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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) December 17, 1998
First Sierra Receivables II, Inc.
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(Exact name of Registrant as specified in its charter)
First Sierra Receivables III, Inc.
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(Exact name of Co-Registrant as specified in its charter)
Delaware 76-0543174
Delaware 333-12199 76-0589331
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(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Incorporation) Identification No.)
c/o First Sierra Financial, Inc.
Attention: E. Roger Gebhart
600 Travis Street, Suite 7050
Houston, Texas 77002
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (713) 221-8822
No Change
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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 Notes and the Contracts
First Sierra Receivables II, Inc. and First Sierra Receivables III,
Inc. (the "Depositor" and, together with First Sierra Receivables II, Inc. (the
"Registrants") have registered issuances of an aggregate of up to $1,537,161,697
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. 333-12199) (as
amended, the "Registration Statement"). Pursuant to the Registration Statement,
the Depositor formed a trust, the First Sierra Equipment Contract Trust 1998-1,
a common law trust acting through its trustee First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Trust"), pursuant to which the Trust issued Notes under an Indenture (the
"Indenture"), attached hereto as Exhibit 4.1, dated as of December 1, 1998, by
and between the Trust, First Sierra Financial, Inc., as servicer and originator
("First Sierra," the "Servicer" and the "Originator") and Bankers Trust Company,
as indenture 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 Notes, the forms of which were filed as
Exhibits to the Registration Statement.
The Notes consist of seven classes, the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B-1 Notes, Class B-2 Notes and
Class B-3 Notes. Only the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and
Class A-4 Notes (the "Class A Notes") were issued pursuant to the Registration
Statement. The Class A-1 Notes represent the right to receive repayment of the
Initial Class A-1 Note Principal Balance ($70,687,140) of the Class A-1 Notes
and monthly interest at a rate of 5.215% per annum on the unpaid portion of such
principal amount, the Class A-2 Notes represent the right to receive repayment
of the Initial Class A-2 Note Principal Balance ($53,856,869) of the Class A-2
Notes and monthly interest at a rate of 5.490% per annum on the unpaid portion
of such principal amount, the Class A-3 Notes represent the right to receive
repayment of the Initial Class A-3 Note Principal Balance ($70,687,140) of the
Class A-3 Notes and monthly interest at a rate of 5.450% per annum on the unpaid
portion of such principal amount and the Class A-4 Notes represent the right to
receive repayment of the Initial Class A-4 Note Principal Balance ($70,687,140)
of the Class A-4 Notes and monthly interest at a rate of 5.628% 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 Notes in the Trust Property (the "Trust Property")
which secures the Class A Notes. The assets of the Trust Property will consist
of certain finance leases and commercial loans received after the close of
business on December 1, 1998 (the "Cut-Off Date") (such leases, the
"Contracts"), a security interest in the underlying equipment or property leased
thereby (the "Equipment" and, together with the Contracts, the "Receivables")
and certain other property more fully described in the Prospectus Supplement.
On December 17, 1998 (the "Closing Date"), the Depositor and certain
trusts sponsored by First Sierra transferred the Contracts and the related
Equipment to the Trust pursuant to the Receivables Transfer Agreement, dated as
of December 1, 1998 (the "Receivables Transfer Agreement"), attached hereto as
Exhibit 10.1, between First Sierra, the Depositor, Prudential Securities Credit
Corporation, First Union National Bank, Variable Funding Capital Corporation,
the Trustee and the Trust.
Principal and interest will be paid to the Class A Noteholders monthly
on the 12th day (or the next succeeding business day thereafter) of each month,
commencing January 12, 1998 (each, a "Payment Date"), as further described
herein. Interest will accrue on the Class A Notes from Payment Date to Payment
Date, or with respect to the initial Payment Date, from December 17, 1998.
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The Class A Notes 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 note insurance policy (the "Note
Insurance Policy") to be issued by MBIA Insurance Corporation and attached
hereto as Exhibit 4.2.
As of the Closing Date, the Contracts possessed the characteristics
described in the Prospectus dated November 25, 1998 and the Prospectus
Supplement dated December 10, 1998, filed pursuant to Rule 424(b)(2) 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 December 10, 1998,
between First Sierra Financial, Inc. and Wheat First
Securities, Inc., doing business as First Union
Capital Markets, a division of Wheat First
Securities, Inc., as Representative of the Several
Underwriters.
4.1 Indenture, dated as of December 1, 1998, among First
Sierra Equipment Contract Trust 1998-1, a common law
trust acting through its trustee, First Union Trust
Company, National Association, not in its individual
capacity but solely as Owner Trustee, First Sierra
Financial, Inc., as servicer and originator, and
Bankers Trust Company, as trustee.
4.2 Note Insurance Policy of MBIA Insurance Corporation.
8.1 Opinion of Dewey Ballantine LLP regarding tax
matters, dated as of December 17, 1998.
10.1 Receivables Transfer Agreement, dated as of December
1, 1998, among First Sierra Financial, Inc., First
Sierra Receivables III, Inc., Prudential Securities
Credit Corporation, First Union National Bank,
Variable Funding Capital Corporation, Bankers Trust
Company and First Sierra Equipment Contract Trust
1998-1, a common law trust acting through its
trustee, First Union Trust Company, National
Association, not in its individual capacity but
solely as Owner Trustee.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their respective
behalf by the undersigned hereunto duly authorized.
FIRST SIERRA RECEIVABLES II, INC.
By: /s/ Thomas J. Depping
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Name: Thomas J. Depping
Title: President
FIRST SIERRA RECEIVABLES III, INC.
By: /s/ Thomas J. Depping
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Name: Thomas J. Depping
Title: President
Dated: December 17, 1998
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EXHIBIT INDEX
1.1 Underwriting Agreement, dated December 10, 1998, between First
Sierra Financial, Inc. and Wheat First Securities, Inc., doing
business as First Union Capital Markets, a division of Wheat
First Securities, Inc., as Representative of the Several
Underwriters.
4.1 Indenture, dated as of December 1, 1998, among First Sierra
Equipment Contract Trust 1998-1, a common law trust acting
through its trustee, First Union Trust Company, National
Association, not in its individual capacity but solely as
Owner Trustee, First Sierra Financial, Inc., as servicer and
originator, and Bankers Trust Company, as trustee.
4.2 Note Insurance Policy of MBIA Insurance Corporation.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
as of December 17, 1998.
10.1 Receivables Transfer Agreement, dated as of December 1, 1998,
among First Sierra Financial, Inc., First Sierra Receivables
III, Inc., Prudential Securities Credit Corporation, First
Union National Bank, Variable Funding Capital Corporation,
Bankers Trust Company and First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through its trustee,
First Union Trust Company, National Association, not in its
individual capacity but solely as Owner Trustee.
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EXHIBIT 1.1
December 10, 1998
Wheat First Securities, Inc.,
doing business as First Union Capital Markets,
a division of Wheat First Securities, Inc.
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0610
as representative of the several Underwriters
First Sierra Financial, Inc. (the "Company") hereby confirms its
agreement to sell certain equipment contract backed notes to Wheat First
Securities, Inc., doing business as First Union Capital Markets, a division of
Wheat First Securities, Inc. (the "Representative"), Prudential Securities
Incorporated ("Prudential") and Bear, Stearns & Co. Inc. ("Bear Stearns" and
together with the Representative and Prudential, the "Underwriters") as
described herein. The notes will be secured by the assets of a trust consisting
primarily of a segregated pool (the "Receivable Pool") of certain finance leases
and commercial loans (the "Contracts"), the security interest of the Company, as
originator (in such capacity, the "Originator") or its affiliate, which was
acquired by the Originator or such affiliate at the time of its origination or
purchase of the related Contracts in the underlying equipment or other property
servicing such Contracts (collectively, the "Equipment," together with the
Contracts, the "Receivables") and certain other property. First Sierra Equipment
Contract Trust 1998-1, a common law trust acting through First Union Trust
Company, National Association, not in its individual capacity but solely as
Owner Trustee (the "Issuer" or the "Trust"), established pursuant to the Trust
Agreement dated as of December 1, 1998 (the "Trust Agreement") between the
Company and First Union Trust Company, National Association, not in its
individual capacity but solely as owner trustee (the "Owner Trustee"), pursuant
to the Indenture to be dated as of December 1, 1998 (the "Indenture"), among the
Trust, the Company, as Originator and as servicer (in such capacity, the
"Servicer") and Bankers Trust Company, as indenture trustee (the "Indenture
Trustee"), will pledge the Receivables to the Indenture Trustee and issue the
Class A Notes as described herein.
On or prior to the date of issuance of the Class A Notes, the Company
will obtain the certificate guaranty insurance policy (the "Policy") 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 Notes full and complete payment of all amounts payable on the Class A Notes.
All capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Indenture. The phrase "This Agreement"
shall refer to this letter by the Company to the Underwriters as agreed to and
accepted by the Underwriters as of the date hereof.
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1. Securities. The securities will be issued in classes as follows: (i)
four classes of senior notes consisting of: (a) 5.215% Equipment Contract-Backed
Notes, Class A-1 (the "Class A-1 Notes"), 5.490% Equipment Contract-Backed
Notes, Class A-2 (the "Class A-2 Notes"), 5.450% Equipment Contract-Backed
Notes, Class A-3 (the "Class A-3 Notes") and 5.628% Equipment Contract Backed
Notes, Class A-4 (the "Class A-4 Notes and collectively with the Class A-1
Notes, the Class A-2 Notes and the Class A-3 Notes, the Class A Notes (the
"Class A Notes"); (ii) three classes of notes subordinate to the Class A Notes
(the "Class B-1 Notes," the "Class B-2 Notes" and the "Class B-3 Notes,"
collectively, the "Class B Notes"); and (iii) a class of certificates
subordinate to the Class A Notes, the Class B-1 Notes, the Class B-2 Notes and
the Class B-3 Notes (the "Trust Certificate"). The Class B Notes and the Trust
Certificate are not being sold hereby.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants with, the Underwriters that:
A. The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (No. 333-12199) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of
Equipment Contract Backed Securities (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)(x) 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 the date
hereof to the prospectus dated November 25, 1998 relating to the Class A Notes
and the method of distribution thereof and has previously advised the
Underwriters of all further information (financial and other) with respect to
the Class A Notes 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 November 25, 1998, 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 "Basic Prospectus"; such
supplement dated the date hereof to the Basic 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 Basic 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 Class A Notes 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 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
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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
Underwriters specifically for use in connection with the preparation of the
Registration Statement and the Prospectus.
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
Contract.
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
Indenture, the Servicing Agreement dated as of December 1, 1998 (the "Servicing
Agreement") among the Company, as Servicer and as Originator, the Issuer and the
Indenture Trustee, the Receivables Transfer Agreement, the Insurance Agreement
dated as of December 1, 1998 (the "Insurance Agreement") among the Insurer, the
Company, in its capacities as Servicer and as Originator, the Issuer, and the
Owner Trustee, the Indemnification Agreement dated December 10, 1998 (the
"Indemnification Agreement" and together with this Agreement, the Indenture, the
Servicing Agreement, the Receivables Transfer Agreement and the Insurance
Agreement, the "Agreements") among the Company, in its capacity as Originator,
the Issuer, the Insurer and the Underwriters, or the Class A Notes; (ii) seeking
to prevent the issuance of the Class A Notes or the consummation of any of the
transactions contemplated by the Agreements; (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, the Agreements or
the Class A Notes; or (iv) which may affect adversely the federal income tax
attributes of the Class A Notes as described in the Prospectus.
E. The execution and delivery by the Company of the Agreements 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
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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 Class A Notes. 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 Agreements or (ii)
the business, operations, results of operations, financial position, income,
properties or assets of the Company.
F. This Agreement has been duly executed and delivered by the Company,
and the other Agreements 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 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 Class A Notes 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 Indenture and sold to the Underwriters as
provided herein, will be validly issued and outstanding and entitled to the
benefits of the Indenture.
H. On 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 Servicing Agreement and the Indenture are hereby made to the Underwriters as
though set out herein, and at the dates specified therein, 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 the Agreements or the execution and issuance of
the Class A Notes 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
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earnings, business or operations of the Company or its subsidiaries, taken as a
whole, from September 30, 1998.
L. The Agreements will conform in all material respects to the
descriptions thereof, if any, 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 Class A Notes for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
3. Agreements of the Underwriters. Each Underwriter, severally and not
jointly, agrees with the Company that upon the execution of this Agreement and
authorization by each Underwriter of the release of the Class A Notes, each
Underwriter shall offer the Class A Notes for sale upon the terms and conditions
set forth in the Prospectus as amended or supplemented in the amounts set forth
in Annex A hereto.
4. Purchase, Sale and Delivery of the Class A Notes. The Company hereby
agrees, subject to the terms and conditions hereof, to sell the Class A Notes to
the Underwriters, who, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, hereby
severally and not jointly agree to purchase the principal amount of the Class A
Notes set forth in Annex A hereto. At the time of issuance of the Class A Notes,
the Receivables will be transferred by the Sellers, at the direction of the
Company, to the Trust pursuant to the Receivables Transfer Agreement.
The Class A Notes to be purchased by each Underwriter will be delivered
by the Company to each Underwriter (which delivery shall be made through the
facilities of The Depository Trust Company ("DTC")) against payment of the
purchase price therefor, equal to $247,169,088.46, 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 December 17, 1998, or
at such other time thereafter as the Underwriters and the Company determine
(such time being herein referred to as the "Closing Date"). The Class A Notes
will be prepared in definitive form and in such authorized denominations as each
Underwriter may request, registered in the name of Cede & Co., as nominee of
DTC.
The Company agrees to have the Class A Notes available for inspection
and review by the Underwriters 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
Underwriters that:
A. The Company will promptly advise each Underwriter and its counsel
(i) when any amendment to the Registration Statement shall have become
effective; (ii) of any request
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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 Notes 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 for the Class A Notes unless the Company has furnished each 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 such
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 each Underwriter, without charge,
executed copies of the Registration Statement (including exhibits thereto) and,
so long as delivery of a Prospectus by the Underwriters 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 Underwriters may
reasonably request. The Company will pay the expenses of printing all offering
documents relating to the offering of the Class A Notes.
D. As soon as practicable, but not later than sixteen months after the
effective date of the Registration Statement, the Company will make generally
available to Class A Noteholders an earnings statement covering a period of at
least twelve 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. So long as any of the Class A Notes are outstanding, the Company
will cause to be delivered to each Underwriter (i) all documents required to be
distributed to the Class A Noteholders and (ii) from time to time, any other
information filed with any government or regulatory authority that is otherwise
publicly available, as any of the Underwriters may reasonably request.
F. The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses in
connection with the
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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 each Underwriter incurred
in connection with (i) the issuance and delivery of the Class A Notes; (ii)
preparation of all documents specified in this Agreement; (iii) any fees and
expenses of the Indenture Trustee; (iv) any fees and expenses of the Owner
Trustee; (v) any fees and expenses of the Insurer; and (vi) any fees charged by
investment rating agencies for rating the Class A Notes.
G. The Company agrees that, so long as any of the Class A Notes shall
be outstanding, it will deliver or cause to be delivered to each Underwriter (i)
the annual statement as to compliance delivered to the Indenture Trustee
pursuant to the Servicing Agreement; (ii) the annual statement of a firm of
independent public accountants furnished to the Indenture Trustee pursuant to
the Servicing Agreement as soon as such statement is furnished to the Company;
and (iii) any information and reports required to be delivered by the Servicer
pursuant to Article 4 of the Servicing Agreement.
H. The Company will enter into the Agreements and all related
agreements on or prior to the Closing Date.
I. The Company will endeavor to qualify the Class A Notes for sale to
the extent necessary under any state securities or Blue Sky laws in any
jurisdictions as may be reasonably requested by the Underwriters, 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 Notes for investment under the laws of such
jurisdictions as the Underwriters may reasonably designate, if any.
6. Conditions of the Underwriters' Obligation. The obligation of each
Underwriter to purchase and pay for the Class A Notes 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 Servicing Agreement and the Indenture 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 Underwriters shall have received the Indenture and the Class A
Notes in form and substance satisfactory to the Underwriters, duly executed by
all signatories required pursuant to the respective terms thereof.
C. The Underwriters shall have received the favorable opinion of Dewey
Ballantine LLP, counsel to the Company with respect to the following items,
dated the Closing Date, to the effect that:
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(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 each of the Agreements. 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 each of the Agreements.
(2) Each of the Agreements has been duly and validly
authorized, executed and delivered by the Company, all requisite
corporate action having been taken with respect thereto, and each
constitutes the valid, legal and binding agreement of the Company, and
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 Class A Notes nor the execution, delivery or
performance by the Company of, the Agreements (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
certificate of incorporation or bylaws of the Company; (ii) to the best
of such counsel's knowledge, any term or provision of any material
agreement, contract, instrument or indenture, to which the Company is a
party or is bound; or (iii) to the best of such counsel's knowledge,
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 or upon
the Class A Notes, except as otherwise contemplated by the Indenture.
(4) 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
Agreements, or the offer, issuance, sale or delivery of the Class A
Notes or the consummation of any other transaction contemplated thereby
by the Company, except such which have been obtained.
(5) 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 Agreements or the Class A Notes; (ii)
seeking to prevent the issuance of the Class A Notes or the
consummation of any of the transactions contemplated by the Agreements;
or (iii) which would materially and adversely affect the performance by
the Company of obligations under, or the validity or enforceability of,
the Class A Notes or the Agreements.
(6) Except as to any financial or statistical data contained
in the Registration Statement, 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.
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(7) 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 Class A Notes (including the Prospectus), and has not
initiated or threatened any proceeding for that purpose.
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 Indenture 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 Underwriters shall have received a letter from Arthur Andersen,
dated on or before the Closing Date, in form and substance satisfactory to the
Underwriters and counsel for the Underwriters, to the effect that they have
performed certain specified procedures requested by the Underwriters with
respect to the information set forth in the Prospectus and certain matters
relating to the Company.
E. The Class A-1 Notes shall have been rated "P-1" by Moody's Investors
Service, Inc. ("Moody's"), "A-1+" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"), "F1+/AAA" by Fitch IBCA,
Inc. ("Fitch") and "D-1+" by Duff & Phelps Credit Rating Co. ("DCR") and the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes shall have been
rated "Aaa" by Moody's and "AAA" by S&P, Fitch and DCR and none of such ratings
shall have been rescinded. The Underwriters and their counsel shall have
received copies of any opinions of counsel supplied to the rating organizations
relating to any matters with respect to the Notes. Any such opinions shall be
dated the Closing Date and addressed to the Underwriters or accompanied by
reliance letters to the Underwriters or shall state that the Underwriters may
rely upon them.
F. The Underwriters 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 and the Agreements
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, as of the Closing Date, and in the other Agreements and in
all related Agreements, as of the date specified in such Agreements,
are true and correct, and the Company has 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 Agreements in any material way; and no merger,
liquidation, dissolution or bankruptcy of the Company is pending or
contemplated;
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(3) the information contained in the Registration Statement
relating to the Company and the Receivables 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 List of Contracts
required to be furnished pursuant to the Receivables Transfer 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
December 1, 1998, and no such amendment has been authorized. No event
has occurred since November 16, 1998, which has affected the good
standing of the Company under the laws of the State of Delaware;
(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, 1998; and
(7) each person who, as an officer or representative of the
Company, signed or signs the Registration Statement, the Agreements 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 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. There shall not have 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, 1998, of (A) the
Company its subsidiaries and affiliates or (B) the Insurer, that is in the
Underwriters' judgment material and adverse and that makes it in the
Underwriters' judgment impracticable to market the Class A Notes on the terms
and in the manner contemplated in the Prospectus.
H. The Policy relating to the Class A Notes 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.
I. The Underwriters 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 Underwriters, to the effect that:
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<PAGE> 11
(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
Policy and perform its obligations under the Policy 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 Policy,
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 Policy has
been duly executed and is the valid and binding obligation of the
Insurer enforceable in accordance with its terms except that the
enforcement of the Policy 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;
(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 Policy; to the extent required by applicable
legal requirements that would adversely affect the validity or
enforceability of the Policy, the form of the 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 Policy constitutes 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 NOTE
INSURANCE POLICY AND THE NOTE INSURER" in the Prospectus, insofar as
such statements constitute a description of the Policy, accurately
summarizes the Policy.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Company, the Indenture
Trustee, the 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.
J. 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
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<PAGE> 12
rating accorded the Insurer's claims paying ability by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of the Act.
