority. Company has the power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery, and performance of this Agreement and other
Transaction Documents to which it is a party have been duly authorized by
Company by all necessary action;
(d) Due Execution and Delivery. This Agreement has been
duly executed and delivered on behalf of Company;
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(e) Binding Obligations. This Agreement constitutes
legal, valid, and binding obligations of the Company and is enforceable in
accordance with its terms subject as to enforceability to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law);
(f) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement and other
Transaction Documents to which it is a party will not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or
without notice of lapse of time) a default under, the Certificate of
Incorporation or By Laws of the Company, or any material term to any indenture
to which Company is a party;
(g) Common Stock. First Sierra is the registered owner
of all of the issued and outstanding common stock of the Company, all of which
common stock is validly issued, fully paid and nonassessable and, to the best
of its knowledge owned of record, free and clear of all mortgages, assignments,
pledges, security interests, warrants, options and rights to purchase;
(h) No Proceedings. There are no proceedings or
investigations of which Company has received service of process to which
Company is a party pending or, to the knowledge of Company, threatened, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (A) asserting the invalidity of or any of the
Transaction Documents, (B) seeking to prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents or (C) seeking
any determination or ruling that would materially and adversely affect the
performance by Company of its obligations under, or the validity or
enforceability of, any of the Transaction Documents;
(i) Approvals and Compliance. All approvals,
authorizations, consents, orders or other actions of any person, corporation or
other organization, or of any court, governmental agency or body or official,
required in connection with the execution and delivery of the Transaction
Documents, have been or will be taken or obtained on or prior to the Closing
Date and the Company is in compliance with all applicable laws, rules,
regulations and orders with respect to Company, its business and properties and
all purchased Leases;
(j) Solvency. Company is solvent and will not be
rendered insolvent by the transactions contemplated by this Agreement and the
other Transaction Documents and the Company has an adequate amount of capital
to conduct its business in the ordinary course and to carry out its obligations
under this Agreement and the other Transaction Documents;
(k) Place of Business. The Company's sole principal
place of business and chief executive office is, and has been during the
immediately preceding four month
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period, at 1061 East Indiantown Road, Suite 204, Jupiter, Florida 33477 and
there have been no other during the immediately preceding calendar month; and
(l) Subsidiaries. Company has no subsidiaries.
SECTION 3.03 Purchase of Leases and Equipment by First
Sierra.
(a) Upon discovery by either First Sierra or Company (or
any of its successors or assigns) of a breach of any of the representations and
warranties made pursuant to Section 3.01(a), the party (including any such
successor or assign) discovering such breach shall give prompt written notice
to the other. If such breach materially adversely affects the interests of
Company or its successors or assigns, including the Trustee, the Certificate
Insurer and the Certificateholders, in any of the Leases or the Equipment,
unless the breach shall have been cured in all material respects within 5
Business Days (or with 30 days with respect to Section 3.01(a) only) after
First Sierra becomes aware, or receives written notice from the Certificate
Insurer, the Trustee, the Servicer or the Company of such breach (a "Warranty
Event"), First Sierra shall either (i) purchase such Lease and the security
interest in the Equipment subject to such Lease that was previously transferred
by First Sierra, for the Reconveyance Price or (ii) replace such Lease with a
Substitute Lease(s) such that the representations and warranties made pursuant
to Section 3.01 are materially correct, in accordance with the provision of
paragraphs (b) and (c) of this Section 3.03; provided, however, that the sum of
the Discounted Contract Principal Balances for all Leases substituted under
this Section 3.03 shall not exceed 10% of the Aggregate Discounted Contract
Principal Balance as of the most recent Calculation Date. In the event of a
repurchase of a Lease, First Sierra shall remit to Company (by wire transfer of
immediately available funds) the Discounted Contract Principal Balance (as of
the date of such repurchase) for each Lease to be repurchased prior to 10:00
a.m. New York City time on the fifth Business Day following First Sierra's
discovery of, or receipt of notice of, any such breach.