K. 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 Policy, 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 Policy, the Insurance Agreement or
the Indemnification Agreement;
(2) each person who as an officer or representative of the
Insurer, signed or signs the Policy, 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 NOTE INSURANCE POLICY AND THE NOTE 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 Policy or the ability of
the Insurer to meet its payment obligations under the Policy;
(4) the tables regarding the Insurer's capitalization set
forth in the Prospectus under the heading "THE NOTE INSURANCE POLICY
AND THE NOTE INSURER" presents fairly the capitalization of the Insurer
as of September 30, 1998;
(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
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, 1997 and December 31, 1996 and for the three years ended
December 31, 1997, prepared in accordance with generally accepted
accounting principles, included in the Annual Report on Form 10-K of
MBIA Inc., for the year ended December 31, 1997, and the consolidated
financial statements of the Insurer and its subsidiaries as of
September 30, 1998 and for the nine-month periods ended September 30,
1998 and September 30, 1997 included in the Quarterly Report on Form
10-Q of MBIA Inc. for the period ending September 30, 1998,
incorporated by referenced into the Prospectus, fairly present in all
material respects the financial
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<PAGE> 13
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 September 30,
1998, 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.
L. The Underwriters shall have received a favorable opinion of counsel
to the Indenture Trustee, dated the Closing Date and in form and substance
satisfactory to the Underwriters, to the effect that:
(1) the Indenture 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 Indenture;
(2) each of (i) the Indenture, (ii) the Servicing Agreement
and (iii) the Insurance Agreement has been duly authorized, executed
and delivered by the Indenture Trustee and each constitutes the legal,
valid and binding obligation of the Indenture Trustee, enforceable
against the Indenture Trustee in accordance with its respective 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 Indenture 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 Indenture Trustee in connection with its execution and delivery
of the Indenture, the Servicing Agreement or the Insurance Agreement or
the performance of its obligations thereunder;
(4) the Notes have been duly executed, authenticated and
delivered by the Indenture Trustee and assuming delivery and payment
are validly issued therefor and outstanding and are entitled to the
benefits of the Indenture; and
(5) the execution and delivery of, and performance by the
Indenture Trustee of its obligations under, the Indenture, the
Servicing Agreement or the Insurance Agreement do not conflict with or
result in a violation of any statute or regulation applicable to the
Indenture Trustee, or the charter or bylaws of the Indenture Trustee,
or to the best knowledge of such counsel, any governmental authority
having jurisdiction
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<PAGE> 14
over the Indenture Trustee or the terms of any indenture or other
agreement or instrument to which the Indenture 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 Indenture
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 Indenture Trustee.
M. The Underwriters shall have received from the Indenture Trustee a
certificate, signed by the president, a senior vice president or a vice
president of the Indenture Trustee, dated the Closing Date, to the effect that
each person who, as an officer or representative of the Indenture Trustee,
signed or signs the Notes, the Indenture, the 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 Indenture 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.
N. The Underwriters shall have received a favorable opinion of counsel
to the Owner Trustee, dated the Closing Date and in form and substance
satisfactory to the Underwriters, to the effect that:
(1) The Owner Trustee is duly incorporated, validly existing
and in good standing as a banking corporation under the laws of the
State of Delaware.
(2) The Owner Trustee has the power and authority to execute,
deliver and perform the Trust Agreement, the Receivables Transfer
Agreement, the Servicing Agreement and the Indenture (collectively, the
"Owner Trustee Agreements").
(3) Each of the Owner Trust Agreements has been duly
authorized, executed and delivered by the Owner Trustee and constitutes
a legal, valid and binding obligation of the Owner Trustee, enforceable
against the Owner Trustee, in accordance with its terms.
(4) To the best of counsel's knowledge, without independent
investigation, neither the execution or delivery by the Owner Trustee
of the Owner Trustee Agreements nor the compliance by the Owner Trustee
with any of the terms thereof or consummation of the transactions
contemplated thereby requires the consent or approval of, the giving of
notice to, the registration with, or the taking of any action with
respect to, any governmental authority or agency under the laws of the
State of Delaware.
(5) Neither the execution, delivery and performance by the
Owner Trustee of the Owner Trustee Agreements, nor the consummation of
the transactions contemplated thereby, nor compliance with the terms
thereof, will violate or result in a breach of, or constitute a default
under the provisions of such Owner Trustee Agreements or the articles
of association or by-laws of the Owner Trustee or, to the best of
counsel's knowledge, without independent investigation, any law, rule
or regulation of the State of Delaware applicable to the Owner Trustee.
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O. The Underwriters shall have received from the Owner Trustee a
certificate, signed by the president, a senior vice president or a vice
president of the Owner Trustee, dated the Closing Date, to the effect that each
person who, as an officer or representative of the Owner Trustee, signed or
signs the Certificates, the Owner Trustee Agreements or any other document
delivered pursuant hereto, on the date hereof or on the Closing Date, in
connection with the transactions described in the Indenture 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.
P. The Underwriters shall have received from Dewey Ballantine LLP,
special counsel to the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Class A Notes, the Prospectus
and such other related matters as the Underwriters shall reasonably require.
Q. The Underwriters and their counsel shall have received copies of any
opinions of counsel to the Company or the Indenture Trustee supplied to the
Indenture Trustee relating to matters with respect to the Notes, the formation
of the Trust or the acquisition of the Receivables. Any such opinions shall be
satisfactory to the Underwriters in form and substance.
R. The Underwriters shall have received an opinion from Dewey
Ballantine LLP, special tax counsel to the Company to the effect that the
statements in the Prospectus Supplement under the heading "CERTAIN FEDERAL
INCOME TAX CONSIDERATIONS" accurately describe the material federal income tax
consequences to the holders of the Class A Notes.
S. The Underwriters shall have received such further information,
certificates and documents as the Underwriters may reasonably have requested not
fewer than three (3) full business days prior to the Closing Date.
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 Underwriters and their counsel, this Agreement and all
obligations of the Underwriters hereunder, may be canceled on, or at any time
prior to, the Closing Date by the Underwriters. Notice of 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 Notes provided for herein is
not consummated by reason of a default by the Company in its obligations
hereunder, then the Company will reimburse the Underwriters, upon demand, for
all reasonable out-of-pocket expenses (including, but not limited to, the
reasonable fees and expenses of counsel for the Underwriters) that shall have
been incurred by it in connection with its investigation with regard to the
Company and the Class A Notes and the proposed purchase and sale of the Class A
Notes.
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8. Indemnification and Contribution.
A. Regardless of whether any Class A Notes are sold, the Company will
indemnify and hold harmless each Underwriter, each of their respective officers
and directors and each person who controls each 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 Basic 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 the Company shall not 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
Company by such Underwriter specifically for use in connection with the
preparation thereof.
B. Regardless of whether any Class A Notes are sold, each Underwriter,
severally and not jointly, 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, 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 Basic 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 such 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
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<PAGE> 17
A, B and E of this Section 8, 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 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 Underwriters in the case of parties
indemnified pursuant to paragraph A of this Section 8 and by the Company in the
case of parties indemnified pursuant to paragraphs B and E of this Section 8.
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. Each Underwriter agrees, severally and not jointly, to provide the
Company no later than the date on which the Prospectus Supplement is required to
be filed pursuant to Rule 424 with a copy of any Derived Information (defined
below) for filing with the Commission on Form 8-K.
E. Each Underwriter agrees, jointly and not severally, assuming all
Company-Provided Information (defined below) is accurate and complete in all
material respects, to indemnify and hold harmless the Company, its respective
officers and directors and each person who controls the Company within the
meaning of the Securities Act or the Exchange Act against any and all losses,
claims, damages
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or liabilities, joint or several, to which they may become subject under the
Securities Act or the Exchange 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 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. The several obligations of each Underwriter under this
Section 8(E) shall be in addition to any liability which each Underwriter may
otherwise have.
The procedures set forth in Section 8(C) shall be equally applicable to
this Section 8(E).
F. For purposes of this Section 8, the term "Derived Information" means
such portion, if any, of the information delivered to the Companies 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.
"Company-Provided Information" means any computer tape furnished to the
Underwriters by the Company concerning the assets comprising the Trust.
G. 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 Company and each Underwriter from the sale of the Class A Notes 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 each 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 each
Underwriter shall be deemed to be in such proportion so that each Underwriter is
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 Notes underwritten by such Underwriter
over the aggregate purchase price of such Class A Notes specified in Section 4
of this Agreement and the related Prospectus Supplement, and the denominator of
which is (y) the Aggregate Resale Price of such Class A Notes, 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 Notes 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 Notes
so purchased), determined on the basis of such principal amounts, paid to the
Underwriter by all subsequent purchasers that purchased the Class A Notes on or
prior to such date of determination. The relative fault of the Company and each
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
18
<PAGE> 19
fact relates to information supplied by the Company or by any of the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
H. The Company and each 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 G of this Section 8. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph G of this Section 8
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.
Notwithstanding the provisions of this Section 8, none of the Underwriters shall
be required to contribute any amount by which the Aggregate Resale Price exceeds
the amount of any damages that such Underwriter has otherwise been required to
pay by reason of any untrue or alleged untrue statement or omission or alleged
omission.
I. The Company and each Underwriter each expressly waive, 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.
J. 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 Underwriters under this Section 8 shall be in addition to any liability
that the Underwriters 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 any of the Underwriters be liable
for double indemnification.
9. Information Supplied by Underwriters. The statements set forth on
the front cover page of the Prospectus Supplement regarding market-making and
under the heading "Method of Distribution" in the Prospectus Supplement (to the
extent such statements relate to the Underwriter) constitute the only
information furnished by the Underwriters to the Company for the purposes of
Sections 2(B) and 8(A) hereof. Each Underwriter confirms that such statements
(to such extent) are correct.
10. Notices. All communications hereunder shall be in writing and, if
sent to the Underwriters, shall be mailed or delivered or telecopied and
confirmed in writing to Wheat First Securities, Inc., doing business as First
Union Capital Markets, a division of Wheat First Securities, Inc., One First
Union Center, TW-06, Charlotte, North Carolina 28288, Attention: Leah Torstrick;
and, if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed in writing to First Sierra Financial, Inc., 600 Travis Street, Suite
7050, Houston, Texas 77002, Attention: Roger Gebhart.
11. Survival. All representations, warranties, covenants and agreements
of the Company contained herein or in agreements or certificates delivered
pursuant hereto, the
19
<PAGE> 20
agreements of the Underwriters and the Company contained in Section 8 hereof,
and the agreement of the Underwriters 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 Underwriters 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 Class A
Notes. The provisions of Sections 5, 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
12. Termination. The Underwriters 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, the New York Stock Exchange or
the American Stock Exchange, (b) trading of any securities 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 Underwriters' 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 Underwriters' reasonable judgment impractical to market the Class A Notes.
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 Underwriters) and Sections 7 and 8 hereof shall at all times be effective.
This Agreement will inure to the benefit of and be binding upon the
signatories hereto and their respective successors and assigns (which successors
and assigns do not include any person purchasing a Class A Note from the
Underwriters), 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.
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
BOROUGH OF MANHATTAN, NEW YORK CITY, 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 signatories hereto.
20
<PAGE> 21
17. Default of Underwriters. If any of the Underwriters defaults
in its obligations to purchase the Class A Notes offered to it hereunder (such
Underwriter, the "Defaulting Underwriter"), then the remaining Underwriters (the
"Performing Underwriters") shall have the option, but not the obligation, to
purchase all, but not less than all, of the Class A Notes offered to the
Defaulting Underwriter. If a Performing Underwriter elects not to exercise such
option, then this Agreement will terminate without liability on the part of such
Performing Underwriter. Nothing contained herein shall relieve the Defaulting
Underwriter from any and all liabilities to the Company and the Performing
Underwriters resulting from the default of the Defaulting Underwriter.
21
<PAGE> 22
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
FIRST SIERRA FINANCIAL, INC.
By: /s/ E. Roger Gebhart
--------------------------------
Name: E. Roger Gebhart
Title: Senior Vice President
Agreed to and Accepted by:
(as of the date hereof)
WHEAT FIRST SECURITIES, INC.,
doing business as FIRST UNION CAPITAL MARKETS,
a division of WHEAT FIRST SECURITIES, INC.
as Representative of the Several Underwriters
By: /s/ Curtis Arledge
--------------------------
Name: Curtis Arledge
Title: Managing Director
[Underwriting Agreement Signature Page]
<PAGE> 23
Annex A
Underwriting
Class A-1 Notes
Principal
Underwriter Percentage Amount
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $35,343,570
Prudential Securities Incorporated 40% $28,274,856
Bear, Stearns & Co. Inc. 10% $ 7,068,714
TOTAL 100% $70,687,140
Class A-2 Notes
Principal
Underwriter Percentage Amount
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $26,928,435
Prudential Securities Incorporated 40% $21,542,748
Bear, Stearns & Co. Inc. 10% $ 5,385,687
TOTAL 100% $53,856,869
Class A-3 Notes
Principal
Underwriter Percentage Amount
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $26,255,224
Prudential Securities Incorporated 40% $21,004,179
Bear, Stearns & Co. Inc. 10% $ 5,251,045
TOTAL 100% $52,510,447
Class A-4 Notes
Principal
Underwriter Percentage Amount
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $35,343,570
Prudential Securities Incorporated 40% $28,274,856
Bear, Stearns & Co. Inc. 10% $ 7,068,714
TOTAL 100% $70,687,140
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
INDENTURE
by and between
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1, A COMMON LAW TRUST ACTING
THROUGH ITS TRUSTEE, FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE
as Issuer,
FIRST SIERRA FINANCIAL, INC
as Servicer and Originator
and
BANKERS TRUST COMPANY
as the Indenture Trustee
----------------------------
Dated as of December 1, 1998
----------------------------
First Sierra Equipment Contract Trust 1998-1
Equipment Contract-Backed Notes
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I. DEFINITIONS.........................................................................................................1
Section 1.01 Definitions....................................................................................1
Section 1.02 Incorporation by Reference of the Trust Indenture Act..........................................1
Section 1.03 General Interpretive Principles................................................................1
Section 1.04 Conflict with TIA..............................................................................2
ARTICLE II. PLEDGE OF INITIAL PLEDGED PROPERTY; ORIGINAL ISSUANCE OF NOTES AND RESIDUAL CLASS..................................2
Section 2.01 Pledge of Pledged Property.....................................................................2
Section 2.02 Indenture Trustee to Act as Custodian..........................................................3
Section 2.03 Conditions to Closing..........................................................................3
Section 2.04 Acceptance by Indenture Trustee................................................................4
Section 2.05 Liabilities of the Trust and Parties to this Indenture; Limitations Thereon....................5
Section 2.06 Intended Tax Characterization..................................................................5
Section 2.07 Treasury Securities............................................................................6
ARTICLE III. ACCOUNTS; ALLOCATION AND APPLICATION OF THE TRUST FUND...........................................................6
Section 3.01 Collection Account.............................................................................6
Section 3.02 Investment of Monies Held in the Accounts; Subaccounts.........................................7
Section 3.03 The Note Insurance Policy......................................................................7
Section 3.04 Disbursements From Collection Account..........................................................8
Section 3.05 Statements to Noteholders.....................................................................12
Section 3.06 Compliance With Withholding Requirements......................................................15
ARTICLE IV. REMOVAL OF NON-CONFORMING PLEDGED PROPERTY; SUBSTITUTION OF CONTRACTS.............................................15
Section 4.01 Removal of Non-Conforming Pledged Property....................................................15
Section 4.02 Substitution of Contracts.....................................................................15
Section 4.03 Release of Trust Property.....................................................................16
ARTICLE V. THE NOTES..........................................................................................................17
Section 5.01 The Notes.....................................................................................17
Section 5.02 Initial Issuance of Notes.....................................................................19
Section 5.03 Registration of Transfer and Exchange of Notes................................................20
Section 5.04 Mutilated, Destroyed, Lost or Stolen Notes....................................................21
Section 5.05 Persons Deemed Owners.........................................................................21
Section 5.06 Access to List of Noteholders' Names and Addresses............................................21
Section 5.07 Acts of Noteholders...........................................................................22
Section 5.08 No Proceedings................................................................................22
</TABLE>
i
<PAGE> 3
<TABLE>
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<S> <C>
ARTICLE VI. THE TRUST.........................................................................................................22
Section 6.01 Liability of the Trust........................................................................22
Section 6.02 Limitation on Liability of the Trust..........................................................22
Section 6.03 Indemnity for Liability Claims................................................................23
Section 6.04 Liabilities...................................................................................23
Section 6.05 [Reserved.]...................................................................................23
Section 6.06 Annual Statement as to Compliance.............................................................23
Section 6.07 Payment of Principal and Interest.............................................................23
Section 6.08 Maintenance of Office or Agency...............................................................24
Section 6.09 Money for Payments to be Held in Trust........................................................24
Section 6.10 Existence.....................................................................................25
Section 6.11 Protection of Trust Property..................................................................26
Section 6.12 Performance of Obligations; Servicing of Receivables..........................................26
Section 6.13 Negative Covenants............................................................................27
Section 6.14 Trust May Consolidate, Etc. Only on Certain Terms.............................................28
Section 6.15 Successor or Transferee.......................................................................29
Section 6.16 No Other Business.............................................................................29
Section 6.17 No Borrowing..................................................................................30
Section 6.18 Guarantees, Loans, Advances and Other Liabilities.............................................30
Section 6.19 Capital Expenditures..........................................................................30
Section 6.20 Compliance with Laws..........................................................................30
Section 6.21 Further Instruments and Acts..................................................................30
ARTICLE VII. THE INDENTURE TRUSTEE............................................................................................30
Section 7.01 Duties of Indenture Trustee...................................................................30
Section 7.02 Eligible Investments..........................................................................32
Section 7.03 Indenture Trustee's Assignment of Contracts...................................................32
Section 7.04 Certain Matters Affecting the Indenture Trustee...............................................33
Section 7.05 Indenture Trustee Not Liable for Notes or Contracts...........................................34
Section 7.06 Indenture Trustee May Own Notes...............................................................35
Section 7.07 Indenture Trustee's Fees and Expenses.........................................................35
Section 7.08 Eligibility Requirements for Indenture Trustee................................................36
Section 7.09 Preferential Collection of Claims Against Issuer..............................................36
Section 7.10 Resignation or Removal of Indenture Trustee...................................................36
Section 7.11 Successor Indenture Trustee...................................................................37
Section 7.12 Merger or Consolidation of Indenture Trustee..................................................38
Section 7.13 Appointment of Co-Indenture Trustee or Separate Indenture Trustee.............................38
Section 7.14 Indenture Trustee May Enforce Claims Without Possession of Note...............................40
Section 7.15 Suits for Enforcement.........................................................................40
Section 7.16 Undertaking for Costs.........................................................................40
Section 7.17 Representations and Warranties of Indenture Trustee...........................................40
Section 7.18 Tax Returns...................................................................................41
</TABLE>
ii
<PAGE> 4
<TABLE>
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ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES.....................................................................................41
Section 8.01 Events of Default.............................................................................41
Section 8.02 Acceleration of Maturity, Rescission and Annulment............................................42
Section 8.03 Remedies......................................................................................42
Section 8.04 Notice of Event of Default....................................................................43
Section 8.05 Exercise of Power by Indenture Trustee........................................................43
Section 8.06 Indenture Trustee May File Proofs of Claim....................................................43
Section 8.07 Allocation of Money Collected.................................................................44
Section 8.08 Waiver of Events of Default...................................................................45
Section 8.09 Limitation On Suits...........................................................................45
Section 8.10 Unconditional Right of Noteholders to Receive Principal and Interest..........................46
Section 8.11 Restoration of Rights and Remedies............................................................46
Section 8.12 Rights and Remedies Cumulative................................................................46
Section 8.13 Delay or Omission Not Waiver..................................................................46
Section 8.14 Control by Controlling Parties................................................................47
Section 8.15 Sale of Pledged Property......................................................................47
Section 8.16 Action on Notes...............................................................................47
ARTICLE IX. TERMINATION.......................................................................................................48
Section 9.01 Termination of Obligations and Responsibilities...............................................48
Section 9.02 Optional Redemption of Notes; Final Disposition of Funds......................................48
ARTICLE X. Noteholders' Lists and Reports.....................................................................................49
Section 10.01 Trust To Furnish To Indenture Trustee Names and Addresses of Noteholders......................49
Section 10.02 Preservation of Information; Communications to Noteholders....................................50
Section 10.03 Reports by Trust..............................................................................50
Section 10.04 Reports by Indenture Trustee..................................................................51
Section 10.05 Compliance Certificates and Opinions, etc.....................................................51
ARTICLE XI. MISCELLANEOUS PROVISIONS..........................................................................................51
Section 11.01 Amendment.....................................................................................51
Section 11.02 Conformity With Trust Indenture Act...........................................................52
Section 11.03 Limitation on Rights of Noteholders...........................................................52
Section 11.04 Counterparts..................................................................................53
Section 11.05 GOVERNING LAW.................................................................................53
Section 11.06 Notices.......................................................................................53
Section 11.07 Severability of Provisions....................................................................53
Section 11.08 Conflict with Trust Indenture Act.............................................................54
Section 11.09 Third Party Beneficiary.......................................................................54
Section 11.10 Assignment....................................................................................54
Section 11.11 Binding Effect................................................................................54
Section 11.12 Survival of Agreement.........................................................................54
Section 11.13 Captions......................................................................................54
Section 11.14 Exhibits......................................................................................54
Section 11.15 Calculations..................................................................................54
Section 11.16 No Proceedings................................................................................55
</TABLE>
iii
<PAGE> 5
Exhibits
- --------
Exhibit A - Form of Trustee's Receipt
Exhibit B - Form of Wiring Instructions
Exhibit C - Form of Class A Notes
Exhibit D - Form of Subordinate Notes
Exhibit E - Form of Transferee Certification (Non-144A)
Exhibit F - Form of Transferee Certification (144A QIB)
Exhibit G - Form of Transferee Certification (Investment Company)
Exhibit H - Form of Instrument of Transfer
Exhibit I - List of Contracts subject to Optional Redemption pursuant to
Section 9.02(b) of the Indenture
Annex A - Defined Terms
iv
<PAGE> 6
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
Reconciliation and Tie between the Indenture
dated as of December 1, 1998 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
ss. 310(a)(1) ss. 7.08
(a)(2) 7.08
(a)(3) 7.13
(a)(4) Not Applicable
(b) 7.08; 7.10
(c) Not Applicable
311(a) 7.09
(b) 7.09
312(a) 10.02
(b) 10.02
(c) 10.02
313(a) 10.04
(b)(1) 10.02; 10.04; 4.01; 4.02; 4.03
(b)(2) 10.04
(c) 10.04
(d) 10.04
314(a) 10.03; 3.05; 6.06
(b) Not Applicable
(c)(1) 10.05
(c)(2) 10.05
(c)(3) Not Applicable
(d) Not Applicable
(e) 10.05
(f) Not Applicable
315(a) 7.01; 7.05
(b) 8.04
(c) 8.05
(d) 7.01
(e) 7.01
316(a) (last sentence) 2.07
(a)(1)(A) 7.17
(a)(1)(B) 8.06
317(a)(1) 8.03
(a)(2) 8.04
(b) 6.09
318(a) 11.09
(c) 11.09
v
<PAGE> 7
This INDENTURE, dated as of December 1, 1998, is made by and between
First Sierra Equipment Contract Trust 1998-1, a common law trust acting through
its trustee, First Union Trust Company, National Association, not in its
individual capacity but solely as Owner Trustee (the "Issuer" or the "Trust"),
First Sierra Financial, Inc., as servicer (in such capacity, the "Servicer"), as
originator (in such capacity, the "Originator") and, in its individual capacity
(in such capacity "First Sierra") and Bankers Trust Company, a New York banking
corporation, not in its individual capacity but solely as the indenture trustee
(the "Indenture 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 Incorporation by Reference of the Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by the TIA,
or defined by Commission rule have the meaning assigned to them by such
definitions.
Section 1.03 General Interpretive Principles. For purposes of this
Indenture except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Indenture have the meanings assigned to
them in this Indenture and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other gender;
<PAGE> 8
(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 Indenture;
(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 Indenture 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 1.04 Conflict with TIA. If any provision hereof limits,
qualifies or conflicts with a provision of the TIA that is required under the
TIA to be part of and govern this Indenture, the latter provision shall control
and all provisions required by the TIA are hereby incorporated by reference. If
any provision of this Indenture modifies or excludes any provision of the TIA
that may be so modified or excluded, the latter provisions shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
ARTICLE II.
PLEDGE OF INITIAL PLEDGED PROPERTY;
ORIGINAL ISSUANCE OF NOTES AND RESIDUAL CLASS
Section 2.01 Pledge of Pledged Property. The Trust, simultaneously with
the execution and delivery of this Indenture, does hereby pledge, deposit,
transfer, assign, and otherwise grant to the Indenture Trustee, without recourse
(except as otherwise expressly set forth herein), to be held in trust for the
benefit of the Noteholders and the Note Insurer, as provided in this Indenture,
all the right, title, and interest of the Owner Trustee on behalf of the Trust
in and to (a)(i) any Equipment that is owned by the Owner Trustee on behalf of
the Trust and any and all income and proceeds from such Equipment, but subject
to the rights of the Obligor to quiet enjoyment of such Equipment under the
related Contract and (ii) any security interest of the Owner Trustee on behalf
of the Trust in any of the Equipment that is not owned by the Owner Trustee on
behalf of the Trust, (b) the Contracts, including, without limitation, all
Scheduled Payments, Defaulted Contract Recoveries and any other payments due or
made with respect to the Contracts after the Cut-Off Date relating to such
Contracts, (c) any guarantees of an Obligor's obligations under a Contract, (d)
all other documents in the Contract Files relating to the Contracts, including,
without limitation, any UCC financing statements related to the Contracts or the
Equipment, (e) any Insurance Policies and Insurance Proceeds with respect to the
Contracts, (f) all of the Trust's right, title and interest in and to, and
rights under the Receivables Transfer Agreement and the Servicing Agreement,
each as executed and delivered
2
<PAGE> 9
in accordance therewith, (g) all amounts on deposit in the Collection Account
and the Lockbox Account held by the Indenture Trustee, (h) all of the Trust's
right, title and interest in and to all Source Agreements and Source Agreement
Rights to the extent they relate to any Contract and any Equipment covered by
the Contracts, (i) the Note Insurance Policy, and (j) any and all income and
proceeds of any of the foregoing (all of the foregoing, collectively,
constituting the "Pledged Property"); provided, however, that the pledge,
transfer and assignment effected by this Section 2.01 shall not include the
Initial Unpaid Amounts relating thereto.
This Indenture is a security agreement within the meaning of Article 8
and Article 9 of the Uniform Commercial Code as in effect in the States of
Delaware, New York and Texas. The pledge provided for in this Section 2.01 is
intended by the Trust to be a grant by the Trust to the Indenture Trustee on
behalf of the Noteholders and the Note Insurer, of a valid first priority
perfected security interest in all of the Owner Trustee's right, title and
interest (on behalf of the Trust) in and to the Pledged Property.
Section 2.02 Indenture Trustee to Act as Custodian. The executed
original counterpart of each Contract, together with the other documents or
instruments, if any, which constitute a part of a Contract File shall be held by
the Indenture Trustee for the benefit of the Noteholders and the Note Insurer.
Section 2.03 Conditions to Closing. As conditions to the execution,
authentication and delivery of the Notes by the Indenture Trustee and the sale
of the Notes by the Trust (by issuance thereof by the Trust upon the Trust's
instructions) on the Closing Date, (i) the Trust shall have received by wire
transfer the net proceeds of sale of the Class A Notes, the Class B-1 Notes and
the Class B-2 Notes in authorized denominations equal in the aggregate to the
Initial Class A Note Principal Balance, the Initial Class B-1 Note Principal
Balance and the Initial Class B-2 Note Principal Balance, and (ii) the Indenture
Trustee shall have received the following on or before the Closing Date:
(a) The List of Initial Contracts, 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 Depositor approving the execution,
delivery and performance of the Transaction Documents to which it is a party and
the transactions contemplated hereby and thereby, 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) A copy of the Trust Certificate;
(e) Delivery of the executed Financing Statements with respect to the
Contracts, in accordance with the Filing Requirements, prepared for filing;
(f) A certificate listing the Servicing Officers as of the Closing
Date;
3
<PAGE> 10
(g) Executed copies of the Transaction Documents in form and substance
acceptable to the Note Insurer;
(h) Copies of resolutions of the Board of Directors of First Sierra
approving the execution, delivery and performance of this Indenture 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 First Sierra;
(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 in the States of Delaware and Texas;
(j) A custody receipt, substantially in the form of Exhibit A hereto,
pursuant to which the Indenture Trustee certifies that it has received a
contract file with respect to each Contract on the List of Contracts;
(k) All Necessary Consents;
(l) An executed Note Insurance Policy;
(m) A letter from Moody's that it has assigned a rating of (i) "P-1" to
the Class A-1 Notes and (ii) "Aaa" to the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes;
(n) A letter from S&P that it has assigned a rating of (i) "A-1+" to
the Class A-1 Notes and (ii) "AAA" to the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes;
(o) A letter from DCR that it has assigned a rating of (i) "BBB" to the
Class B-1 Notes, (v) "BB" to the Class B-2 Notes and (vi) "B" to the Class B-3
Notes;
(p) A letter from Fitch that it has assigned a rating of (i) "BBB" to
the Class B-1 Notes, (ii) "BB" to the Class B-2 Notes and (iii) "B" to the Class
B-3 Notes; and
(q) Opinions of counsel to First Sierra and the Depositor, in form and
substance acceptable to the Indenture Trustee and the Note Insurer, covering
such matters as the Indenture Trustee and the Note Insurer may reasonably
request including, without limitation, opinions concerning nonconsolidation,
true sale, security interest, federal tax and general corporate matters.
Section 2.04 Acceptance by Indenture Trustee. The Indenture Trustee
acknowledges its acceptance, simultaneously with the execution and delivery of
this Indenture, of all right, title and interest in and to the Pledged Property
on behalf of the Noteholders and the Note Insurer and declares that the
Indenture Trustee holds and will hold such right, title and interest for the
benefit of all present and future Noteholders and the Note Insurer for the use
and purpose and subject to the terms and provisions of this Indenture. The Trust
hereby (a) appoints the Indenture Trustee as the Trust's attorney-in-fact with
all power independently to enforce all of the Trust's rights against the
Originator hereunder, under the Receivables Transfer Agreement and under the
Servicing Agreement and (b) directs the Indenture Trustee to enforce such
rights. The Indenture Trustee hereby accepts such appointment and agrees to
enforce such rights.
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Section 2.05 Liabilities of the Trust and Parties to this Indenture;
Limitations Thereon. (a) The obligations evidenced by the Notes provide recourse
only to the Trust Property and provide no recourse against First Sierra, the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee or any other
Person other than the Note Insurer under the Note Insurance Policy.
(b) Neither First Sierra, the Trust, the Depositor, the Servicer nor
any other Person shall be liable to the Indenture Trustee or the Noteholders
except as provided in Article VI hereof and Sections 5.01, 5.03, 5.05, 5.07 and
5.08 of the Servicing Agreement and Section 4.01(g) of the Receivables Transfer
Agreement. Without limiting the generality of the foregoing, if any Obligor
fails to pay any Scheduled Payment, Final Scheduled Payment or other amounts due
under a Contract, then neither the Indenture Trustee nor the Noteholders will
have any recourse against First Sierra or the Servicer for such Scheduled
Payment, Final Scheduled Payment, other amounts due under the Contract or any
losses, damages, claims, liabilities or expenses incurred by the Indenture
Trustee or any Noteholder as a direct or indirect result thereof, except as may
be provided for in Article VI hereof and Sections 5.01, 5.03, 5.05, 5.07 and
5.08 of the Servicing Agreement and Section 4.01(g) of the Receivables Transfer
Agreement.
(c) The Indenture Trustee agrees that in the event of a default by an
Obligor under the terms of a Contract, which default is not cured within any
applicable cure period set forth in such Contract, the Indenture Trustee and the
Noteholders shall be expressly limited to the sources of payment specified
herein. In addition, the Indenture Trustee shall have the right to exercise the
rights of the Originator under the Contracts, the Insurance Policies and any
document in any Contract File in the name of the Indenture Trustee and the
Noteholders, either directly or through the Servicer as agent, and the Indenture
Trustee is hereby directed by the Trust to exercise such rights; provided,
however, that the Indenture 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 Indenture or any
financing statement is sufficient as a financing statement in any State.
(d) The pledge of the Pledged Property by the Trust pursuant to this
Indenture does not constitute and is not intended to result in an assumption by
the Indenture Trustee, the Trust, the Note Insurer or any Noteholder of any
obligation (except for the obligation not to disturb an Obligor's right of quiet
enjoyment) of the Originator or the Servicer to any Obligor or other Person in
connection with the Equipment, the Contracts, the Insurance Policies or any
document in the Contract 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 Notes and the Subordinate Notes will constitute indebtedness and that for all
applicable tax purposes, accordingly, the Trust will be treated as sole and
exclusive owner of the Pledged Property. Further, each party hereto and each
Noteholder (by receiving and holding a Note), hereby covenants to every other
party hereto and to every other Noteholder to treat the Class A Notes and the
Subordinate Notes 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 Notes or
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of the Subordinate Notes as indebtedness for tax purposes. All successors and
assigns of the parties hereto shall be bound by the provisions hereof.
Section 2.07 Treasury Securities. In determining whether the
Noteholders of the required outstanding principal balance of the Notes have
concurred in any direction, waiver or consent, Notes owned by First Sierra, any
other obligor upon the Notes or an Affiliate of First Sierra shall be considered
as though not outstanding, except that for the purposes of determining whether
the Indenture Trustee shall be protected in relying on any such direction,
waiver or consent, only Notes which a Responsible Officer actually knows are so
owned shall be so disregarded.
ARTICLE III.
ACCOUNTS; ALLOCATION AND APPLICATION OF
THE TRUST FUND
Section 3.01 Collection Account. (a) The Servicer shall establish and
maintain with the Indenture Trustee the Collection Account for the benefit of
the Noteholders and the Note Insurer as an Eligible Bank Account, in the name of
"First Sierra Equipment Contract-Backed Notes 1998-1 Collection Account, in
trust for the registered holders of Equipment Contract-Backed Notes." At the
Servicer's written direction, the Indenture Trustee shall make withdrawals from
the Collection Account only as provided in this Indenture. The Indenture 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 Indenture Trustee for the
benefit of the Noteholders and the Note Insurer.
(b) At the times indicated in this Section 3.01(b) or in Section
3.01(c) below, the following amounts (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 4.03 of the Servicing Agreement;
(iii) The Servicer shall deposit any Repurchase Amounts
payable by it under the Servicing Agreement, or by the Originator
pursuant to Section 4.01 hereof;
(iv) Investment Earnings, as described in Section 3.02(a)
hereof; and
(v) The amount, if any, received by the Indenture Trustee as a
result of a drawing on the Note Insurance Policy pursuant to Section
3.03(a) 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
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deposit the aggregate amount of Servicer Advances no later than one day prior to
the related Payment Date. The Servicer shall instruct the Indenture 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. Except as
otherwise expressly set forth, any other deposits and transfers of funds to be
made pursuant to this Section 3.01 shall be made no later than the third
Business Day immediately preceding the related Payment Date.
Notwithstanding the foregoing, the Servicer may deduct from amounts
otherwise payable to the Collection Account amounts previously deposited by the
Servicer into the Collection Account but (i) subsequently uncollectable as a
result of dishonor of the instrument of payment for or on behalf of the Obligor
or (ii) later determined to have resulted from mistaken deposits.
Section 3.02 Investment of Monies Held in the Accounts; Subaccounts.
(a) The Servicer shall direct the Indenture Trustee in writing to invest the
amounts in any 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. 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.
(b) The Indenture Trustee and the Servicer may, from time to time and
in connection with the administration of any Account, establish and maintain
with the Indenture Trustee one or more sub-accounts of any of the Accounts, as
the Indenture Trustee and/or the Servicer may consider useful.
Section 3.03 The Note Insurance Policy
(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 Indenture Trustee in
writing no later than 10:00 a.m., New York City time, on such Determination Date
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 Indenture Trustee shall complete a
Notice in the form of Exhibit A to the Note Insurance Policy and submit such
notice to the Note Insurer via facsimile transmission no later than 12:00 noon
New York City time on the second Business Day preceding such Payment Date as a
claim for an Insured Payment in an amount equal to such Available Funds
Shortfall.
(c) Upon receipt of Insured Payments from the Note Insurer, the
Indenture 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 3.04 hereof to the Class A Noteholders
exclusively. The parties hereto recognize that the making of
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an Insured Payment does not relieve any of the parties hereto of any obligation
hereunder or under any of the Transaction Documents.
(d) The Indenture Trustee shall (x) receive Insured Payments as
attorney-in-fact of each of the Class A Noteholders and (y) disburse such
Insured Payment to the Class A Noteholders as set forth in Section 3.04 hereof.
The Note Insurer shall be entitled to receive the related Reimbursement Amount
pursuant to Sections 3.04(b)(xiii) hereof with respect to each Insured Payment
made by the Note Insurer. The Indenture Trustee hereby agrees on behalf of each
Class A Noteholder and the Trust for the benefit of the Note Insurer that it
recognizes that to the extent the Note Insurer makes Insured Payments, either
directly or indirectly (as by paying through the Indenture Trustee), to the
Class A Noteholders, the Note Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Sections 3.04(b)(xiii) hereof.
(e) The Class A Notes will be insured by the Note Insurance Policy
pursuant to the terms set forth therein, notwithstanding any provisions to the
contrary contained in this Indenture. All amounts received under the Note
Insurance Policy shall be used solely for the payment to Class A Noteholders of
principal at maturity and interest on the Class A Notes.
(f) If a Responsible Officer of the Indenture 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 Class A
Noteholders on the applicable Payment Date, the Indenture Trustee shall
immediately notify the Note 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 Indenture
Trustee has actual notice that any of the Class A Noteholders have been required
to disgorge payments of principal or interest on the Class A Note 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 Indenture Trustee shall notify the Note
Insurer or its designees 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 Note Insurance Policy for making a
claim under the Note Insurance Policy.
(g) The parties hereto recognize that, to the extent that the Note
Insurer makes payments, directly or indirectly, on account of principal of or
interest on the Class A Notes, the Note Insurer shall be subrogated to the
rights of the Holders of the Class A Notes to receive distributions of principal
and interest in accordance with the terms hereof.
(h) The parties hereto grant to the Note 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
Noteholders hereunder.
Section 3.04 Disbursements From Collection Account. (a) On each Payment
Date, the Indenture 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, 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
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the Indenture Trustee shall, nevertheless, pay interest on each Class of Notes
from the sources of funding set forth herein, in each case in an amount with
respect to each Class equal to the product of (i) one-twelfth, (ii) the related
Note Rate and (iii) the related Note Principal Balance, as reflected on the
Monthly Statement most recently delivered by the Servicer (net of any principal
payments in respect thereof on the immediately preceding Payment Date).