(b) With respect to a substitution of Leases in
accordance with the provisions of this Section 3.03, each proposed Substitute
Lease must (i) be an Eligible Lease, (ii) satisfy all of the representations
and warranties set forth in Section 3.01(a) of this Agreement, (iii) have a
Discounted Contract Principal Balance of not less than the Discounted Contract
Principal Balance of the Lease being replaced. For purposes of determining
compliance with clause (iii) of the preceding sentence, if more than one
Substitute Lease is being provided on any date, the Discounted Contract
Principal Balance of the Substitute Leases and the Leases being replaced shall
be determined on an aggregate basis and (iv) is eligible to be substituted by
the Company under the Pooling and Servicing Agreement.
(c) Any substitution of a Lease pursuant to this
Agreement will be effected by (i) delivery to the Trustee of the Lease File for
each such Substitute Leases (ii) filing of any UCC financing statements
necessary to perfect the interest of the Trustee
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in the Substitute Leases and (iii) delivery to the Trustee of a supplement to
the List of Leases reflecting such substitution.
(d) The parties hereto agree that in addition to the
obligation of First Sierra as provided in this Section 3.03 to repurchase or
substitute any Lease and the related Equipment as to which a breach of the
representations set forth in Section 3.01(a) has occurred and is continuing,
First Sierra will enforce its remedies against any Source under any Source
Agreement. In consideration of the purchase of the Equipment and the Lease,
First Sierra shall remit the Reconveyance Price to the Servicer for allocation
of such Reconveyance Price pursuant to the terms of the Pooling and Servicing
Agreement. It is understood and agreed that the obligations of First Sierra
with respect to a breach as provided in this Section 3.03 constitute the sole
remedy against First Sierra for such breach available to Company, the
Certificate Insurer, any Trustee and Certificateholders. The representations
and warranties set forth in Section 3.01 shall survive each contribution and
assignment of the Equipment and Leases to Company and any conveyance to any
Trustee.
ARTICLE IV
COVENANTS OF FIRST SIERRA AND COMPANY
SECTION 4.01 First Sierra Covenants. First Sierra hereby
covenants and agrees with Company, the Certificate Insurer, the
Certificateholders and any Trustee as follows:
(a) Preservation of Security Interest. First Sierra
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places as
may be required by law fully to preserve, maintain, and protect the respective
right, title and interest of Company and the Trustee in the Conveyed Assets.
First Sierra shall deliver (or cause to be delivered) to Company file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing.
(b) Preservation of Name, etc. First Sierra will not
change its name, identity or corporate structure in any manner that would,
could, or might make any financing statement or continuation statement filed by
First Sierra in accordance with paragraph (c) above or under any Transaction
Document seriously misleading within the meaning of Section 9-402(7) of the
UCC, unless it shall have given Company, the Certificate Insurer and the
Trustee at least 60 days' prior written notice thereof.
(c) Preservation of Office. First Sierra will give
Company and the Trustee at least 60 days' prior written notice of any
relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would
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require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement.
(d) Obligations with Respect to Conveyed Assets. First
Sierra will duly fulfill all obligations on its part to be fulfilled under or
in connection with the Lockbox Agreement, each Lease and each Source Agreement,
and will do nothing to impair the rights of Company or the Trustee in any of
the Conveyed Assets.
(e) Compliance with Law. First Sierra will comply, in
all material respects, with all acts, rules, requisitions, orders, decrees and
directions of any Governmental Authority applicable to its business and to the
Conveyed Assets or any part thereof; provided, however, that First Sierra may
contest any act, regulation, order, decree or direction in any reasonable
manner which shall not materially and adversely affect the rights of Company,
the Trustee or the Trust in the Conveyed Assets.
(f) Conveyance of Conveyed Assets; Security Interests.