(b) On each Payment Date, the Indenture 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 Contract, 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 Servicer Fee owing on such
Payment Date, plus any unpaid Servicer 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 Note Insurer by wire transfer to the account designated
in writing by the Note Insurer, an amount equal to the Premium Amount
owing on such Payment Date, plus any unpaid Premium Amounts from prior
Collection Periods;
(v) From the Available Funds then remaining in the Collection
Account, to the Indenture Trustee by wire transfer to the account
designated in writing by the Indenture Trustee, an amount equal to the
Indenture Trustee Fees owing on such Payment Date, plus any unpaid
Indenture Trustee Fees from prior Collection Periods, subject to the
limitation set forth in Section 7.07 (a)(i) hereof;
(vi) From the Available Funds then remaining in the Collection
Account, to the Indenture Trustee by wire transfer to the account
designated in writing by the Indenture Trustee, an amount equal to the
reimbursable expenses due and unpaid to the Indenture Trustee in
accordance with and subject to Section 7.07(a)(ii) hereof;
(vii) From (x) the Available Funds then remaining in the
Collection Account plus (y) the proceeds of any applicable Insured
Payment, to the Class A-1
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Noteholders, the Class A-1 Note Interest for the related Collection
Period, to the Class A-2 Noteholders, the Class A-2 Note Interest for
the related Collection Period, to the Class A-3 Noteholders, the Class
A-3 Note Interest for the related Collection Period, and to the Class
A-4 Noteholders, the Class A-4 Note Interest for the related Collection
Period pari passu;
(viii) From the Available Funds then remaining in the
Collection Account 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 Noteholders an
amount equal to the Class B-1 Note Interest for the related Collection
Period;
(ix) From the Available Funds then remaining in the Collection
Account, 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-2 Noteholders an amount equal to the
Class B-2 Note Interest for the related Collection Period;
(x) From the Available Funds then remaining in the Collection
Account, to the extent that such disbursement shall not result in an
Available Funds Shortfall, to the Class B-3 Noteholders an amount equal
to the Class B-3 Note Interest for the related Collection Period;
(xi) From (x) the Available Funds then remaining in the
Collection Account plus (y) the proceeds of any applicable Insured
Payment, until the Class A Note Principal Balance has been reduced to
zero, to the Class A Noteholders 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, such amount to be applied sequentially, with 100% of
such amount being applied to reduce the Note Principal Balance of the
Class A Notes then Outstanding and having the lowest numerical
designation (e.g., first to the Class A-1 Notes) to zero before any
principal payment is made to the next Class;
(xii) From the Available Funds then remaining in the
Collection Account, to the Note Insurer by wire transfer to the account
designated in writing by the Note Insurer, the Reimbursement Amount, if
any, owing on such Payment Date;
(xiii) From the Available Funds then remaining in the
Collection Account, until the Class B-1 Note Principal Balance has been
reduced to zero, to the Class B-1 Noteholders, 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 Class A Note
Principal Balance on such Payment Date (after giving effect to all
prior payments of principal to the Class A Noteholders made on such
Payment Date) exceeds zero, the amount otherwise required to be paid to
the Class B Noteholders under this clause (xiii) shall instead be paid
to the Class A Noteholders pursuant to this clause (xiii) during such
time as a Restricting Event is continuing as an additional reduction of
the Class A Note Principal
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Balance up to the amount necessary to reduce the Class A Note Principal
Balance to zero (and shall be paid in the sequential-pay fashion
described in clause (xi) above);
(xiv) From the Available Funds then remaining in the
Collection Account, until the Class B-2 Note Principal Balance has been
reduced to zero, to the Class B-2 Noteholders, 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, the amount otherwise
required to be paid to the Class B-2 Noteholders under this clause
(xiv) shall instead be paid (x) if the Class A Note Principal Balance
on such Payment Date (after giving effect to all prior payments of
principal to the Class A Noteholders made on such Payment Date) exceeds
zero, to the Class A Noteholders pursuant to this clause (xiv) during
such time as a Restricting Event is continuing as an additional
reduction of the Class A Note Principal Balance up to the amount
necessary to reduce the Class A Note Principal Balance to zero (and
shall be paid in the sequential-pay fashion described in clause (xi)
above) and (y) if the Class A Note Principal Balance is zero, but the
Class B-1 Note Principal Balance on such Payment Date (after giving
effect to all prior payments of principal to the Class B-1 Noteholders
made on such Payment Date) exceeds zero, the amount otherwise required
to be paid to the Class B-2 Noteholders under this clause (xiv) shall
instead be paid to the Class B-1 Noteholders during such time as a
Restricting Event is continuing as an additional reduction of the Class
B-1 Note Principal Balance up to the amount necessary to reduce such
balance to zero;
(xv) From the Available Funds then remaining in the Collection
Account, until the Class B-3 Note Principal Balance has been reduced to
zero, to the Class B-3 Noteholders, the sum of (i) the Class B-3 Base
Principal Distribution Amount for such Payment Date and (ii) any Class
B-3 Overdue Principal; provided, however, that if a Restricting Event
exists on such Payment Date, the amount otherwise required to be paid
to the Class B-3 Noteholders under this clause (xv) shall instead be
paid (x) if the Class A Note Principal Balance on such Payment Date
(after giving effect to all prior payments of principal to the Class A
Noteholders made on such Payment Date) exceeds zero, to the Class A
Noteholders pursuant to this clause (xv) during such time as a
Restricting Event is continuing as an additional reduction of the Class
A Note Principal Balance up to the amount necessary to reduce such
balance to zero (and shall be paid in the sequential-pay fashion
described in clause (xi) above), (y) if the Class A Note Principal
Balance is zero, but the Class B-1 Note Principal Balance on such
Payment Date (after giving effect to all prior payments of principal to
the Class B-1 Noteholders made on such Payment Date) exceeds zero, the
amount otherwise required to be paid to the Class B-3 Noteholders under
this clause (xv) shall instead be paid to the Class B-1 Noteholders
during such time as a Restricting Event is continuing as an additional
reduction of the Class B-1 Note Principal Balance up to the amount
necessary to reduce such balance to zero; and (z) if the Class A Note
Principal Balance and the Class B-1 Note Principal Balance is zero, but
the Class B-2 Note Principal Balance on such Payment Date (after giving
effect to all prior payments of principal to the Class B-2 Noteholders
made on such Payment Date) exceeds zero, the amount otherwise required
to be paid to the Class B-3 Noteholders under this clause (xv) shall
instead be paid to the Class B-2 Noteholders during such time as a
Restricting Event is continuing as an
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additional reduction of the Class B-2 Note Principal Balance up to the
amount necessary to reduce such balance to zero;
(xvi) From the Available Funds then remaining in the
Collection Account, to the Indenture Trustee, the Indenture Trustee
Expenses then due together with any Indenture Trustee Expenses from
prior Collection Periods, in excess of the $75,000 limitation set forth
in Section 7.07(a)(ii) hereof,
(xvii) 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 the
Servicing Agreement; and
(xviii)From the Available Funds then remaining in the
Collection Account, to the Residual Holder, any remaining amounts;
provided, however, that during the continuance of a Restricting Event,
no distribution will be made to the Residual Holder. Instead, such
amount will be paid to the most senior class of Notes then outstanding.
(c) All payments to Noteholders shall be made on each Payment Date to
each Noteholder of record on the related Record Date by check, or, if requested
by such Noteholder, by wire transfer to the account designated in writing in the
form of Exhibit B hereto (or such other account as the Noteholder may designate
in writing) delivered to the Indenture Trustee on or prior to the related
Determination Date, in immediately available funds, in amounts equal to such
Noteholder's pro rata share (based on the aggregate Class A Percentage Interest
in the case of the Class A Noteholders, the Class B-1 Percentage Interest in the
case of the Class B-1 Noteholders, the Class B-2 Percentage Interest in the case
of the Class B-2 Noteholders and the Class B-3 Percentage in the case of the
Class B-3 Noteholders, of such payment.
Section 3.05 Statements to Noteholders. (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 Note Insurer and the
Indenture Trustee will mail to the Rating Agencies a statement (which statement
will be prepared by the Servicer furnished to the Indenture Trustee in the
Monthly Statement delivered pursuant to Section 4.07 of the Servicing Agreement
or otherwise pursuant to this Indenture), not later than one Business Day prior
to such Payment Date, setting forth the following information (per $1,000 of the
Initial Class A Note Principal Amount, the Initial Class B-1 Note Principal
Amount, the Initial Class B-2 Note Principal Amount or of the Initial Class B-3
Note Principal Amount (as the case may be) as to (i) and (ii) below):
(i) With respect to a statement to a Class A Noteholder, a
Class B-1 Noteholder, a Class B-2 Noteholder or a Class B-3 Noteholder,
the amount of such payment allocable to such Noteholder's Percentage
Interest of the Principal Distribution Amount and Class A, Class B-1,
Class B-2 or Class B-3 Overdue Principal, as applicable;
(ii) With respect to a statement to a Noteholder, the amount
of such payment allocable to such Noteholder's Percentage Interest of
Class A-1, Class A-2, Class A-3, Class A-4, Class B-1, Class B-2 or
Class B-3 Note Interest and Class A-1,
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Class A-2, Class A-3, Class A-4, Class B-1, Class B-2 or Class B-3
Overdue Interest, as applicable;
(iii) The aggregate amount of fees and compensation received
by the Servicer pursuant to Section 3.04 hereof for the Collection
Period;
(iv) The aggregate Class A Note Principal Balance (and,
individually, the Class A-1 Note Principal Balance, the Class A-2 Note
Principal Balance, the Class A-3 Note Principal Balance, the Class A-4
Note Principal Balance), the aggregate Class B-1 Note Principal
Balance, the aggregate Class B-2 Note Principal Balance and the
aggregate Class B-3 Note Principal Balance, the Class A Percentage, the
Class B-1 Percentage, the Class B-2 Percentage, the Class B-3
Percentage, the Class A Note Factor, the Class B-1 Note Factor, the
Class B-2 Note Factor, the Class B-3 Note 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 amount of Residual Receipts and Defaulted Residual
Contract Recoveries for the related Collection Period and the Aggregate
Discounted Contract Principal Balances for all Contracts that became
Defaulted Contracts during the related Collection Period;
(vii) The total number of Contracts and the Aggregate
Discounted Contract Principal Balances thereof, together with the
number and Aggregate Discounted Contract Principal Balances of all
Contracts as to which the Obligors, as of the related Calculation Date,
have missed one, two, three or four Scheduled Payments (including Final
Scheduled Payments), and Delinquent Contracts reconveyed; and
(b) By January 31 of each calendar year, commencing January 31, 1999,
or as otherwise required by applicable law, the Indenture Trustee shall furnish
to each Person who at any time during the immediately preceding calendar year
was a Noteholder a statement prepared by the Servicer, and delivered to the
Indenture Trustee, containing the applicable aggregate amounts with respect to
such Noteholder hereof for such calendar year or, in the event such Person was a
Noteholder during a portion of such calendar year, for the applicable portion of
such year, for the purposes of such Noteholder's preparation of federal income
tax returns. In addition to the foregoing the Servicer and the Indenture Trustee
(to the extent the Servicer has provided the necessary information to the
Indenture Trustee) shall make available to Noteholders or the Note Insurer any
other information provided to the Servicer or the Indenture Trustee or otherwise
in the Indenture Trustee's possession reasonably requested by Noteholders or the
Note Insurer in connection with tax matters, in accordance with the written
directions of the Servicer.
(c) The Servicer shall furnish to each Subordinate Noteholder, on
request, during the term of this Indenture, such periodic, special or other
reports or information not specifically provided for herein, as shall be
necessary, reasonable or appropriate with respect to such Subordinate Noteholder
all such reports or information to be provided by and in accordance
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with such applicable instructions and directions as the Subordinate Noteholder
may reasonably require and as the Servicer may reasonably be able to produce;
provided, however, that the Servicer may require such Subordinate Noteholder to
execute a confidentiality agreement in form and substance acceptable to the
Servicer.
(d) The Indenture Trustee shall promptly send to each Noteholder and
the Note Insurer and to the Rating Agencies in writing:
(i) Notice of any breach by First Sierra, the Depositor, the
Trust, the Originator or the Servicer of any of their respective
representations, warranties and covenants made herein, the Servicing
Agreement or in the Receivables Transfer Agreement.
(ii) A copy of each Servicer compliance statement delivered to
the Indenture Trustee pursuant to Section 4.08 of the Servicing
Agreement.;
(iii) Notice of any breach by the Indenture Trustee of its
representations and warranties set forth in Section 7.17 hereof of
which a Responsible Officer has actual knowledge;
(iv) Notice of the occurrence of any Event of Default (which
shall also be given to the Rating Agencies);
(v) Notice of any Event of Servicing Termination, default
under the Insurance Agreement or any other default under any of the
Transaction Documents; and
(vi) Notice of the resignation or removal of the Indenture
Trustee;
provided, however, that in each case the Indenture Trustee shall only be
required to send such notices and other items to the Subordinate Noteholders to
the extent that the Indenture Trustee has itself received the related
information and the Subordinate Noteholders have not already received such
notice or other items. Except as may be specifically provided herein, the
Indenture Trustee shall have no obligation to seek to obtain any such
information.
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Section 3.06 Compliance With Withholding Requirements. Notwithstanding
any other provisions of this Indenture, the Indenture 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 Noteholders 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 Noteholder for all purposes of this Indenture. In no
event shall the consent of Noteholders be required for any withholding.
ARTICLE IV.
REMOVAL OF NON-CONFORMING PLEDGED
PROPERTY; SUBSTITUTION OF CONTRACTS
Section 4.01 Removal of Non-Conforming Pledged Property. (a) Upon
discovery by the Trust, the Note Insurer, the Servicer (or any of its successors
or assigns) or in the case of the Indenture Trustee, upon actual knowledge of a
Responsible Officer of the Indenture Trustee, of a breach of any of the
representations or warranties set forth in Section 2.02 of the Servicing
Agreement that materially and adversely affects any Contract, the related
Equipment or the related Contract File, as the case may be, or if the Servicer
fails to cause delivery of evidence of filing or copies of any UCC financing
statement or delivery of any Certificate of Title in accordance with the
Servicing Agreement (any such event, a "Warranty Event"), the party (including
any such successor or assign) discovering such breach shall give prompt written
notice to the other parties. The Note Insurer in its reasonable discretion shall
then determine whether the related Contract, Equipment or Contract File has been
materially and adversely affected by such breach of a representation or warranty
set forth in Section 2.02 of the Servicing Agreement. As of the last day of the
calendar month following the month of its discovery or its receipt of notice of
breach (or, at First Sierra's election, any earlier date), First Sierra shall
deposit (or cause to be deposited) in the Collection Account the Repurchase
Amount with respect to such Contract or replace such contract with a Substitute
Contract pursuant to Section 4.02 hereof. Any such nonconforming Contract so
removed shall not be deemed to be a Defaulted Contract for purposes of this
Article IV.
(b) The obligation of First Sierra to remove any Trust Property from
the Trust and to remit the Repurchase Amount, as appropriate, with respect to
the related Contract as to which a breach has occurred and is continuing shall
constitute the sole remedy against First Sierra for such breach available to the
Indenture Trustee and the Noteholders, except to the extent that such breach is
the result of any fraud or willful misconduct on the part of First Sierra.
Section 4.02 Substitution of Contracts. (a) Subject to the provisions
of Sections 4.02(b) through (d) hereof, First Sierra, upon notice from the
Servicer and with the consent of the Note Insurer, may substitute one or more
Contracts (each a "Substitute Contract") and transfer all of its right, title
and interest in the related Equipment for and replace Contracts and terminate
the security interest in the related Equipment that (i) becomes a Defaulted
Contract or an Early Termination Contract or (ii) are the subject of a
Prepayment, a Casualty Loss or a Warranty Event.
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(b) Each Substitute Contract shall be a Contract, with respect to which
all of the representations and warranties set forth in Section 2.02 of the
Servicing Agreement were true as of the related Substitute Contract Cut-Off
Date.
(c) Prior to any substitution pursuant to this Section 4.02, the
Indenture Trustee shall have received an executed transfer agreement between the
Trust and First Sierra providing for the unconditional sale and transfer of the
Substitute Contracts and related Equipment by First Sierra to the Trust, the
List of Substitute Contracts reflecting the substitution, a release request, in
form and substance acceptable to the Indenture Trustee, with respect to the
Contract being replaced and the originally executed trust receipt relating
thereto.
(d) No such substitution under this Section 4.02 shall be permitted on
any Transfer Date if:
(i) on a cumulative basis from the initial Cut-Off Date, the
sum of the Discounted Contract Principal Balances (as of the related
Substitute Cut-Off Date) of such Substitute Contracts would exceed ten
percent (10%) of the Aggregate Discounted Contract Principal Balance of
all Contracts as of the initial Cut-Off Date;
(ii) as of the related Substitute Cut-Off Date, the Substitute
Contracts then being transferred have a Discounted Contract Principal
Balance not less than the Discounted Contract Principal Balance of the
Contracts being replaced; and
(iii) as a result thereof, (x) the sum of the Scheduled
Payments on all Contracts due in any Collection Period thereafter would
be less than or increase the amount by which it is less than (y) the
sum of the Scheduled Payments which would otherwise be due in such
Collection Period.
(e) Upon the replacement of a Contract and the related Equipment with a
Substitute Contract as described above, the security interest of the Indenture
Trustee in such replaced Contract, the related Equipment and all proceeds
thereon shall be terminated and such replaced Contract and the related Equipment
shall be transferred to the Trust.
Section 4.03 Release of Trust Property. (a) The Indenture Trustee when
required by the Trust and the provisions of this Indenture shall execute
instruments provided to it in order to release property from the lien of this
Indenture, in a manner and under circumstances that are not inconsistent with
the provisions of this Indenture and the Servicing Agreement. No party relying
upon an instrument executed by the Indenture Trustee as provided in this Article
IV shall be bound to ascertain the Indenture Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
monies.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding and all sums due the Indenture Trustee and the Note Insurer pursuant
to the Insurance Agreement have each been paid, release any remaining portion of
the Trust Property that secured the Note from the lien of this Indenture and
release to the Trust or any other Person entitled thereto any funds then on
deposit in the Collection Account and any subaccounts thereof as may have been
established pursuant to Section 3.02(b). The Indenture Trustee shall release
property from the lien of this Indenture pursuant to this Section 4.03(b) only
upon receipt of an Issuer Request
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accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA ss.ss. 314(c) and
314(d)(1) meeting the applicable requirements of Section 10.05 hereof.
ARTICLE V.
THE NOTES
Section 5.01 The Notes. (a) The Class A Notes will be issued in
denominations of $1,000 and multiples of $1,000 in excess thereof (with the
exception of one Note of each class which will be issued in an odd amount) of
the Initial Class A-1 Note Principal Balance, the Initial Class A-2 Note
Principal Balance, the Initial Class A-3 Note Principal Balance, the Initial
Class A-4 Note Principal Balance and the Subordinate Notes will be issued in
denominations of $1,000,000 and $1,000 increments above $1,000,000 of the
Initial Class B-1 Note Principal Balance, the Initial Class B-2 Note Principal
Balance and the Initial Class B-3 Note Principal Balance. Each Note shall
represent a validly issued and binding obligation, but only if such Note has
been executed on behalf of the Trust by a Responsible Officer of the Owner
Trustee by manual signature, and authenticated on behalf of the Indenture
Trustee by a Responsible Officer of the Indenture Trustee by manual signature.
Each Note 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 prior to the authentication and
delivery of such Note or did not hold such offices at the date of such Note. No
Note shall be entitled to any benefit under this Indenture, or be valid for any
purpose, unless there appears on such Note a certificate of authentication
substantially in the form set forth in the form of the Notes of the related
Class, each attached as Exhibits hereto, signed by the Indenture Trustee by
manual signature, and such signature upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder. All Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4
Notes shall be substantially in the forms set forth in Exhibits C-1, C-2, C-3
and C-4 hereto, respectively, all Class B-1 Notes shall be substantially in the
form set forth in Exhibit D-1 hereto, all Class B-2 Notes shall be substantially
in the form set forth in Exhibit D-2 hereto, all Class B-3 Notes shall be
substantially in the form set forth in Exhibit D-3 hereto. Each Note shall be
dated the date of their authentication. Neither the Notes nor the Contracts are
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
(b) It is intended that the Offered Notes be registered so as to
participate in a global book-entry system with the Trust, as set forth herein.
The Offered Notes shall, except as otherwise provided in the next paragraph, be
initially issued in the form of a single fully registered Class A-1 Note, Class
A-2 Note, Class A-3 Note and Class A-4 Note, each with a denomination equal to
the Initial Class A-1 Note Principal Balance, the Initial Class A-2 Note
Principal Balance, the Initial Class A-3 Note Principal Balance and the Initial
Class A-4 Note Principal Balance, respectively. Upon initial issuance, the
ownership of each such Offered Note shall be registered in the Register in the
name of Cede & Co., or any successor thereto, as nominee for the Trustee.
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The Trust and the Indenture Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Offered Notes registered in the Register in the name of
Cede & Co., as nominee of the Depository, the Trust and the Indenture Trustee
shall have no responsibility or obligation to Direct or Indirect Participants or
beneficial owners for which the Depository holds Offered Notes from time to time
as a trustee. Without limiting the immediately preceding sentence, the Trust,
the Servicer and the Indenture 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 Offered Note, (ii) the delivery to any Direct or Indirect
Participant or any other Person, other than a Noteholder, of any notice with
respect to the Offered Notes or (iii) the payment to any Direct or Indirect
Participant or any other Person, other than a Noteholder, of any amount with
respect to any distribution of principal or interest on the Offered Notes. No
Person other than a Noteholder shall receive a certificate evidencing such
Offered Note.
Upon delivery by the Depository to the Indenture 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
Noteholders appearing as Noteholders at the close of business on a Record Date,
the name "Cede & Co." in this Indenture shall refer to such new nominee of the
Depository.
(c) In the event that (i) the Depository or the Servicer advises the
Indenture 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 Offered Notes and the Servicer or the Depository is unable to locate a
qualified successor or (ii) the Indenture Trustee at its sole option elects to
terminate the book-entry system through the Depository, the Offered Notes shall
no longer be restricted to being registered in the 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 Offered Notes 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 Offered Notes may be registered in whatever name or names Noteholders
transferring Offered Notes 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 Indenture to the
contrary, so long as any Offered Note is registered in the name of Cede & Co.,
as nominee of the Depository, all distributions of principal or interest on such
Offered Notes, as the case may be, and all notices with respect to such Offered
Notes, as the case may be, shall be made and given, respectively, in the manner
provided in the Representation Letter.
In the event any Notes are issued in book-entry form with the
Depository: (i) the Indenture Trustee may deal with the Depository as the
authorized representative of the Noteholders; (ii) the rights of the Noteholders
shall be exercised only through the Depository and shall be limited to those
established by law and agreement between the Noteholders and the
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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 Notes to such direct participants; and (iv) the
direct participants of the Depository shall have no rights under this Indenture
under or with respect to any of the Notes held on their behalf by the
Depository, and the Depository may be treated by the Indenture Trustee and its
agents, employees, officers and directors as the absolute owner of the Notes for
all purposes whatsoever.
(e) No transfer of any Subordinate Note 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, (A) the
Indenture 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 Depositor, the Servicer, the Trust or the Indenture
Trustee or (B) the Indenture Trustee shall require the transferee to execute a
certification, substantially in the form of Exhibit F 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 Subordinate Noteholder shall
cause its prospective transferee to execute and deliver a certificate
substantially in the form of Exhibit G hereto; provided, however, that with
respect to any sale of a Subordinate Note by an investment company registered
under the Investment Company Act of 1940, as amended, made in reliance on Rule
144A, the Subordinate Noteholder may (in lieu of delivering a certificate in the
form of Exhibit G) deliver to the Indenture Trustee a certificate in the form of
Exhibit H 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 Subordinate
Notes in connection with the resale of the Subordinate Notes to permit
compliance with Rule 144A in connection with such resale. No Subordinate Note
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.
No resale or other transfer of the Subordinate Notes may be made to a
nonresident alien individual, foreign corporation or other non-United States
person.
(f) Notwithstanding anything else contained in this Indenture, neither
the Indenture Trustee nor the Note Registrar shall effect the registration of
any transfer of a Subordinate Note (i) unless, prior to such transfer, the
Indenture Trustee shall have received from the Subordinate Noteholder (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 the sum
of (a) the number of Holders of a Subordinate Note and (b) the number of Holders
of the Trust Certificate, would be more than 99. Ownership of the Trust
Certificate shall be nontransferable, but may be pledged to secure non-recourse
debt of the Depositor.
Section 5.02 Initial Issuance of Notes. The Indenture Trustee shall,
upon the written instruction of the Trust, in exchange for the Pledged Property,
authenticate and deliver the Class A Notes and the Subordinate Notes executed by
the Trust in authorized denominations equaling in the aggregate the Initial
Class A Note Principal Balance, the Initial Class B-1 Note
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Principal Balance, the Initial Class B-2 Note Principal Balance and the Initial
Class B-3 Note Principal Balance.
Section 5.03 Registration of Transfer and Exchange of Notes. (a) The
Indenture Trustee, as initial Note Registrar, shall maintain, or cause to be
maintained, at the Corporate Trust Office, a register (the "Register") in which
the Indenture Trustee shall provide for the registration of Notes and of
transfers and exchanges of Notes as herein provided. All Notes shall be so
registered.
(b) Upon surrender for registration of transfer of any Note at the
Corporate Trust Office, the Trust shall execute, and the Indenture Trustee shall
authenticate and deliver, subject to the requirements of Sections 5.01(e) and
(f) hereof in the case of the Subordinate Notes, in the name of the designated
transferee or transferees, one or more new Notes in authorized denominations of
the same class, of a like aggregate Class A-1 Percentage Interest, Class A-2
Percentage Interest, Class A-3 Percentage Interest, Class A-4 Percentage
Interest, Class B-1 Percentage Interest, Class B-2 Percentage Interest or Class
B-3 Percentage Interest, as the case may be, dated the date of such
authentication.
(c) At the option of a Noteholder, Notes may be exchanged for other
Notes of the same class (of authorized denominations in the case of Class A
Notes and Subordinate Notes) of a like aggregate Class A-1 Percentage Interest,
Class A-2 Percentage Interest, Class A-3 Percentage Interest, Class A-4
Percentage Interest, Class B-1 Percentage Interest, Class B-2 Percentage
Interest or Class B-3 Percentage Interest, as the case may be, upon surrender of
the Notes to be exchanged at any such office or agency. Whenever any Notes are
so surrendered for exchange, the Trust shall execute, and the Indenture Trustee
shall authenticate and deliver the Notes that the Noteholder making the exchange
is entitled to receive. Every Note presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
substantially in the form of Exhibit H hereto, duly executed by the Noteholder
thereof or its attorney duly authorized in writing.
(d) No service charge shall be made for any registration of transfer of
any Note or for the exchange of any Note, but the Indenture Trustee may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer of any Note or exchange of any Note.
(e) All Notes surrendered for registration of transfer and all Notes
surrendered for exchange shall be delivered to the Indenture Trustee and
cancelled and subsequently destroyed by the Indenture Trustee in accordance with
its customary practices in effect from time to time.
(f) The Note Registrar shall not register the transfer of any Note
(other than the transfer of an Offered Note to the nominee of the Depository or
a successor depository) unless the transferee has executed and delivered to the
Indenture Trustee a certification to the effect that either (i) the transferee
is not (A) an employee benefit plan (as defined in Section 3(3) of ERISA) that
is subject to the provisions of Title I of ERISA or (B) a plan (as defined in
Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code
(each of the foregoing, a "Benefit Plan"), and is not acting on behalf of or
investing the assets of a Benefit
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Plan, or (ii) with respect to the transfer of any Note other than a Class B-3
Note, that the transferee's acquisition and continued holding of the Note will
be covered by a U.S. Department of Labor Prohibited Transaction Class Exemption.
Each transferee of a beneficial interest in an Offered Note that is registered
in the name of, and deposited with, a depository operating a global book-entry
system shall be deemed to make one of the foregoing representations.
Section 5.04 Mutilated, Destroyed, Lost or Stolen Notes. If any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (a) there is delivered to the Trust, the Servicer and the Indenture
Trustee such security or indemnity satisfactory to each of them as may be
required by them to save each of them harmless (provided, that with respect to a
Subordinate Noteholder 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 Indenture Trustee that any such
Note has been acquired by a bona fide purchaser, the Trust shall execute and the
Indenture Trustee shall authenticate and deliver in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note a new Note of like Class and
Percentage Interest. In connection with the issuance of any new Note under this
Section 5.04, the Indenture Trustee may require the payment by the Noteholder 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 Indenture Trustee) in connection therewith shall be paid by the Servicer.
Any duplicate Note issued pursuant to this Section 5.04 shall constitute a Note
duly issued by the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Note shall be found at any time.
Section 5.05 Persons Deemed Owners. The Indenture Trustee and the Note
Insurer may treat the Person in whose name any Note is registered as the owner
of such Note for the purpose of receiving distributions pursuant to Section 3.04
hereof and for all other purposes whatsoever, and the Note Insurer and the
Indenture Trustee shall not be affected by any notice to the contrary.
Section 5.06 Access to List of Noteholders' Names and Addresses. (a)
The Indenture Trustee will furnish or cause to be furnished to the Servicer
within 15 days after receipt by the Indenture Trustee of a request therefor from
the Servicer in writing, a list of the names and addresses of the Noteholders as
of the most recent Record Date. If one or more Noteholders representing a Class
A Percentage Interest, a Class B-1 Percentage Interest, a Class B-2 Percentage
Interest or a Class B-3 Percentage Interest of not less than 25% (an
"Applicant") shall apply in writing to the Indenture Trustee, and such
application shall state that the Applicant desires to communicate with other
Noteholders with respect to its rights under this Indenture or under the Notes,
then the Indenture Trustee shall, within five Business Days after the receipt of
such application, send such notice to the current list of Noteholders. Every
Noteholder, by receiving and holding a Note, agrees with the Trust, the Servicer
and the Indenture Trustee that none of the Trust, the Servicer nor the Indenture
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 5.07 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders 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 Indenture Trustee and, where
required, to the Trust, the Note Insurer 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 Indenture and (subject to Section 7.01
hereof) conclusive in favor of the Indenture Trustee, the Trust, First Sierra
and the Servicer, if made in the manner provided in this Section 5.07.
(b) The fact and date of the execution by any Noteholder of any such
instrument or writing may be proven in any reasonable manner which the Indenture
Trustee deems sufficient.
(c) The ownership of Notes shall be proven by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Noteholder shall bind every holder of every Note 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 Indenture
Trustee, the Trust or the Servicer in reliance thereon, whether or not notation
of such action is made upon such Note.
Section 5.08 No Proceedings. By its acceptance of a Note, each
Noteholder shall be deemed to have agreed that it will not directly or
indirectly institute, or cause to be instituted, against the Residual Holder 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 Trust.
ARTICLE VI.
THE TRUST
Section 6.01 Liability of the Trust. (a) The Trust shall be liable for
payments in respect of the Notes in accordance herewith only to the extent of
the obligations specifically undertaken by the Trust herein.
Section 6.02 Limitation on Liability of the Trust. (a) Neither the
Owner Trustee nor the directors, officers, employees or agents of the Trust or
the Owner Trustee shall be under any liability to the Indenture Trustee, the
Noteholders, First Sierra, the Servicer, the Residual Holder 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 Trust's execution and delivery of
this Indenture and the issuance of the Notes. The Trust shall not be under any
liability to the Indenture Trustee, the Noteholders, First Sierra, the Servicer,
the Residual Holder or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Trust pursuant to this
Indenture whether arising from express or implied duties under this Indenture;
provided,
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however, that this provision shall not protect the Trust against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith,
misrepresentation or gross negligence in the performance of duties or by reason
of reckless disregard of obligations and duties hereunder. The Trust 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 6.03 Indemnity for Liability Claims. (a) The Residual Holder on
behalf of the Trust shall be deemed to have agreed to indemnify, defend and hold
harmless the Indenture Trustee (which shall include any of its directors,
employees, officers and agents), the Owner Trustee (which shall include any of
its directors, employees, officers and agents), the Noteholders and the Note
Insurer 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 5.01 of the Servicing Agreement; provided, however, that
such amounts shall be payable solely from amounts payable to the Residual Holder
pursuant to Section 3.04(b)(xviii) hereof.
Section 6.04 Liabilities. Notwithstanding any provision of this
Indenture, by entering into this Indenture, the Trust and the Residual Holder
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 Noteholder, a Class B-1 Noteholder, a Class B-2 Noteholder or a Class
B-3 Noteholder in the capacity of an investor in the Class A Notes, the Class
B-1 Notes, the Class B-2 Notes or the Class B-3 Notes) imposed on or asserted
against the Trust or otherwise arising out of or based on the arrangements
created by this Indenture (to the extent of the Trust assets remaining after the
Class A Noteholders, the Subordinate Noteholders and the Note Insurer have been
paid in full are insufficient to pay such losses, claims, damages or
liabilities).
Section 6.05 [Reserved.]
Section 6.06 Annual Statement as to Compliance. The Servicer on behalf
of the Trust will deliver to the Indenture Trustee and the Note Insurer, within
90 days after the end of each fiscal year of the Trust (commencing with the
fiscal year ended December 31, 1998), and otherwise in compliance with the
requirements of TIA Section 314(a)(4) an Officer's Certificate stating, as to
the Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Trust during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Trust has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 6.07 Payment of Principal and Interest. The Trust will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the
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Notes and this Indenture. Amounts properly withheld under the Code by any Person
from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Trust to such Noteholder for all purposes
of this Indenture.
Section 6.08 Maintenance of Office or Agency. The Trust will maintain
in New York, New York, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Trust in respect of the Notes and this Indenture may be served. The Trust
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Trust will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Trust shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Trust hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 6.09 Money for Payments to be Held in Trust. On or before each
Payment Date, the Trust shall deposit or cause to be deposited in the Collection
Account, but only from the sources described herein, an aggregate sum sufficient
to pay the amounts then becoming due under the Notes, such sum to be held in
trust for the benefit of the Persons entitled thereto and (unless the paying
agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of
its action or failure so to act.
The Trust will cause each paying agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee and the Note Insurer an
instrument in which such paying agent shall agree with the Indenture Trustee
(and if the Indenture Trustee acts as paying agent, it hereby so agrees),
subject to the provisions of this Section, that such paying agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the
Trust (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such paying agent;
(iv) immediately resign as a paying agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a paying agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding
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taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
The Trust may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, direct
any paying agent to pay to the Indenture Trustee all sums held in trust by such
paying agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such paying agent; and upon such a
payment by any paying agent to the Indenture Trustee, such paying agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to the escheat of funds, any
money held by the Indenture Trustee or any paying agent in trust for the payment
of any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Trust with the written consent and direction of the Note
Insurer and shall be deposited by the Indenture Trustee in the Collection
Account; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Trust for payment thereof (but only to the extent of
the amounts so paid to the Trust), and all liability of the Indenture Trustee or
such paying agent with respect to such trust money shall thereupon cease;
provided, however, that, if such money or any portion thereof had been
previously deposited by the Note Insurer with the Indenture Trustee for the
payment of principal or interest on the Notes, to the extent any amounts are
owing to the Note Insurer, such amounts shall be paid promptly to the Note
Insurer upon receipt of a written request by the Note Insurer to such effect;
and provided, further, that the Indenture Trustee or such paying agent, before
being required to make any such repayment, shall at the expense of the Trust
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Trust. The Indenture Trustee shall also adopt and employ, at the
expense of the Trust, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
paying agent, at the last address of record for each such Holder).
Section 6.10 Existence. Except as otherwise permitted by the provisions
of Section 6.13, the Owner Trustee, on behalf of the Trust, will keep in full
effect the Trust's existence, rights and franchises as a common law trust under
the laws of the State of Delaware (unless the Trust becomes, or any successor
Trust hereunder is or becomes, organized under the laws of any other state or of
the United States of America, in which case the Owner Trustee or a successor
Owner Trustee, on behalf of the Trust, will keep in full effect the Trust's
existence, rights and franchises under the laws of such other jurisdiction) and
the Servicer, on behalf of the Trust, will obtain and preserve the Trust's
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes and each other instrument or agreement included in the
Pledged Property.
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Section 6.11 Protection of Trust Property. The Trust intends the
security interest granted pursuant to this Indenture in favor of the Indenture
Trustee, the Note Insurer and the Noteholders, as their interests appear herein,
to be prior to all other liens in respect of the Trust Property, and the Trust
shall take all actions necessary to obtain and maintain, in favor of the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer, a
first lien on and a first priority, perfected security interest in the Trust
Property. The Trust will from time to time prepare (or shall cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) grant more effectively all or any portion of the Trust
Property;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Indenture Trustee for the benefit
of the Noteholders and the Note Insurer, created by this Indenture or
carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any grant made or to be made by this Indenture;
(iv) enforce any of the Pledged Property;
(v) preserve and defend title to the Trust Property and the
rights of the Indenture Trustee in such Trust Property against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Property when due.
The Trust hereby designates the Indenture Trustee its agent and attorney-in-fact
to execute any financing statement, continuation statement or other instrument
required by the Indenture Trustee or the Note Insurer pursuant to this Section
6.11.
Section 6.12 Performance of Obligations; Servicing of Receivables. (a)
The Trust will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Property or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the other Transaction Documents or any other instrument or agreement.
(b) The Trust may contract with other Persons acceptable to the Note
Insurer to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Indenture Trustee and
the Note Insurer in an Officer's Certificate of the Trust shall be deemed to be
action taken by the Trust. Initially, the Trust has contracted with the Servicer
to substantially perform the Trust's duties under this Indenture, and in such
regard, the
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Trust may rely upon information provided by the Servicer in connection with any
Officer's Certificates of the Trust to be provided pursuant to this Indenture
and any other action to be take by the Trust pursuant to this Indenture.
(c) The Trust will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and in the instruments and agreements included in the Trust Property,
including, but not limited to, preparing (or causing to be prepared) and filing
(or causing to be filed) all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture and the Servicing
Agreement in accordance with and within the time periods provided for herein and
therein.
(d) If a Responsible Officer of the Owner Trustee shall have actual
knowledge of the occurrence of an Event of Servicing Termination under the
Servicing Agreement, the Trust shall promptly notify the Indenture Trustee, the
Note Insurer and the Rating Agencies in writing thereof, and shall specify in
such notice the action, if any, the Trust is taking in respect of such default.
If a Servicer Termination Event shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Servicing Agreement with
respect to the Contracts, the Trust shall take all reasonable steps available to
it to remedy such failure.
Section 6.13 Negative Covenants. So long as any Notes are Outstanding,
the Trust shall not:
(i) except as expressly permitted by this Indenture or the
Transaction Documents, sell, transfer, exchange or otherwise dispose of
any of the properties or assets of the Trust, including those included
in the Trust Property, unless directed to do so by the Note Insurer;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Property; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Indenture
Trustee created by this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Property or
any part thereof or any interest therein or the proceeds thereof (other
than tax liens, mechanics' liens and other liens that arise by
operation of law, in each case on Equipment and arising solely as a
result of an action or omission of the related Obligor), (C) permit the
lien of this Indenture not to constitute a valid first priority (other
than with respect to any such tax, mechanics' or other lien) security
interest in the Trust Property or (D) amend, modify or fail to comply
with the provisions of the Transaction Documents without the prior
written consent of the Note Insurer;
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Section 6.14 Trust May Consolidate, Etc. Only on Certain Terms. (a) The
Trust shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Trust) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory
to the Indenture Trustee and the Note Insurer, the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Trust to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such transaction, no
Event of Default or Restricting Event shall have occurred and be
continuing;
(iii) the Trust shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee and the
Note Insurer) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Note Insurer or any
Noteholder;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(v) the Trust shall have delivered to the Indenture Trustee
and the Note Insurer an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation or merger and such supplemental
indenture comply with this Article VI and that all conditions precedent
herein provided for relating to such transaction have been complied
with (including any filing required by the Exchange Act);
(vi) the Rating Agencies have confirmed that such transaction
will not result in the reduction or withdrawal of any rating on any
class of Notes; and
(vii) the Note Insurer has given its prior written consent.
(b) The Trust shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Trust Property, to any
Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Trust the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any state, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee and the Note Insurer, the due and
punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture and each of the Transaction Documents on the part of the
Trust to be performed or observed, all as provided herein, (C)
expressly agree by means of such supplemental indenture that all right,
title and interest so conveyed or transferred shall be subject and
subordinate to the rights of Holders of the Notes, (D)
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unless otherwise provided in such supplemental indenture, expressly
agree to indemnify, defend and hold harmless the Trust against and from
any loss, liability or expense arising under or related to this
Indenture and the Notes and (E) expressly agree by means of such
supplemental indenture that such Person (or if a group of persons, then
one specified Person) shall prepare (or cause to be prepared) and make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Event of Default or Restricting Event shall have occurred and be
continuing;
(iii) the Trust shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee and the
Note Insurer) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Note Insurer or any
Noteholder;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(v) the Trust shall have delivered to the Indenture Trustee
and the Note Insurer an Officers' Certificate and an Opinion of Counsel
each stating that such conveyance or transfer and such supplemental
indenture comply with this Article VI and that all conditions precedent
herein provided for relating to such transaction have been complied
with (including any filing required by the Exchange Act);
(vi) the Rating Agencies have confirmed that such transaction
will not result in the reduction or withdrawal of any rating on any
class of Notes; and
(vii) the Note Insurer has given its prior written consent.
Section 6.15 Successor or Transferee. (a) Upon any consolidation or
merger of the Trust in accordance with Section 6.14, the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the Trust
under this Indenture with the same effect as if such Person had been named as
the Trust herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Trust pursuant to Section 6.14(b), the Trust will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Trust with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee and the Note Insurer stating that the Trust is
to be so released.
Section 6.16 No Other Business. The Trust shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the other
Transaction Documents and activities incidental thereto.
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Section 6.17 No Borrowing. The Trust shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Note Insurer and (iii) any other Indebtedness permitted by or arising
under the Transaction Documents. The proceeds of the Notes shall be used
exclusively to fund the Trust's purchase of the Contracts and the other assets
constituting the Pledged Property and to pay the Trust's organizational,
transactional and start-up expenses.
Section 6.18 Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Servicing Agreement or this Indenture, the Trust shall
not make any loan or advance or credit to, or guarantee (directly or indirectly
or by an instrument having the effect of assuring another's payment or
performance on any obligation or capability of so doing or otherwise), endorse
or otherwise become contingently liable, directly or indirectly, in connection
with the obligations, stocks or dividends of, or own, purchase, repurchase or
acquire (or agree contingently to do so) any stock, obligations, assets or
securities of, or any other interest in, or make any capital contribution to,
any other Person.
Section 6.19 Capital Expenditures. The Trust shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personal).
Section 6.20 Compliance with Laws. The Trust shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Trust to perform its obligations under the Notes, this Indenture or any
other Transaction Document.
Section 6.21 Further Instruments and Acts. Upon request of the
Indenture Trustee or the Note Insurer, the Trust will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture and the other
Transaction Documents.
ARTICLE VII.