Except for the transfers and conveyances hereunder and pursuant to the Pooling
and Servicing Agreement, or under any Transaction Document, First Sierra will
not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien, on any Conveyed Asset, or any
interest therein and First Sierra shall defend the right, title, and interest
of such, the Trustee and their respective successors and assigns in, to, and
under the Conveyed Assets, against all claims of third parties claiming,
through or under First Sierra; provided, however, that nothing in this Section
4.01(i) shall prevent or be deemed to prohibit First Sierra from suffering to
exist upon any of the Conveyed Assets any Liens for municipal or other local
taxes if such taxes shall not at the time be due and payable or if First Sierra
shall concurrently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate reserves
with respect thereto.
(g) Notification of Breach. First Sierra will advise
Company, the Trustee and the Certificate Insurer promptly, in reasonable
detail, upon discovery of the occurrence of any breach by First Sierra of any
of its representations, warranties and covenants contained herein.
(h) Further Assurances. First Sierra will make, execute
or endorse, acknowledge and file or deliver to Company and the Trustee from
time to time such schedules, confirmatory assignments, conveyances, transfer
endorsements, powers of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the Conveyed Assets and
other rights covered by this Agreement, as Company, the Trustee and the
Certificate Insurer may request and reasonably require, provided that no UCC
filing will be required with respect to the Equipment, except as required by
Section 2.01(b) hereof.
(i) Indemnification. First Sierra agrees to indemnify,
defend and hold Company, the Trustee and the Certificate Insurer harmless from
and against any and all
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loss, liability, damage, judgment, claim, deficiency, or expense (including
interest, penalties, reasonable attorneys' fees and amounts paid in settlement)
to which any of them may become subject insofar as such loss, liability,
damage, judgment, claim, deficiency, or expense arises out of or is based upon
a breach by First Sierra of its covenants contained in Section 4.01, or any
information certified set forth in this Agreement or in any schedule delivered
by First Sierra hereunder, being untrue in any material respect at any time.
The obligations of First Sierra under this Section 4.01(1) shall be considered
to have been relied upon by Company, the Trustee and the Certificate Insurer
and shall survive the execution, delivery, and performance of this Agreement
regardless of any investigation made by Company, the Trustee and the
Certificate Insurer or on their respective behalf. THE INDEMNIFICATION
OBLIGATIONS OF FIRST SIERRA PURSUANT TO THE PRECEDING PROVISIONS OF THIS
PARAGRAPH SHALL APPLY REGARDLESS OF ANY NEGLIGENCE OR OTHER FAULT ON THE PART
OF COMPANY, THE TRUSTEE OR ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES OR
AGENTS.
(j) Notice of Liens. First Sierra shall notify Company,
the Trustee and the Certificate Insurer promptly after becoming aware of any
Lien on any Conveyed Asset.
(k) Taxes. First Sierra shall promptly pay all taxes
required to be paid in connection with the contribution of the Conveyed Assets
and acknowledges that Company shall have no responsibility with respect
thereto. First Sierra shall promptly pay and discharge, or cause the payment
and discharge of, all federal income taxes (and all other material taxes) when
due and payable by First Sierra, the First Sierra Group, or the Company, except
(i) such as may be paid thereafter without penalty or (ii) such as may be
contested in good faith by appropriate proceedings and for which an adequate
reserve has been established and is maintained in accordance with GAAP. First
Sierra shall promptly notify the Company, the Trustee, the Certificateholders
and the Certificate Insurer of any material challenge, contest or proceeding
pending by or against First Sierra or the First Sierra Group before any taxing
authority. First Sierra Group and the Company shall enter into a Tax Sharing
Agreement, pursuant to which (i) First Sierra shall assume the sole
responsibility for making any required payments of taxes to the Internal
Revenue Service and shall agree to indemnify and hold the Company harmless
against any claims of liability for such taxes and (ii) the Company shall be
required to make certain payments to First Sierra in respect of its separate
federal income tax liability. So long as any Securities or the Obligations
remain outstanding, First Sierra and the Company shall not terminate or amend
such Tax Sharing Agreement without the prior written consent of the Trustee and
the Certificate Insurer, except that First Sierra shall not require the Company
to make any payments to First Sierra, pursuant to the Tax Sharing Agreement,
which exceed the aggregate federal income tax liability of the Company, on a
separate return basis for all taxable years covered by Tax Sharing Agreement,
that would arise if all allowable losses arising at an time during such period
were applied to reduce the Company's aggregate separate taxable income for all
such years.