THE INDENTURE TRUSTEE
Section 7.01 Duties of Indenture Trustee. (a) The Indenture Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. If an Event of Default of which a Responsible Officer
of the Indenture Trustee shall have actual knowledge has occurred and has not
been cured or waived, the Indenture Trustee shall exercise such of the rights
and powers vested in it by this Indenture, 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 Indenture Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Indenture Trustee that are specifically required to
be furnished pursuant to any provision of this Indenture, shall examine them to
determine whether they conform as to form to the requirements of this Indenture.
No acceptance of, or reliance on, any such item by the Indenture Trustee shall
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constitute a representation by the Indenture Trustee of the enforceability or
sufficiency of such item.
(c) No provision of this Indenture shall be construed to relieve the
Indenture 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 Default, and after
the curing of all such Events of Default that may have occurred, the
duties and obligations of the Indenture Trustee shall be determined
solely by the express provisions of this Indenture; the Indenture
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture; no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and in the absence of bad faith on the
part of the Indenture Trustee, the Indenture 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 Indenture Trustee and, if specifically required to be furnished
pursuant to any provision of this Indenture, conforming to the
requirements of this Indenture;
(ii) The Indenture Trustee shall not be liable for an error of
judgment made in good faith by a Responsible Officer of the Indenture
Trustee unless it shall be proved that the Indenture Trustee was
grossly negligent in ascertaining the pertinent facts;
(iii) The Indenture 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 Indenture, pursuant to the
direction of the Notes 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 Indenture
Trustee, or exercising, suffering or omitting to take any trust or
power conferred upon the Indenture Trustee, under this Indenture;
(iv) The Indenture Trustee shall not be charged with knowledge
of any Event of Servicing Termination, any Event of Default or
Restricting Event unless a Responsible Officer of the Indenture Trustee
obtains actual knowledge of such failure or event or the Indenture
Trustee receives written notice of such failure or event from the
Servicer, the Trust, the Note Insurer or any Noteholder; and
(v) The Indenture 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. The Indenture Trustee shall have no liability in
connection with compliance of the Servicer or the Trust with statutory
or regulatory requirements related to the Contracts or the related
Equipment. The Indenture Trustee shall not make or be deemed to have
made any representations or warranties with respect to the Contracts or
related Equipment or the validity or sufficiency of any assignment of
the Contracts to the Trust or the Indenture Trustee. The Indenture
Trustee
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shall have no obligation or liability in respect of the maintenance of
casualty or liability insurance in connection with the Contracts or the
related Equipment.
(d) The Indenture 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 Indenture shall in any event
require the Indenture Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Indenture or
the Servicing Agreement except during such time, if any, as the Indenture
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 Indenture.
(e) On each Determination Date, the Indenture Trustee shall give
notice, by facsimile, to a Servicing Officer of the Servicer and the Note
Insurer if the total amount then on deposit in the Collection Account is less
than the amount indicated in the Monthly Statement.
(f) The Indenture Trustee shall promptly notify the Note Insurer upon
obtaining actual knowledge or receipt of written notice by a Responsible Officer
of the Indenture Trustee of: (a) any proposed change herein or supplement
hereto; (b) the occurrence of any Event of Default, Event of Servicing
Termination or Restricting Event actually known to a Responsible Officer of the
Indenture Trustee; (c) any proposed change of the Indenture Trustee hereunder;
(d) any matter to be put to the Noteholders for election hereunder; (e) any
proposed exercise by the Noteholders 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 Noteholders or to the Indenture Trustee.
Section 7.02 Eligible Investments. The Servicer shall direct the
Indenture Trustee to invest in Eligible Investments, as further specified from
time to time by written notice to the Indenture Trustee executed by a Servicing
Officer, any cash amounts deposited in the Collection Account pursuant to the
terms of this Indenture or the Servicing 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 maturity. The Indenture
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 7.02. The Indenture Trustee shall have no
obligation to initiate any investments in the absence of such written direction.
Section 7.03 Indenture Trustee's Assignment of Contracts. If in any
enforcement suit or legal proceeding it is held, or in connection with the
collection of a Defaulted Contract the Servicer or its assigns reasonably
anticipates, that the Servicer or its assigns may not or will not be able to
enforce a Contract on the ground that neither the Servicer nor its assigns are a
real party in interest or a holder entitled to enforce the Contract, then the
Indenture Trustee shall, at the Servicer's or its assigns' expense, take such
steps as the Indenture Trustee deems necessary to enforce the Contract,
including (i) bringing suit in the Indenture Trustee's name or the names of the
Noteholders and the Note Insurer and (ii) executing
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and delivering all such instruments or documents as shall be required to
transfer title to a Contract to the Servicer or its assigns or otherwise enforce
such Contract.
Section 7.04 Certain Matters Affecting the Indenture Trustee. Except as
otherwise provided in Section 7.01:
(i) The Indenture 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 Indenture 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 Indenture Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture, or
to institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Noteholders,
pursuant to the provisions of this Indenture unless such Noteholders
shall have offered to the Indenture 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 Indenture Trustee; provided, however, that nothing contained
herein shall relieve the Indenture Trustee of the obligations, upon the
occurrence of an Event of Default (that has not been cured), to
exercise such of the rights and powers vested in it by this Indenture
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 Indenture 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 Indenture;
(v) Prior to the occurrence of an Event of Default of which a
Responsible Officer of the Indenture Trustee shall have actual
knowledge and after the curing of all Events of Default that may have
occurred, the Indenture 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 Note Insurer or the Holders of
Notes of any Class evidencing Percentage Interests of not less than 25%
of such Class; provided, however, that if the payment within a
reasonable time to the Indenture 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 Indenture Trustee, not
reasonably assured to the Indenture Trustee by the security afforded to
it by the terms of this Indenture, the Indenture Trustee may require
indemnity satisfactory to it against such cost, expense or liability as
a condition to so proceeding. The reasonable expense of
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every such examination shall be paid by the requesting party or, if
paid by the Indenture 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 Obligors; and
(vi) The Indenture 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 Indenture Trustee shall not be
responsible for the misconduct, negligence or for the supervision of
any of the Indenture Trustee's agents or attorneys appointed with due
care by the Indenture Trustee hereunder or that of First Sierra, the
Servicer or the Trust.
Section 7.05 Indenture Trustee Not Liable for Notes or Contracts. The
Notes do not represent an obligation issued by the Indenture Trustee or any
Affiliate thereof. The promise to pay the Notes according to their terms and the
terms of this Indenture set forth in the Notes and in Section 2.05 hereof
provides recourse to the Pledged Property and the Note Insurance Policy only.
The Indenture Trustee does not assume any responsibility for the accuracy of the
statements herein or in the Notes (other than as set forth in Section 7.17 and
the certificate of authentication on the Notes). The Indenture Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes (other than the certificate of authentication on the Notes) or of any
Contract or related document. The Indenture 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 Contract, to the
perfection or priority thereof, or to the efficacy of the Trust or any portion
thereof to pay any Note, the existence or validity of any Contract, the validity
of the assignment of any Contract or the related Pledged Property to the Trust
or of any intervening assignment, the review of any Contract, any Contract File
or the Computer Tape (it being understood that neither the Indenture Trustee nor
any of its agents have reviewed or intend to review such matters, the sole
responsibility for such review being vested in the Trust), the completeness of
any Contract File, the receipt by it or its custodian of any Contract, the
performance or enforcement of any Contract, subject to Section 4.01 of the
Servicing Agreement, the compliance by the Trust with any covenant or the breach
by First Sierra or the Trust of any warranty or representation made under the
Servicing Agreement, the Receivables Transfer Agreement or in any related
document or the accuracy of any such warranty or representation, any investment
of monies in the Collection Account (except to the extent that the Indenture
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 Obligor, any action of the Servicer taken in the name of the
Indenture Trustee, any action by the Indenture 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 Indenture,
the Notes or any Contract 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 Noteholder 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 Indenture Trustee shall not be
accountable for the use or application by First Sierra or the Trust of any of
the Notes or of the proceeds of such Notes or for the use or application of any
funds paid to the Servicer in respect of the Contracts.
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Section 7.06 Indenture Trustee May Own Notes. The Indenture Trustee in
its individual or any other capacity may become the owner or pledge of Notes
with the same rights as it would have if it were not Indenture Trustee, subject
to the definition of the term "Noteholder" in Annex A hereto.
Section 7.07 Indenture Trustee's Fees and Expenses. (a) The Servicer on
behalf of the Residual Holder agrees:
(i) to pay to the Indenture Trustee, pursuant to Section
3.04(b)(v), 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
Indenture Trustee of an express trust); provided, however, that to the
extent payment of any such Indenture Trustee Fees from the Collection
Account would result in an Available Funds Shortfall, such Indenture
Trustee Fees in an amount equal to the amount of the Available Funds
Shortfall shall instead be paid directly by First Sierra to the
Indenture Trustee;
(ii) except to the extent otherwise expressly provided herein,
to reimburse the Indenture Trustee, pursuant to Section 3.04(b)(vi), as
applicable, upon its request, for all reasonable expenses,
disbursements and advances incurred or made by the Indenture Trustee in
accordance with any provision of this Indenture (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, however, that for purposes of this clause (ii), such
expenses, disbursements and advances shall be limited to an aggregate
amount of $75,000; provided, further, however, that to the extent
payment of any such Indenture Trustee Expenses from the Collection
Account would result in an Available Funds Shortfall, such Indenture
Trustee Expenses in an amount equal to the amount of the Available
Funds Shortfall shall instead be paid directly by First Sierra to the
Indenture Trustee; and
(iii) to reimburse the Indenture Trustee, pursuant to Section
3.04(b)(xvi), as applicable, for all reasonable expenses, disbursements
and advances that would have been paid pursuant to Section 7.07(a)(ii)
but for the $75,000 limitation.
(b) The Servicer's obligations under this Section 7.07 shall survive
the termination of this Indenture or the earlier resignation or removal of the
Indenture Trustee. The Indenture 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 7.10 hereof, the failure by the Servicer to pay
to the Indenture Trustee any compensation or other expenses shall not relieve
the Indenture Trustee of its obligations hereunder.
(d) In the event the Indenture Trustee performs services or incurs
expenses in the context of a proceeding described in Sections 6.01(a)(iv),
6.01(a)(v) or 6.01(a)(vii) of the Servicing Agreement, the fees for such
services and such expenses shall be considered expenses
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of administration for the purposes of any bankruptcy laws or laws relating to
creditors rights generally.
Section 7.08 Eligibility Requirements for Indenture Trustee. The
Indenture Trustee shall at all times satisfy the requirements of TIA ss. 310(a).
The Indenture Trustee hereunder shall at all times be a corporation acceptable
to the Note 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
Indenture Trustee hereunder to the extent that such qualification would, in
itself, affect any then current rating of the Offered Notes or the Subordinate
Notes 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 7.08,
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 Indenture Trustee's deposit ratings shall be at
least "investment grade" by the Rating Agencies. In case at any time the
Indenture Trustee shall cease to be eligible in accordance with the provisions
of this Section 7.08, the Indenture Trustee shall resign immediately in the
manner and with the effect specified in Section 7.09 hereof. The Indenture
Trustee shall comply with TIA ss. 310(b), including the optional provision
permitted by the second sentence of TIA ss. 310(b)(9); provided, however, that
there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or
indentures under which other securities of the Trust are outstanding if the
requirements for such exclusion set forth in TIA ss. 310(b)(1) are met.
Section 7.09 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss.311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 7.10 Resignation or Removal of Indenture Trustee. The Indenture
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer, the Trust, the Note Insurer
and each Noteholder which resignation will not become effective until such time
as a successor Indenture Trustee has been appointed in accordance with the
provisions of this Section 7.10. Upon receiving such notice of resignation, the
Servicer shall promptly appoint a successor Indenture Trustee acceptable to the
Note Insurer by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Indenture Trustee and one copy to the
successor Indenture Trustee. If no successor Indenture Trustee shall have been
so appointed and have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Indenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
(a) If at any time the Indenture Trustee shall cease to be eligible in
accordance with the provisions of Section 7.08 hereof and shall fail to resign
after written request therefor by the Servicer, the Note Insurer, the Holders of
Notes of any Class evidencing Percentage Interests of more than 25% of such
Class, or, if at any time the Indenture Trustee shall be legally unable to act,
or shall be adjudged a bankrupt or insolvent, or a receiver of the Indenture
Trustee or of its
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property shall be appointed, or any public officer shall take charge or control
of the Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation, or liquidation, then the Servicer may, with the
consent of the Note Insurer, and shall, at the direction of (i) the Note Insurer
or (ii) the Holders of Notes of any Class evidencing Percentage Interests of
more than 25% of the related Class, with the consent of the Note Insurer, remove
the Indenture Trustee. Notwithstanding anything in this Indenture to the
contrary, the Note Insurer shall have the right to remove the Indenture Trustee
for "cause." For purposes of this section, "cause" shall mean (i) the gross
negligence or willful misconduct of the Indenture Trustee in the performance of
its duties under this Indenture or the Insurance Agreement or (ii) the failure
or unwillingness of the Indenture Trustee to perform its duties under this
Indenture or the Insurance Agreement; provided, however, the Note Insurer may
not remove the Indenture Trustee for "cause" pursuant to clause (ii) of the
immediately preceding sentence unless it has (A) consulted with the Indenture
Trustee in good faith and provided notice to the Indenture Trustee regarding any
actions or omissions of the Indenture Trustee under this Indenture or the
Insurance Agreement which the Note Insurer believes constitutes a failure or
unwillingness of the Indenture Trustee to perform its duties under this
Indenture or the Insurance Agreement and (B) provided the Indenture Trustee with
the opportunity to remedy such failure or unwillingness within 10 Business Days
(or such longer period to which the Note Insurer may reasonably consent)
following the receipt by the Indenture Trustee of written notice thereof. In the
event that the Indenture Trustee is removed by the Note Insurer pursuant to this
Section, the removal and substitution procedures set forth in this Section 7.10
and Section 7.11 hereof shall be followed. If the Servicer, the Note Insurer or
Noteholders remove the Indenture Trustee, the Servicer, the Note Insurer or such
Noteholders shall promptly appoint a successor Indenture Trustee acceptable to
the Note Insurer by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Indenture Trustee so removed and one copy
to the successor Indenture Trustee.
(b) Any resignation or removal of the Indenture Trustee and appointment
of a successor Indenture Trustee pursuant to this Section 7.10 shall not become
effective until acceptance of appointment by the successor Indenture Trustee as
provided in Section 7.11 hereof. Notice of the resignation or removal of the
Indenture Trustee shall be given in writing to the Rating Agencies by the
Servicer. In the event no successor Indenture Trustee has been appointed within
30 days of the resignation or removal of the Indenture Trustee, the Indenture
Trustee, the Note Insurer or the Majority Holders of the Notes may petition a
court of competent jurisdiction to appoint a successor Indenture Trustee.
Section 7.11 Successor Indenture Trustee. (a) Any successor Indenture
Trustee appointed as provided in Section 7.10 hereof shall execute, acknowledge
and deliver to the Servicer, the Trust and predecessor Indenture Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Indenture Trustee shall become effective and such
successor Indenture 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 Indenture
Trustee. The predecessor Indenture Trustee shall deliver to the successor
Indenture Trustee all documents and statements held by it hereunder. The
Servicer, the Trust and the predecessor Indenture 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 Indenture
Trustee all
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such rights, powers, duties and obligations. The predecessor Indenture Trustee
shall not be liable for the acts or omissions of any successor Indenture Trustee
hereunder.
(b) No successor Indenture Trustee shall accept appointment as provided
in this Section 7.11 unless at the time of such acceptance such successor
Indenture Trustee shall be acceptable to the Note Insurer and eligible as the
Indenture Trustee under the provisions of Section 7.08 hereof, and as a
successor Servicer under the provisions of Section 6.02 of the Servicing
Agreement.
(c) Upon acceptance of appointment by a successor Indenture Trustee as
provided in this Section 7.11, the Servicer shall mail notice of the succession
of such Indenture Trustee hereunder to the Note Insurer and all Noteholders at
their addresses as shown in the Note Register. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by such successor
Indenture Trustee, then the successor Indenture Trustee shall cause such notice
to be mailed at the expense of the Servicer.
Section 7.12 Merger or Consolidation of Indenture Trustee. Any
corporation into which the Indenture 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 Indenture Trustee shall be a party, or
any corporation succeeding to the corporate trust business of the Indenture
Trustee, shall be the successor of the Indenture Trustee hereunder, provided
such corporation shall be eligible under the provisions of Section 7.08 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 7.13 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, 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
Indenture Trustee shall, with the consent of, or at the written direction of,
the Note Insurer, execute and deliver all instruments to appoint one or more
Persons approved by the Indenture Trustee to act as co-Indenture Trustee or
co-Indenture Trustees, jointly with the Indenture Trustee, or separate Indenture
Trustee or separate Indenture 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
Noteholders, and the Note Insurer such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 7.13, such powers, duties,
obligations, rights and trusts as the Servicer, the Trust and the Indenture
Trustee may consider necessary or desirable; provided, however, that if there is
a conflict between the Trust, the Indenture Trustee and the Note Insurer
regarding the appointment of a co-Indenture Trustee or separate Indenture
Trustee, the Note 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 Indenture Trustee and Trust, acting jointly, shall have the
power to make such appointment; provided, however, that if the Trust shall not
have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Indenture Trustee alone shall have the power to make such
appointment. No co-Indenture Trustee or separate Indenture Trustee hereunder
shall be required to meet the terms of eligibility as a successor Indenture
Trustee under Section 7.08 hereof, and no notice to Noteholders of the
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appointment of any co-Indenture Trustee or separate Indenture Trustee shall be
required under Section 7.12 hereof.
(b) Every separate Indenture Trustee and co-Indenture 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 Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
Indenture Trustee or co-Indenture Trustee jointly (it being understood
that such separate Indenture Trustee or co-Indenture Trustee is not
authorized to act separately without the Indenture 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
Indenture Trustee hereunder or as successor to the Servicer hereunder),
the Indenture 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 Indenture Trustee or co-Indenture
Trustee but solely at the direction of the Indenture Trustee;
(ii) No separate Indenture Trustee or co-Indenture Trustee
hereunder shall be personally liable by reason of any act or omission
of any other separate Indenture Trustee or co-Indenture Trustee
hereunder; and
(iii) The Indenture Trustee may at any time accept the
resignation of or remove any separate Indenture Trustee or co-Indenture
Trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate Indenture
Trustees and co-Indenture Trustees, as effectively as if given to each of them.
Every instrument appointing any separate Indenture Trustee or co-Indenture
Trustee shall refer to this Indenture and the conditions of this Article VII.
Each separate Indenture Trustee and co-Indenture 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 Indenture Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of, or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee and a copy thereof given to the Servicer and the Trust.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at any
time constitute the Indenture 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 Indenture on its behalf and in its name. If any
separate Indenture Trustee or co-Indenture 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 Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
separate Indenture Trustee or successor co-Indenture Trustee.
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(e) The Servicer shall be responsible for the payment of any fees or
expenses of any separate Indenture Trustee or co-Indenture Trustee.
Section 7.14 Indenture Trustee May Enforce Claims Without Possession of
Note. All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Indenture Trustee without the possession of any
of the Notes or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Indenture Trustee shall be brought in its
own name or in its capacity as Indenture Trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents and counsel, be
for the ratable benefit of the Noteholders in respect of which such judgment has
been recovered.
Section 7.15 Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Servicer under the Servicing Agreement or
under this Indenture shall occur and be continuing, the Indenture Trustee, in
its discretion, may, subject to the provisions of 6.04 of the Servicing
Agreement, proceed to protect and enforce its rights and the rights of the
Noteholders and the Note Insurer under this Indenture 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 Indenture or in aid
of the execution of any power granted in this Indenture or for the enforcement
of any other legal, equitable or other remedy, as the Indenture Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Indenture Trustee, the Noteholders and the Note Insurer.
Section 7.16 Undertaking for Costs. All parties to this Indenture agree
(and each holder of any Note by its acceptance thereof 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 Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture 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,
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 shall not apply to any suit instituted by the
Indenture Trustee or the Note Insurer, to any suit instituted by any Noteholder,
or group of Noteholders, holding in the aggregate more than 10% of the then
outstanding principal balance of the Notes, or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal of or interest on
any Note on or after the maturities for such payments, including the stated
maturity as applicable.
Section 7.17 Representations and Warranties of Indenture Trustee. The
Indenture Trustee represents and warrants for the benefit of the Noteholders and
the Note Insurer that:
(a) Organization and Good Standing. The Indenture 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 Indenture Trustee has the power, authority and
legal right to execute, deliver and perform this Indenture, and the execution,
delivery and performance
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of this Indenture have been duly authorized by the Indenture Trustee by all
necessary corporate action.