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(l) Taxes and Other Liabilities. First Sierra shall
promptly pay and discharge all material taxes, assessments, fees, claims and
other governmental charges when due and payable by First Sierra, the First
Sierra Group, or any member of the First Sierra Group, including Company,
except (i) such as may be paid thereafter without penalty or (ii) such as may
be contested in good faith by appropriate proceedings and for which an adequate
reserve has been established and is maintained in accordance with GAAP. First
Sierra shall promptly notify Company, the Certificate Insurer and the Trustee
of any material challenge, contest or proceeding pending by or against First
Sierra or the First Sierra Group before any taxing authority.
(m) Non-Consolidation. First Sierra shall take all
action necessary to ensure that the Company would not be substantially
consolidated with First Sierra, such that the separate corporate existence of
First Sierra and the Company would be ignored in the event of a bankruptcy of
First Sierra. First Sierra will conduct its business in a manner consistent
with Section 4.02(c).
SECTION 4.02 Company Covenants. Company hereby covenants and
agrees with First Sierra, the Certificate Insurer and the Trustee as follows:
(a) Company Certificate. Prior to each date as of which
Leases and the interest of the Company in the Equipment subject to such Leases
are to be purchased by First Sierra pursuant to Section 3.03, Company shall
submit to First Sierra a certificate signed by the president, executive vice
president, any vice president or the treasurer of Company (a "Company
Certificate"), executed by Company and completed as to its date and the date of
this Agreement. Each Company Certificate shall operate as an assignment,
without recourse, representation, or warranty, to First Sierra of all Company's
right, title, and interest in and to such purchased Lease, Company's interest
in the related Equipment, and all security and documents relating thereto, such
assignment being an assignment outright and not for security; and upon payment
of the Reconveyance Price, First Sierra will thereupon own such Lease, such
interest in the related Equipment and all such security and documents, free of
any further obligation to Company with respect thereto. If in any enforcement
suit or legal proceeding it is held that the Servicer may not enforce a Lease
on the ground that it is not a real party in interest or holder entitled to
enforce the Lease, Company shall, at the Servicer's expense, take such steps as
the Servicer deems necessary to enforce the Lease, including bringing suit in
Company's name.
(b) Lessee's Quiet Enjoyment. Company hereby
acknowledges and agrees that its rights in the Equipment are expressly subject
to the rights of the related Lessees in such Equipment pursuant to the
applicable Leases. Company covenants and agrees that, so long as a Lessee
shall not be in default of any of the provisions of the applicable Lease,
neither Company nor any assignee of Company will disturb the Lessee's quiet and
peaceful possession of the related Equipment and the Lessee's unrestricted use
thereof for its intended purpose.
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(c) Operation of Company. Company shall be operated in
such a manner that it would not be substantively consolidated in the trust
estate of another Person (that is, such that the separate legal existence of
Company and such Person would be disregarded) and in that regard, the Company
shall:
(i) not engage in any action that would cause the
separate legal identity of the Company not to be respected, including, without
limitation, (a) holding itself out as being liable for the debts of any other
party or (b) acting other than through its duly authorized agents;
(ii) not incur, assume or guarantee any indebtedness
except for such indebtedness as may be incurred by the Company in connection
with the issuance of the Certificates or as otherwise permitted by the
Certificate Insurer;
(iii) not commingle its funds with those of any other
entity;
(iv) act solely in its name in the conduct of its
business and shall conduct its business so as not to mislead others as to the
identity of the entity with which they are concerned;
(v) maintain company records and books of account and
shall not commingle its company records and books of account with the records
and books of account of any entity;
(vi) not engage in any business or activity other than
in connection with or relating to the Articles of Incorporation and/or Bylaws;
(vii) not form, or cause to be formed, any subsidiaries;
(viii) comply with all restrictions and covenants in, and
shall not fail to comply with the corporate formalities established in, the
Articles of Incorporation and/or Bylaws;
(ix) maintain separate bank accounts;
(x) manage its day-to-day business without the
involvement of First Sierra;
(xi) maintain a separate office from that of First
Sierra;
(xii) not act as an agent of First Sierra; and
(xiii) maintain at all times two independent directors as
required by the Articles of Incorporation and/or Bylaws.
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SECTION 4.03 Transfer of Conveyed Assets. First Sierra
understands that Company intends to convey the Conveyed Assets and its rights
under this Agreement to Trustee on behalf of the Certificate Insurer and the
Certificateholders pursuant to the Pooling and Servicing Agreement. First
Sierra agrees that any such assignee of Company may exercise the rights of
Company hereunder and shall be entitled to all of the benefits of Company
hereunder to the extent provided for in such assignment.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions to Company Obligations. The
obligations of Company to accept the contribution of the Conveyed Assets on the
Closing Date shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of First Sierra
contained in this Agreement shall be true and correct on the Closing Date with
the same effect as though such representations and warranties had been made on
such date;
(b) All information concerning the Conveyed Assets
provided to Company shall be true and correct as of the Cut-Off Date in all
material respects;
(c) First Sierra shall have delivered to Company a List
of Leases as of the Cut-Off Date and shall have substantially performed all
other obligations required to be performed by the provisions of this Agreement;
(d) First Sierra shall have recorded and filed, at its
expense, any financing statement with respect to the Leases and the other
Conveyed Assets to be transferred from time to time to Company from First
Sierra pursuant to this Agreement meeting the requirements of applicable state
law in such manner in such jurisdictions as are necessary to perfect the
transfer and contribution of the Leases and the other Conveyed Assets from
First Sierra to Company, and shall deliver a file-stamped copy of such
financing statements or other evidence of such filings to Company; and
(e) All corporate and legal proceedings and all
instruments in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Company, and Company shall have
received from First Sierra copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as Company may reasonably have requested.
SECTION 5.02 Conditions to First Sierra's Obligations. The
obligations of First Sierra to convey and contribute the Conveyed Assets on the
Closing Date shall be subject to the satisfaction of the following conditions:
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<PAGE> 29
(a) All representations and warranties of Company
contained in this Agreement shall be true and correct with the same effect as
though such representations and warranties had been made on such date; and
(b) All corporate and legal proceedings and all
instruments in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to First Sierra, and First Sierra
shall have received from Company copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as First Sierra may reasonably have requested.
ARTICLE VI
TERMINATION
SECTION 6.01 Termination. The respective obligations and
responsibilities of First Sierra and Company created by this Agreement shall
terminate upon the latest of (i) the maturity or other liquidation of the last
Lease and the disposition of any amounts received upon disposition of any
Defaulted Leases and any Equipment leased thereunder; (ii) the distribution to
Company of all amounts required to be paid to it pursuant to this Agreement;
and (iii) the termination of the Pooling and Servicing Agreement.
SECTION 6.02 Effect of Termination. No termination or
rejection or failure to assume the executory obligations of this Agreement in
the bankruptcy of First Sierra or Company shall be deemed to impair or affect
the obligations pertaining to any executed contribution or executed
obligations, including, without limitation, pre-termination breaches of
representations and warranties by First Sierra or Company. Without limiting
the foregoing, prior to termination, neither the failure of Company to deliver
a Company Certificate pursuant to Section 4.02, nor the failure of First Sierra
to pay a Reconveyance Price shall render such transfer or obligation executory,
nor shall the continued duties of the parties pursuant to Article 4 or Section
7.06 of this Agreement render an executed contribution executory.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01 Amendment. This Agreement may be amended from
time to time by First Sierra and Company only with the prior written consent of
the Servicer, the Trustee and the Certificate Insurer.