(c) Binding Obligations. This Indenture, assuming due authorization,
execution and delivery by all other parties thereto, constitutes the legal,
valid and binding obligation of the Indenture Trustee, enforceable against the
Indenture 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 7.18 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 Owner Trustee for signature at least five days before such returns are due
to be filed. The Indenture Trustee, upon request, will furnish the Servicer with
all such information known to the Indenture Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust. In
no event shall the Indenture Trustee or the Owner Trustee in their respective
individual capacities be liable for any liabilities, costs or expenses of the
Trust, the Noteholders 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 VIII.
EVENTS OF DEFAULT; REMEDIES
Section 8.01 Events of Default. "Event of Default" wherever used herein
means any one of the following events (whatever the reason for such Event of
Default and without regard to 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 administrative or governmental
body):
(a) failure to distribute or cause to be distributed to the Indenture
Trustee, for the benefit of the Noteholders, all or part of any payment of
interest required to be made under the terms of such Notes or this Indenture on
each monthly Payment Date when such amount is due and payable; and
(b) failure to distribute or cause to be distributed to the Indenture
Trustee, for the benefit of the Noteholders (x) on any Payment Date, an amount
equal to the principal due on the Outstanding Notes as of such Payment Date to
the extent that sufficient Available Funds are on deposit in the Collection
Account or (y) on the Class A-1 Maturity Date, the Class A-2 Maturity Date, the
Class A-3 Maturity Date, the Class A-4 Maturity Date, the Class B-1 Maturity
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Date, the Class B-2 Maturity Date or the Class B-3 Maturity Date, as the case
may be, any remaining principal owed on the Outstanding Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B-1 Notes, Class B-2 Notes or
Class B-3 Notes, as the case may be.
Section 8.02 Acceleration of Maturity, Rescission and Annulment. (a) If
an Event of Default occurs and is continuing, then and in every such case the
Indenture Trustee, at the written direction of the Controlling Parties, shall
declare the principal of all of the Notes to be immediately due and payable, by
a notice in writing to the Servicer, and upon any such declaration such
principal (together with all accrued and previously unpaid interest) shall
become immediately due and payable. The Indenture Trustee shall give notice to
each Noteholder, the Note Insurer and the Rating Agencies of such declaration.
(b) At any time, after such a declaration of acceleration has been
made, but before any sale of the Pledged Property has been made or a judgment or
decree for payment of the money due has been obtained by the Indenture Trustee
as hereinafter in this Article VIII provided, the Controlling Parties, by
written notice to the Servicer and the Indenture Trustee, may rescind and annul
such declaration and its consequence if monies have been paid or deposited with
the Indenture Trustee in a sum sufficient to pay:
(i) all overdue installments of interest on all Class A Notes
and the Subordinate Notes;
(ii) the principal of any of the Class A Notes or the
Subordinate Notes which has become due otherwise than by such
declaration of acceleration and interest thereon at the applicable Note
Rate;
(iii) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest on the Class A Notes and
the Subordinate Notes at the rate specified therefor in the applicable
Notes; and
(iv) all sums paid or advanced, together with interest
thereon, by the Indenture Trustee, or the Note Insurer hereunder or
under the Insurance Agreement or the Note Insurance Policy and the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, the Note Insurer and their respective agents and
counsel.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Subsequent to any such declaration of acceleration and so long as such
declaration and its consequences has not been rescinded and annulled, prior to
the exercise by the Indenture Trustee of the remedies set forth in Section
8.03(b) or (c) hereof, the Indenture Trustee shall give the Noteholders and the
Note Insurer ten days notice of its intention to take such actions.
Section 8.03 Remedies. (a) If an Event of Default shall have occurred
and be continuing, the Indenture Trustee, at the written direction of the
Controlling Parties, may do one or more of the following:
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(b) institute, in its own name and as Indenture Trustee, Proceedings
for the collection of the entire amount of principal and interest remaining
unpaid on the Notes, or under this Indenture in respect of the Notes, whether by
declaration or otherwise, enforce any judgment obtained, and collect from the
Pledged Property securing the Notes the monies adjudged due;
(c) sell the Pledged Property or any portion thereof or rights or
interest therein, at one or more sales called and conducted in any manner
permitted by law;
(d) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Pledged Property securing the
Notes; or
(e) exercise any remedies of a secured party under the UCC or other
applicable law and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Note Insurer or the
Noteholders hereunder.
Section 8.04 Notice of Event of Default. Within two Business Days after
a Responsible Officer obtaining actual knowledge of the occurrence of any Event
of Default, the Indenture Trustee shall transmit, by certified mail return
receipt requested, hand delivery or overnight courier, to all Noteholders, as
their names and addresses appear in the Register, notice of such Event of
Default, unless such Event of Default shall have been cured or waived.
Section 8.05 Exercise of Power by Indenture Trustee In case an Event of
Default has occurred and is continuing to the actual knowledge of a Responsible
Officer of the Indenture Trustee, the Indenture Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in its exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his own affairs.
Section 8.06 Indenture Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, reorganization,
arrangement, adjustment, composition or other judicial Proceeding, relating to
the Trust or any other obligor upon the Notes or the property of the Trust or of
such other obligor or their creditors, the Indenture Trustee (irrespective of
whether the principal of any class of Notes shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand for the payment of overdue
principal or interest) shall be entitled and empowered, to intervene in such
proceeding or otherwise:
(a) to file and prove a claim for all amounts owing and unpaid in
respect of the Notes and to file such other papers or documents and take such
other action including participating as a member, voting or otherwise, in any
committee of creditors appointed in the matter, as may be necessary or advisable
in order to have the claims of the Indenture Trustee, the Note Insurer
(including, in each case, any claim for the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, the Note Insurer, and their
respective agents and counsel) and the Noteholders allowed in such judicial
Proceeding;
(b) to petition for lifting of the automatic stay and thereupon to
foreclose upon the Pledged Property as elsewhere provided herein; and
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(c) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such judicial Proceeding is hereby authorized by each
Noteholder to make such payments to the Indenture Trustee, and in the event that
the Indenture Trustee shall consent to the making of such payments directly to
the Note Insurer or the Noteholders, to pay to the Indenture Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture Trustee to
authorize or to consent or accept or adopt on behalf of the Note Insurer or any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting, the Note Insurer, the Notes or the rights of any Holder thereof, or
to authorize the Indenture Trustee to vote in respect of the claim of the Note
Insurer or any Noteholder in any such Proceeding.
Section 8.07 Allocation of Money Collected. If the Notes have been
declared due and payable following an Event of Default and such declaration and
its consequences have not been rescinded and annulled, any money collected by
the Indenture Trustee with respect to the Notes pursuant to this Article (and
any funds then held or thereafter received by the Indenture Trustee) shall be
applied in the following order, at the date or dates fixed by the Indenture
Trustee:
First: To the payment of all amounts due the Indenture Trustee
under Section 7.07 hereof;
Second: To the payment of all Premium Amounts due and payable
to the Note Insurer;
Third: To the payment of Class A-1 Note Interest to the Class
A-1 Noteholders, Class A-2 Note Interest to the Class A-2 Noteholders,
Class A-3 Note Interest to the Class A-3 Noteholders and Class A-4 Note
Interest to the Class A-4 Noteholders, pari passu;
Fourth: To the payment of the Class B-1 Note Interest to the
Class B-1 Noteholders;
Fifth: To the payment of Class B-2 Note Interest to the Class
B-2 Noteholders;
Sixth: To the payment of Class B-3 Note Interest to the Class
B-3 Noteholders;
Seventh: To the payment of the outstanding Class A Note
Principal Balance to the Class A Noteholders (in the sequential-pay
fashion described in Section 3.04(b)(xi) hereof);
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Eighth: To the payment of all Reimbursement Amounts, if any,
to the Note Insurer;
Ninth: To the payment of the outstanding Class B-1 Note
Principal Balance to the Class B-1 Noteholders;
Tenth: To the payment of the outstanding Class B-2 Note
Principal Balance to the Class B-2 Noteholders;
Eleventh: To the payment of the outstanding Class B-3 Note
Principal Balance to the Class B-3 Noteholders;
Twelfth: To the payment of all reasonable costs and expenses
incurred by any Noteholder in connection with the enforcement of its
rights hereunder or under the Notes, ratably, without preference or
priority of any kind; and
Thirteenth: To the payment of any surplus to or at the written
direction of the Residual Holder.
Section 8.08 Waiver of Events of Default. (a) The Note Insurer or the
holders of 66-2/3% of the then outstanding principal balance of the Notes (with
the prior written consent of the Note Insurer) may, by one or more instruments
in writing, waive any Event of Default hereunder and its consequences, except a
continuing Event of Default:
(i) in respect of the payment of the principal of or interest
on any Note (which may only be waived by the Holder of such Note), or
(ii) in respect of a covenant or provision hereof which under
Article XI cannot be modified or amended without the consent of the
Holder of each Note outstanding affected (which only may be waived by
the Holders of all Notes outstanding affected).
(b) A copy of each waiver pursuant to Section 8.08(a) shall be
furnished by First Sierra to the Indenture Trustee. Upon any such waiver, such
Event of Default shall cease to exist and shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereon.
Section 8.09 Limitation On Suits. No Holder shall have any right to
institute any Proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Controlling Parties shall have made written request to the
Indenture Trustee to institute Proceedings in respect of such Event of Default
in its own name as Indenture Trustee hereunder;
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(c) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Indenture Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such Proceeding;
(e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 30 day period by the Controlling Parties;
and
(f) the Note Insurer has given its prior written consent;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders
or the Note Insurer or to enforce any right under this Indenture, except in the
manner herein provided.
Section 8.10 Unconditional Right of Noteholders to Receive Principal
and Interest. Notwithstanding any other provision in this Indenture, the
Noteholders shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Note as such principal
and interest becomes due and payable in accordance with the terms of this
Indenture (including, without limitation, the limitation on such payments to the
extent of Available Funds on each Payment Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Noteholder.
Section 8.11 Restoration of Rights and Remedies. If the Indenture
Trustee, the Note Insurer or any Noteholder has instituted any Proceeding to
enforce any right or remedy in accordance with the terms of this Indenture and
such Proceeding has been discontinued or abandoned for any reason, or has been
determined adverse to the Indenture Trustee, the Note Insurer or to such
Noteholder, then and in every such case, the Indenture Trustee, the Note Insurer
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies hereunder shall continue as though no such
Proceeding has been instituted.
Section 8.12 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Note Insurer or the
Noteholders 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 otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 8.13 Delay or Omission Not Waiver. No delay or omission of the
Indenture Trustee, the Note Insurer or any Noteholder to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Indenture Trustee,
the Note Insurer or the Noteholders, or any of them, may be exercised from time
to time, as often as may be deemed expedient, by the Indenture Trustee, the
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Note Insurer or the Noteholders, subject however to the right of the Note
Insurer to control any such right and remedy.
Section 8.14 Control by Controlling Parties. The Controlling Parties
shall have the right to direct in writing the decision whether to conduct, and
the time, method and place of conducting, any Proceeding for any remedy
available to the Indenture Trustee with respect to the Notes or exercising any
trust or power conferred on the Indenture Trustee with respect to the Notes;
provided, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture; and
(b) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee which is not inconsistent with such direction; provided,
however, that the Indenture Trustee need not take any action which it determines
might involve it in liability or be unjustly prejudicial to the Holders not
consenting.
Section 8.15 Sale of Pledged Property. (a) The power to effect any sale
pursuant to Section 8.03 hereof shall not be exhausted by any one or more sales
as to any portion of the Pledged Property remaining unsold, but shall continue
unimpaired until the entire Pledged Property securing the Notes shall have been
sold or all amounts payable under this Indenture with respect thereto shall have
been paid. The Indenture Trustee may from time to time postpone any sale by
public announcement made at the time and place of such sale. To the extent
permitted by law, the Indenture Trustee shall not sell the Pledged Property
without the prior written consent of the Note Insurer.
(b) The Note Insurer and any Noteholder may bid for and acquire any
portion of the Pledged Property securing the Notes in connection with any sale
thereof.
(c) Each of the parties hereby covenants and agrees that a sale of the
entirety of the Contracts and the Equipment by a public sale held not less than
ten days after notice thereof is commercially reasonable.
(d) The Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance, provided to it by the Servicer, transferring its
interest in any portion of the Pledged Property in connection with a sale
thereof. In addition, the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Trust to transfer and convey its interest in
any portion of the Pledged Property in connection with a sale thereof, and to
take all action necessary to effect such sale. No purchaser or transferee at
such a sale shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any monies.
Section 8.16 Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Trust or the
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Depositor or by the levy of any execution under such judgment upon any portion
of the Pledged Property or upon any of the assets of the Trust or the Depositor.
ARTICLE IX.
TERMINATION
Section 9.01 Termination of Obligations and Responsibilities. The
respective obligations and responsibilities of First Sierra, the Servicer, the
Indenture Trustee and the Trust created hereby shall terminate (i) at the option
of the Residual Holder, at any time which is 123 days after the payment to
Noteholders of all amounts required to be paid to them pursuant to this
Indenture, reducing the Class A Note Principal Balance, the Class B-1 Note
Principal Balance, the Class B-2 Note Principal Balance and the Class B-3 Note
Principal Balance to zero or (ii) after the 120th day following the Class A-4
Maturity Date; provided that all amounts then owing to the Note Insurer and the
Indenture 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 Indenture 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 Servicing Agreement shall survive the
termination of the Trust and of this Indenture. Upon termination of the Trust,
the Indenture Trustee shall release any remaining Trust Property to the Residual
Holder but not if the Class A Note Principal Balance, the Class B-1 Note
Principal Balance, the Class B-2 Note Principal Balance and the Class B-3 Note
Principal Balance have not been reduced to zero or any amounts are owing to the
Note Insurer or the Indenture Trustee.
Section 9.02 Optional Redemption of Notes; Final Disposition of Funds.
(a) On any Payment Date following any Calculation Date on which the Aggregate
Discounted Contract Principal Balance is less than ten percent (10%) of the
Aggregate Discounted Contract Principal Balance as of the Closing Date, the
Residual Holder shall have the option to redeem the Notes in whole by depositing
or causing to be deposited into the Collection Account the greater of (x) the
sum of (1) the Class A Note Principal Balance, the Class B-1 Note Principal
Balance, the Class B-2 Note Principal Balance and the Class B-3 Note Principal
Balance and (2) the Class A Note Interest, the Class B-1 Note Interest, the
Class B-2 Note Interest and the Class B-3 Note Interest and (y) the Repurchase
Amount for each Contract that was not a Defaulted Contract as of the close of
business on the second preceding Collection Period, by two Business Days prior
to such Payment Date; it being understood that in the event the purchase price
paid is equal to the amount in clause (y) above, any Defaulted Contracts and any
related recoveries shall remain property of the Trust. In the event that the
Residual Holder elects to redeem the Notes in accordance with this Section
9.02(a), the Residual Holder shall be required to notify the Indenture Trustee
in writing by no later than two (2) Business Days prior to a notice required to
be sent by the Indenture Trustee pursuant to Section 9.02(c).
(b) On any Payment Date following any Calculation Date on which the
Aggregate Discounted Contract Principal Balance of the Contracts identified in
Exhibit I to this Indenture is less than fifteen percent (15%) of the Aggregate
Discounted Contract Principal Balance for such
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Contracts as of the Closing Date, the Residual Holder may redeem the Notes in
part by depositing or causing to be deposited into the Collection Account the
Repurchase Amount for each such Contract that was not a Defaulted Contract as of
the close of business on the second preceding Collection Period by two Business
Days prior to such Payment Date; it being understood that such Defaulted
Contracts and any related recoveries shall remain property of the Trust. In the
event that the Residual Holder elects to redeem the Notes in part in accordance
with this Section 9.02(b), the Residual Holder shall be required to notify the
Indenture Trustee in writing by no later than two (2) Business Days prior to a
notice required to be sent by the Indenture Trustee pursuant to Section 9.02(d).
(c) Notice of any termination pursuant to Section 9.02(a) shall be
given promptly by the Indenture Trustee, by letter to the Note Insurer and
Noteholders 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 Notes will be made, (ii) the scheduled amount of
any such final payment, (iii) that interest shall cease to accrue on the Class A
Notes and the Subordinate Notes on such final Payment Date and (iv) the address
for presentation of the Notes for final payment. On such final Payment Date, the
Indenture Trustee shall cause to be distributed the amounts otherwise
distributable on such Payment Date pursuant to Section 3.04 hereof, taking into
account the purchase pursuant to Section 9.02(a). After such Payment Date,
interest on the Class A and Subordinate Notes shall cease to accrue.
(d) Notice of any partial redemption pursuant to Section 9.02(b) shall
be given promptly by the Indenture Trustee, by letter to the Note Insurer and to
the Noteholders mailed not later than two days prior to the related Payment Date
specifying the scheduled amount of the additional payment that will be included
in the distributions pursuant to Section 3.04 hereof as a result of the purchase
pursuant to Section 9.02(b).
(e) The final payment on any Note shall only be made upon the
presentation of such Note to the Indenture Trustee at the office specified in
the notice described in Section 9.02(b) above.
(f) In the event that any amount due to any Noteholder 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 Indenture Trustee upon written
direction from the Servicer shall transfer such funds and shall be discharged of
any responsibility for such funds and, the Noteholders shall look to the
Servicer for payment.
ARTICLE X.
Noteholders' Lists and Reports
Section 10.01 Trust To Furnish To Indenture Trustee Names and Addresses
of Noteholders. The Trust will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last
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Record Date, a list, in such form as the Indenture Trustee may reasonably
require, of the names and addresses of the Holders as of such Record Date, (b)
at such other times as the Indenture Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished. The Indenture Trustee
or, if the Indenture Trustee is not the Note Registrar, the Trust shall furnish
to the Note Insurer or the Trust in writing upon their written request and at
such other times as the Note Insurer or the Trust may request a copy of the list
of Noteholders.
Section 10.02 Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee and the names and
addresses of Noteholders received by the Indenture Trustee in its capacity as
Note Registrar.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).
Section 10.03 Reports by Trust. (a) The Trust shall:
(i) file with the Indenture Trustee, within 15 days after the
Trust is required to file the same with the Commission, copies of the
annual reports and copies of the information documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe)
which the Trust may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(i) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(ii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Trust pursuant to clauses (i) and (ii) of
this Section 10.03(a) as may be required by rules and regulations
prescribed from time to time by the Commission.
(b) Unless the Trust otherwise determines, the fiscal year of the Trust
shall end as of December 31 of each year for purposes of this section.
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Section 10.04 Reports by Indenture Trustee. If required by TIA ss.
313(a), within 60 days after each August 31, beginning with August 31, 1999, the
Indenture Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a
brief report dated as of such date that complies with TIA ss. 313(a). The
Indenture Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Trust shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
Section 10.05 Compliance Certificates and Opinions, etc. Upon any
application or request by the Trust to the Indenture Trustee to take any action
under any provision of this Indenture, the Trust shall furnish to the Indenture
Trustee and the Note Insurer (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
Section 11.01 Amendment. (a) This Indenture may be amended from time to
time by the Trust, the Servicer, the Originator and the Indenture Trustee,
without the consent of
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any of the Noteholders but with the consent of the Note Insurer, to cure any
ambiguity herein; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel acceptable to the Indenture Trustee adversely affect in
any respect the interests of any Noteholder.
(b) This Indenture may also be amended from time to time by the Trust,
the Servicer, the Originator and the Indenture Trustee with the consent of the
Note Insurer and the Majority Holders for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Noteholders; 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
Contracts or distributions that are required to be made on any Note without the
consent of the Holder of such Note or (ii) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the Holders of
all Notes then outstanding.
(c) Prior to the effectiveness of any amendment under Section 11.01(a)
or (b), the Rating Agencies shall have confirmed in writing their respective
ratings of the Notes.
(d) Promptly after the execution of any such amendment, the Indenture
Trustee shall furnish a written copy of the text of such amendment (and any
consent required with respect thereto) to each Noteholder, the Note Insurer 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 Noteholders under Section
11.01(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 Noteholders shall be subject to
such reasonable requirements as the Indenture Trustee may prescribe.
(f) The Indenture Trustee and the Note 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 Indenture have been satisfied.
The Indenture Trustee may, but shall not be obligated to, execute and deliver
any such amendment which affects that Indenture Trustee's rights, powers,
immunities or indemnifications hereunder.
Section 11.02 Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article XI shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the TIA.