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<PAGE> 30
SECTION 7.02 GOVERNING LAW. THIS AGREEMENT AND ANY AMENDMENT
HEREOF PURSUANT TO SECTION 7.01 SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
CHOICE OF LAW PRINCIPLES) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
THEREIN AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 7.03 Notices. All demands, notices, and
communications under this Agreement shall be in writing and shall be deemed to
have been duly given, made and received (i) when delivered against receipt of
registered or certified mail or upon actual receipt of registered or certified
mall, postage prepaid, return receipt requested; (ii) when delivered by courier
with appropriate evidence of receipt; or (iii) upon transmission via facsimile
or telex with appropriate evidence of receipt (a) in the case of First Sierra,
at the following address: Texas Commerce Tower 70th Floor, 600 Travis Street,
Houston, Texas 77002 and (b) in the case of Company, at the following address:
1061 East Indiantown Road, Suite 204, Jupiter, Florida 33477. Either party may
alter the address to which communications are to be sent by giving notice of
such change of address in conformity with the provisions of this Section 7.03
for giving notice and by otherwise complying with any applicable terms of this
Agreement, including, but not limited to, subsections 4.01(d) and (e).
SECTION 7.04 Severability of Provisions. If any one or more
of the covenants, agreements, provisions, or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions, or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement.
SECTION 7.05 Assignment. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may not be assigned by
First Sierra except as provided in Section 4.01(a), without the prior written
consent of Company, the Certificate Insurer and the Trustee and, except as
provided in Section 4.03, this Agreement may not be assigned by Company without
the prior written consent of First Sierra, the Certificate Insurer and the
Trustee. Whether or not expressly stated, all representations, warranties,
covenants and agreements of First Sierra, the Servicer and Company in this
Agreement, or in any document delivered by any of them in connection with this
Agreement, shall be for the benefit of, and shall be exercisable by, the
Trustee.
SECTION 7.06 Further Assurances. Each of First Sierra and
Company agrees to do such further acts and things and to execute and deliver to
the Trustee such additional assignments, agreements, powers and instruments as
are required by the Trustee or the Certificate Insurer to carry into effect the
purposes of this Agreement or to better
26
<PAGE> 31
assure and confirm unto the Trustee or the Certificate Insurer its rights,
powers and remedies hereunder.
SECTION 7.07 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of Company or First Sierra,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.
SECTION 7.08 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
SECTION 7.09 Binding Effect: Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto
and the Trustee. The Trustee, the Certificate Insurer and the
Certificateholders are intended third party beneficiaries of this Agreement.
SECTION 7.10 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior
understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 7.11 Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
SECTION 7.12 Schedules and Exhibits. The schedules and
exhibits attached hereto and referred to herein shall constitute a part of this
Agreement and are incorporated into this Agreement for all purposes.
SECTION 7.13 No Bankruptcy Petition Against Company. First
Sierra agrees that, prior to the date that is one year and one day after the
payment in full of the of the latest maturing securities issued by the Company,
it will not institute against Company, or join any other Person in instituting
against Company, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other proceedings under the laws of the United
States or any state of the United States. This Section 7.13 shall survive the
termination of this Agreement.
SECTION 7.14 General Interpretive Principles. For purposes
of this Agreement except as otherwise expressly provided or unless the context
otherwise requires:
27
<PAGE> 32
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the other
gender;
(b) accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections",
"Subsections", "paragraphs", and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, paragraphs and
other subdivisions of this Agreement;
(d) a reference to a Subsection without further reference
to a Section is a reference to such Subsection as contained in the same Section
in which the reference appears, and this rule shall also apply to paragraphs
and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
SECTION 7.15 Conspicuous. EACH OF THE PARTIES HERETO
SPECIFICALLY ACKNOWLEDGES AND AGREES THAT CERTAIN OF THE TERMS OF THIS
AGREEMENT PROVIDE FOR (A) CERTAIN WAIVERS AND (B) FOR THE ASSUMPTION BY ONE OR
MORE PARTIES OF, AND/OR THE RELEASE OF ONE OR MORE OTHER PARTIES FROM, CERTAIN
LIABILITIES THAT SUCH PARTY OR PARTIES MIGHT OTHERWISE BE RESPONSIBLE FOR UNDER
THE LAW. EACH PARTY HERETO FURTHER AGREES AND COVENANTS THAT IT WILL NOT
CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY SUCH PROVISIONS OF THIS AGREEMENT
ON THE BASIS THAT SUCH PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISIONS OR
THAT SUCH PROVISIONS ARE NOT "CONSPICUOUS."
28
<PAGE> 33
IN WITNESS WHEREOF, First Sierra and Company have caused this
Sale and Contribution Agreement to be duly executed by their respective
officers as of the day and year first above written.
FIRST SIERRA FINANCIAL, INC.
By:
--------------------------------
Name: Thomas Depping
Title: President
FIRST SIERRA RECEIVABLES II, INC.
By:
--------------------------------
Name: Sandy M. Ho
Title: Senior Vice President
29
<PAGE> 1
EXHIBIT 10.2
------------
<PAGE> 2
EXHIBIT 10.2
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $63,381,510 POLICY NUMBER: 22420
First Sierra Equipment Lease Trust 1996-2
Equipment Lease Backed Certificates, Class A
MBIA Insurance Corporation (the "Insurer"), in consideration
of the payment of the premium and subject to the terms of this Certificate
Guaranty Insurance Policy (this "Policy"), hereby unconditionally and
irrevocably guarantees to any Owner that an amount equal to each full and
complete Insured Payment will be received by Bankers Trust Company or its
successor, as trustee for the Owners (the "Trustee"), on behalf of the Owners
from the Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations
hereunder with respect to a particular Insured Payment shall be discharged to
the extent funds equal to the applicable Insured Payment are received by the
Trustee, whether or not such funds are properly applied by the Trustee.
Insured Payments shall be made only at the time set forth in this Policy, and
no accelerated Insured Payments shall be made regardless of any acceleration of
the Obligations, unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not
cover shortfalls, if any, attributable to the liability of the Trust or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference
Amount (as described below) on the Business Day following receipt on a Business
Day by the Fiscal Agent (as described below) of (i) a certified copy of the
order requiring the return of a preference payment, (ii) an opinion of counsel
satisfactory to the Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Owner
relating to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and
(iv) appropriate instruments to effect the appointment of the Insurer as agent
for such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon, New York City time, on such Business
Day, they will be deemed to be received on the following Business Day. Such
payments shall be disbursed to the receiver or trustee in bankruptcy named in
the final order of the court exercising jurisdiction on behalf of the Owner and
not to any Owner directly unless such Owner has returned principal or interest
paid on the Obligations to such receiver or trustee in bankruptcy, in which
case such payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no
later than 12:00 noon, New York City time, on the later of the Payment Date on
which the related
<PAGE> 3
Deficiency Amount is due or the third Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent") of a Notice (as described below); provided that if
such Notice is received after 12:00 noon, New York City time, on such Business
Day, it will be deemed to be received on the following Business Day. If any
such Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim hereunder, it shall be deemed not
to have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Trustee and the Trustee may submit an amended Notice.
Insured Payments due hereunder, unless otherwise stated
herein, will be disbursed by the Fiscal Agent to the Trustee on behalf of the
Owners by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such Insured Payment
and legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the
Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal
Agent or any failure of the Insurer to deposit or cause to be deposited,
sufficient funds to make payments due under this Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the
Obligations to the extent of any payment by the Insurer hereunder.
As used herein, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as
of November 1, 1996 among First Sierra Financial, Inc. as Servicer, First
Sierra Receivables II, Inc. as Depositor and the Trustee, as Trustee and
Back-up Servicer, without regard to any amendment or supplement thereto.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which the Insurer and banking institutions in New York City or in
the city in which the corporate trust office of the Trustee under the Agreement
is located are authorized or obligated by law or executive order to close.
"Deficiency Amount" means as of any Payment Date, the
Available Funds Shortfall.
"Insured Payment" means (i) as of any Payment Date any
Deficiency Amount and (ii) any Preference Amount.
2
<PAGE> 4
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A
attached hereto, the original of which is subsequently delivered by registered
or certified mail, from the Trustee specifying the Insured Payment which shall
be due and owing on the applicable Payment Date.
"Owner" means each holder of a Class A Certificate (other than
the Depositor, the Servicer or any subservicer) who, on the applicable Payment
Date, is entitled under the terms of the applicable Obligations to payment
thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent
of the Insurer may be made at the address listed below for the Fiscal Agent of
the Insurer or such other address as the Insurer shall specify in writing to
the Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th
Floor, New York New, York 10006 Attention: Municipal Registrar and Paying
Agency (Telecopy No: (212) 825-4581), or such other address as the Fiscal
Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall
be construed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on
this Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Obligations.
3
<PAGE> 5
IN WITNESS WHEREOF, the Insurer has caused this Policy to be
executed and attested this 15th day of November, 1996.
MBIA INSURANCE CORPORATION
----------------------------
President
Attest:
----------------------------
Assistant Secretary
4
<PAGE> 6
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 22420
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 22420
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of ___________ as
trustee (the "Trustee"), hereby certifies to State Street Bank and Trust
Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Certificate Guaranty Insurance Policy Number:
22420 (the "Policy") issued by the Insurer in respect of the First Sierra
Equipment Lease Trust 1996-2, Equipment Lease Backed Certificates, Class A (the
"Obligations"), that:
(i) the Trustee is the trustee under the Pooling and
Servicing Agreement dated as of November 1, 1996, among First Sierra
Financial, Inc., as Servicer, First Sierra Receivables II, Inc., as
Depositor, and the Trustee, as Trustee and Back-up Servicer;
(ii) the Available Funds Shortfall for the Payment Date
occurring on __________ (the "Applicable Payment Date") is $_________
(the "Deficiency Amount");
(iii) the amount of previously distributed payments on
the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the
Bankruptcy Code in accordance with a final nonappealable order of a
court having competent jurisdiction is $_________ (the "Preference
Amount");
(iv) the total Insured Payment due is $_______, which
amount equals the sum of the Deficiency Amount and the Preference
Amount;
A-1
<PAGE> 7
(v) the Trustee is making a claim under and pursuant
to the terms of the Policy for the dollar amount of the Insured
Payment set forth in (ii) above to be applied to the payment on the
Obligations for the Applicable Payment Date in accordance with the
Agreement and for the dollar amount of the Insured Payment set forth
in (iii) above to be applied to the payment of any Preference Amount;
and
(vi) the Trustee directs that payment of the Insured
Payment be made to the following account by bank wire transfer of
federal or other immediately available funds in accordance with the
terms of the Policy; [TRUSTEE'S ACCOUNT].
Any capitalized term used in this Notice and not otherwise
defined herein shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any
Insurance Company Or Other Person Files An Application For Insurance Or
Statement Of Claim Containing Any Materially False Information, Or Conceals For
The Purpose Of Misleading, Information Concerning Any Fact Material Thereto,
Commits A Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject
To A Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of
The Claim For Each Such Violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Notice under the Policy as of the ____ day of __________, ____.
as Trustee
By
----------------------------------------
Title
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A-2