Section 11.03 Limitation on Rights of Noteholders. (a) The death or
incapacity of any Noteholder shall not operate to terminate this Indenture or
the Trust, nor entitle such Noteholder'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) It is understood and intended, and expressly covenanted by each
Noteholder with every other Noteholder and the Indenture Trustee, that no one or
more Holders of Notes shall have any right in any manner whatever by virtue or
by availing itself or themselves of any provisions of this Indenture to affect,
disturb or prejudice the rights of the Holders of any other
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of the Notes, to obtain or seek to obtain priority over or preference to any
other Holder of the same class of Notes or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all Noteholders of the same class. For the protection and
enforcement of the provisions of this Section 11.03, each and every Noteholder
and the Indenture Trustee shall be entitled to such relief as can be given
either at law or in equity.
Section 11.04 Counterparts. For the purpose of facilitating the
execution of this Indenture and for other purposes, this Indenture may be
executed simultaneously in any 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 11.05 GOVERNING LAW. THIS INDENTURE 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 11.06 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 Pledged
Property, the Servicer and the Trust required to be delivered hereunder, which
shall be delivered or mailed by first class mail or facsimile transmission)
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 600 Travis Street, Suite 7050, Houston, Texas 77002,
Attention: Sandy Ho, telephone (713) 221-8822, telecopy (713) 221-1818, (b) in
the case of the Trust, First Union Trust Company, National Association, at One
Rodney Square, 920 King Street, Suite 102, Wilmington, Delaware 19801,
Attention: Corporate Trust Administration, telephone (302) 888-7539, telecopy
(302) 888-7544, (c) in the case of the Indenture Trustee, at Four Albany Street,
10th Floor, New York, New York 10006, Attention: Corporate Trust and Agency
Group Structured Finance Team, telephone 212-250-4237, 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 Fitch, at One State Street Plaza, New York, New
York 10004, Attention: Asset Backed Surveillance, telephone (212) 908-0500,
telephone (212) 514-9879, (f) in the case of Moody's, 99 Church Street, New
York, New York 10004, Attention: ABS Monitoring Group, telephone (212) 553-0300,
telecopy (212) 553-3856, (g) in the case of DCR, 55 East Monroe Street, Suite
3800, Chicago, Illinois 60603, Attention: Asset Backed Monitoring - Equipment
Leases, telephone (312) 368-3160, telecopy (312) 368-2069 (h) in the case of the
Note Insurer, at 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management - SF, telephone (914) 273-4545, telecopy (914) 765-3810 and
(i) any notice so mailed within the time prescribed in this Indenture shall be
conclusively presumed to have been duly given on the fifth Business Day
following mailing, whether or not the Noteholder receives such notice.
Section 11.07 Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Indenture shall be for any
reason whatsoever held
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invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Indenture and shall in no way affect the validity or enforceability of the other
provisions of this Indenture or of the Notes or the rights of the Holders
thereof.
Section 11.08 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.09 Third Party Beneficiary. The parties hereto acknowledge
and agree that each of the Note Insurer is an express third party beneficiary of
this Indenture.
Section 11.10 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02 of the Servicing Agreement,
this Indenture may not be assigned by the Servicer except with prior written
consent of the Note Insurer and the Trust and the Holders of the Notes 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 Indenture
Trustee shall be given to the Rating Agencies by the Indenture Trustee.
Section 11.11 Binding Effect. This Indenture shall inure to the benefit
of, and shall be binding upon the Servicer, the Trust, the Indenture Trustee and
the Noteholders and their respective successors and permitted assigns, subject,
however, to the limitations contained in this Indenture. This Indenture shall
not inure to the benefit of any Person other than the Trust, the Servicer, the
Indenture Trustee, the Note Insurer and the Noteholders.
Section 11.12 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the other documents delivered
pursuant hereto shall survive the pledge of the Pledged Property and the
issuance of the Notes and shall continue in full force and effect until
terminated pursuant to Section 9.01 hereof.
Section 11.13 Captions. The captions or headings in this Indenture are
for convenience only and in no way define, limit or describe the scope or intent
of any provisions or sections of this Indenture.
Section 11.14 Exhibits. The Exhibits to this Indenture are hereby
incorporated herein and made a part hereof and are an integral part of this
Indenture.
Section 11.15 Calculations. Except as otherwise provided in this
Indenture, including, without limitation, with respect to the calculation of
interest on the Class A-1 Notes, all interest rate calculations under this
Indenture, including those with respect to the Contracts, will be made on the
basis of a 360-day year and twelve 30-day months (i.e., each Interest
54
<PAGE> 61
Accrual Period shall be deemed to be equal 30 day periods) and will be carried
out to at least seven decimal places.
Section 11.16 No Proceedings. The Servicer, the Originator, the Trust
and the Indenture Trustee each hereby agrees that it will not directly or
indirectly institute, or cause to be instituted, against the Residual Holder 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 Trust.
55
<PAGE> 62
IN WITNESS WHEREOF, the Trust, the Servicer, the Originator and the
Indenture Trustee have caused this Indenture to be duly executed by their
respective officers, all as of the day and year first above written.
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1998-1, a common law trust acting through
its trustee, FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its individual
capacity but solely as owner trustee, as
Issuer
By: /s/ Edward L. Truitt, Jr.
-------------------------------------------
Name: Edward L. Truitt, Jr.
Title: Vice President
FIRST SIERRA FINANCIAL, INC., as Servicer
and as Originator
By: /s/ E. Roger Gebhart
-------------------------------------------
Name: E. Roger Gebhart
Title: Senior Vice President
BANKERS TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee
By: /s/ Patricia M. F. Russo
-------------------------------------------
Name: Patricia M. F. Russo
Title: Vice President
[Signature Page to Indenture]
<PAGE> 63
EXHIBIT A
INDENTURE TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
Bankers Trust Company, in its capacity as Indenture Trustee
(the "Indenture Trustee") under that certain Indenture (the "Indenture"), dated
as of December 1, 1998, by and among First Sierra, as Servicer and Originator,
First Sierra Equipment Contract Trust 1998-1, a common law trust acting through
its trustee, First Union Trust Company, National Association, not in its
individual capacity but solely as Owner Trustee, as Issuer ("Issuer") and the
Indenture Trustee, hereby acknowledges receipt of files with respect to each
Contract on the List of Contracts.
The List of Contracts relating to the Issuer is attached to
this Receipt.
BANKERS TRUST COMPANY
as Indenture Trustee
By:
--------------------------------------
Name:
Title:
Dated: December 17, 1998
<PAGE> 64
EXHIBIT B
WIRING INSTRUCTIONS FORM
_____________, 199_
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group -- Structured Finance
Re: Equipment Contract Backed Notes, Series 1998-1, Issued by,
First Sierra Equipment Contract Trust 1998-1, a common law
trust acting through First Union Trust Company, National
Association, not in its individual capacity but solely as
Owner Trustee
Dear Sirs:
In connection with the sale of the above-captioned Notes by
__________ to __________ ("Transferee") you, as Indenture Trustee with respect
to the related Notes, are instructed to make all remittances to Transferee as
Noteholder as of __________ , 199_ 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> 65
EXHIBIT C-1
FORM OF CLASS A-1 NOTE
UNLESS THIS NOTE 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 NOTE 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
5.215% EQUIPMENT CONTRACT-BACKED NOTE, CLASS A-1
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class A-1 Note is payable monthly
as set forth herein.
This Class A-1 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
A-1 Notes nor the Contracts are insured by any governmental agency.
CUSIP: 33641N AH8
Class A-1
Note $70,687,140 Initial Class A-1 Percentage
No. A-1 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to CEDE
& CO. the principal sum of SEVENTY MILLION SIX HUNDRED EIGHTY SEVEN THOUSAND ONE
HUNDRED FORTY Dollars ($70,687,140) in monthly installments and to pay interest
monthly in arrears on the unpaid portion of said principal sum (and, to the
extent that the payment of such interest shall be legally enforceable, on any
overdue installment of interest on this Note) on the 12th day of each month or,
if such 12th day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), commencing in January 1999, for the period commencing
on and including the immediately preceding Payment Date (or on the Closing Date
with respect to the initial Payment Date) and ending on and including the day
immediately preceding such Payment Date, until such unpaid principal is fully
paid, at a rate per annum equal to 5.215% (the "Class A-1 Note Rate"); provided,
however, that interest on any amount of principal or interest that is not timely
paid when due shall accrue interest until paid at the Class A-1 Note Rate plus
1%. The Issuer hereby agrees to pay to such registered holder its pro rata share
(based on the aggregate Class A-1 Percentage Interest held by such registered
Holder) of the amounts which all Holders of the Class A-1
C-1-1
<PAGE> 66
Notes are entitled to receive, as hereinafter set forth in this Class A-1 Note
and as more fully set forth in the Indenture dated as of December 1, 1998 among
the Issuer, First Sierra, as Servicer and Originator (the "Servicer" and
"Originator") and Bankers Trust Company, as Indenture Trustee (the "Indenture
Trustee"), at all times from the sources and on the terms and conditions
hereinafter set forth and as more fully set forth in the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class A-1 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December 1, 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class A-1 Note is one of the duly authorized Class A-1
Notes designated as "5.215% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class A-1" (the "Class A-1 Notes"). This Class
A-1 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class A-1 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class A-1 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class A-1
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class A-1 Note is registered and at the address
specified in the 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 sum of (i) the Class A-1 Note Interest
and (ii) the Class A Base Principal Distribution Amount. The final payment of
principal and interest on this Class A-1 Note will not be later than the
January, 2000 Payment Date.
Payments on this Class A-1 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class A-1 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class A-1 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
A-1 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class A-1 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class A-1 Notes are limited in right of payment to
certain collections and recoveries respecting the Contracts, all as more
specifically set forth above in the Indenture. Pursuant to the Indenture, the
Indenture Trustee shall, in addition to the Class A-1 Notes, issue Class A-2
Notes, Class A-3 Notes and Class A-4 Notes (together with the Class A-1 Notes,
the "Class A Notes" or the "Offered Notes") and Class B-1 Notes, Class B-2 Notes
and Class B-3 Notes (collectively the "Subordinate Notes") and pursuant to the
Trust Agreement, the Owner Trustee shall issue the Trust Certificate. THE RIGHT
TO RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS
PARI PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND THE RIGHT TO RECEIVE
PAYMENTS OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS ON A
SEQUENTIAL-PAY BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL
C-1-2
<PAGE> 67
BALANCE OF THE CLASS A NOTES THEN OUTSTANDING AND HAVING THE LOWEST NUMERICAL
DESIGNATION (E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE ANY PRINCIPAL
PAYMENT IS MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO
THE SUBORDINATE NOTES 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 NOTES ON EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class A-1
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class A-1 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class A-1 Note and of
any Class A-1 Note 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-1
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class A-1 Noteholders.
By its acceptance of this Class A-1 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class A-1
Note is registrable in the Register upon surrender of this Class A-1 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class A-1
Notes of authorized denominations evidencing the same aggregate Class A-1
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
Each transferee of a beneficial interest in this Class A-1
Note shall be deemed to represent either (i) that it is not (A) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and is not acting on
behalf of or investing the assets of a Benefit Plan, or (ii) that its
acquisition and continued holding of this Class A-1 Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
The Class A-1 Notes are issuable only as registered Class A-1
Notes without coupons in minimum denominations of $1,000 of the Initial Class
A-1 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class A-1 Notes are exchangeable for new Class
A-1 Notes of authorized denominations evidencing the same aggregate Class A-1
Percentage Interest, as requested by the Class A-1 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the Notes as of any
Payment Date following the date on which the aggregate Class A Note Principal
Balance and the Subordinate Note Principal Balance is less than 10% of the
Initial Class A Note Principal Amount and the Initial Subordinate Note Principal
Amount. In the event of such redemption, the entire outstanding Class A Note
Principal Balance and the Subordinate Note Principal Balance, together with
accrued interest thereon at the related Note Rate, will be required to be paid
to the respective Class A Noteholders and the respective Subordinate Noteholders
on such Payment Date. If an Event of Default as defined in the Indenture shall
occur and be continuing, the principal of all the Notes may become or be
declared due and payable in the manner and with the effect provided in the
Indenture.
C-1-3
<PAGE> 68
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class A-1
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
C-1-4
<PAGE> 69
IN WITNESS WHEREOF, the Issuer has caused this Class A-1 Note to be duly
executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
C-1-5
<PAGE> 70
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
C-1-6
<PAGE> 71
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1998-1
$70,687,140 First Sierra Equipment Contract Backed Notes
Series 1998-1
Class A-1 Notes, 5.215% Interest Rate
MBIA Insurance Corporation (the "Insurer") has issued a Note
Guaranty Insurance Policy (the "Policy") relating to the Class A-1 Notes
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee (as defined herein).
The Insurer, in consideration of the payment of the premium
and subject to the terms of 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 under the Policy 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 the Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Class A-1 Notes, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the 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 Class A-1 Notes 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 Class A-1 Notes 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 under the Policy
no later than 12:00 noon, New York City time, on the later of the Payment Date
on which the related Deficiency Amount is due or the second 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 under the
Policy, 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 under the Policy, unless otherwise stated
in the Policy, 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.
C-1-7
<PAGE> 72
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 the Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Class A-1
Notes to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Indenture dated as of December 1, 1998
among First Sierra Financial, Inc. as Servicer and as Originator, First Sierra
Equipment Contract Trust 1998-1, a common law trust acting through its trustee,
First Union Trust Company, National Association, not in its individual capacity
but solely as Owner Trustee, as Issuer, and the Trustee, as Indenture Trustee,
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.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, 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-1 Note (other than the
Servicer or any subservicer) who, on the applicable Payment Date, is entitled
under the terms of the applicable Class A-1 Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Class A-1 Notes 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 in the Policy and not otherwise defined
in the Policy shall have the respective meanings set forth in the Agreement as
of the date of execution of the 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 under the Policy 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.
The 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 the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
C-1-8
<PAGE> 73
The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Class A-1 Notes.
MBIA INSURANCE CORPORATION
C-1-9
<PAGE> 74
EXHIBIT C-2
FORM OF CLASS A-2 NOTE
UNLESS THIS NOTE 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 NOTE 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST
5.490% EQUIPMENT CONTRACT-BACKED NOTE, CLASS A-2
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class A-2 Note is payable monthly
as set forth herein.
This Class A-2 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
A-2 Notes nor the Contracts are insured by any governmental agency.
CUSIP: 33641N AJ4
Class A-2
Note $53,856,869 Initial Class A-2 Percentage
No. A-2 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to CEDE
& CO. the principal sum of FIFTY THREE MILLION EIGHT HUNDRED FIFTY SIX THOUSAND
EIGHT HUNDRED SIXTY NINE Dollars ($53,856,869) in monthly installments and to
pay interest monthly in arrears on the unpaid portion of said principal sum
(and, to the extent that the payment of such interest shall be legally
enforceable, on any overdue installment of interest on this Note) on the 12th
day of each month or, if such 12th day is not a Business Day, the Business Day
immediately following (each, a "Payment Date"), commencing in January 1999, for
the period commencing on and including the immediately preceding Payment Date
(or on the Closing Date with respect to the initial Payment Date) and ending on
and including the day immediately preceding such Payment Date, until such unpaid
principal is fully paid, at a rate per annum equal to 5.490% (the "Class A-2
Note Rate"); provided, however, that interest on any amount of principal or
interest that is not timely paid when due shall accrue interest until paid at
the Class A-2 Note Rate plus 1%. The Issuer hereby agrees to pay to such
registered holder its pro rata share (based on the aggregate Class A-2
Percentage Interest held by such registered Holder) of the amounts which all
Holders of
C-2-1
<PAGE> 75
the Class A-2 Notes are entitled to receive, as hereinafter set forth in this
Class A-2 Note and as more fully set forth in the Indenture dated as of December
1, 1998 among the Issuer, First Sierra, as Servicer and Originator (the
"Servicer" and "Originator") and Bankers Trust Company, as Indenture Trustee
(the "Indenture Trustee"), at all times from the sources and on the terms and
conditions hereinafter set forth and as more fully set forth in the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class A-2 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December 1, 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class A-2 Note is one of the duly authorized Class A-2
Notes designated as "5.490% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class A-2" (the "Class A-2 Notes"). This Class
A-2 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class A-2 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class A-2 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class A-2
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class A-2 Note is registered and at the address
specified in the 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 sum of (i) the Class A-2 Note Interest
and (ii) the Class A Base Principal Distribution Amount. The final payment of
principal and interest on this Class A-2 Note will not be later than the April,
2001 Payment Date.
Payments on this Class A-2 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class A-2 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class A-2 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
A-2 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class A-2 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class A-2 Notes are limited in right of payment to
certain collections and recoveries respecting the Contracts, all as more
specifically set forth above in the Indenture. Pursuant to the Indenture, the
Indenture Trustee shall, in addition to the Class A-2 Notes, issue Class A-1
Notes, Class A-3 Notes and Class A-4 Notes (together with the Class A-2 Notes,
the "Class A Notes or the "Offered Notes") and Class B-1 Notes, B-2 Notes and
Class B-3 Notes (collectively the Subordinate Notes") and pursuant to the Trust
Agreement, the Owner Trustee shall issue the Trust Certificate. THE RIGHT TO
RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS PARI
PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND THE RIGHT TO RECEIVE PAYMENTS
OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS ON A SEQUENTIAL-PAY
C-2-2
<PAGE> 76
BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL BALANCE OF THE
CLASS A NOTES THEN OUTSTANDING AND HAVING THE LOWEST NUMERICAL DESIGNATION
(E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE ANY PRINCIPAL PAYMENT IS
MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO THE
SUBORDINATE NOTES 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
NOTES ON EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class A-2
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class A-2 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class A-2 Note and of
any Class A-2 Note 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-2
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class A-2 Noteholders.
By its acceptance of this Class A-2 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class A-2
Note is registrable in the Register upon surrender of this Class A-2 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class A-2
Notes of authorized denominations evidencing the same aggregate Class A-2
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
Each transferee of a beneficial interest in this Class A-2
Note shall be deemed to represent either (i) that it is not (A) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and is not acting on
behalf of or investing the assets of a Benefit Plan, or (ii) that its
acquisition and continued holding of this Class A-2 Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
The Class A-2 Notes are issuable only as registered Class A-2
Notes without coupons in minimum denominations of $1,000 of the Initial Class
A-2 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class A-2 Notes are exchangeable for new Class
A-2 Notes of authorized denominations evidencing the same aggregate Class A-2
Percentage Interest, as requested by the Class A-2 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the Notes as of any
Payment Date following the date on which the aggregate Class A Note Principal
Balance and the Subordinate Note Principal Balance is less than 10% of the
Initial Class A Note Principal Amount and the Initial Subordinate Note Principal
Amount. In the event of such redemption, the entire outstanding Class A Note
Principal Balance and the Subordinate Note Principal Balance, together with
accrued interest thereon at the related Note Rate, will be required to be paid
to the respective Class A Noteholders and the respective Subordinate Noteholders
on such Payment Date. If an Event of Default as defined in the Indenture shall
occur and be continuing, the principal of all the Notes may become or be
declared due and payable in the manner and with the effect provided in the
Indenture.
C-2-3
<PAGE> 77
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class A-2
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
C-2-4
<PAGE> 78
IN WITNESS WHEREOF, the Issuer has caused this Class A-2 Note
to be duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
C-2-5
<PAGE> 79
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
C-2-6
<PAGE> 80
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1998-1
$53,856,869 First Sierra Equipment Contract Backed Notes
Series 1998-1
Class A-2 Notes, 5.490% Interest Rate
MBIA Insurance Corporation (the "Insurer") has issued a Note
Guaranty Insurance Policy (the "Policy") relating to the Class A-2 Notes
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee (as defined herein).
The Insurer, in consideration of the payment of the premium
and subject to the terms of 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 under the Policy 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 the Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Class A-2 Notes, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the 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 Class A-2 Notes 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 Class A-2 Notes 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 under the Policy
no later than 12:00 noon, New York City time, on the later of the Payment Date
on which the related Deficiency Amount is due or the second 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 under the
Policy, 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 under the Policy, unless otherwise stated
in the Policy, 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.
C-2-7
<PAGE> 81
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 the Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Class A-2
Notes to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Indenture dated as of December 1, 1998
among First Sierra Financial, Inc. as Servicer and as Originator, First Sierra
Equipment Contract Trust 1998-1, a common law trust acting through its trustee,
First Union Trust Company, National Association, not in its individual capacity
but solely as Owner Trustee, as Issuer, and the Trustee, as Indenture Trustee,
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.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, 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-2 Note (other than the
Servicer or any subservicer) who, on the applicable Payment Date, is entitled
under the terms of the applicable Class A-2 Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Class A-2 Notes 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 in the Policy and not otherwise defined
in the Policy shall have the respective meanings set forth in the Agreement as
of the date of execution of the 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 under the Policy 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.
The 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 the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
C-2-8
<PAGE> 82
The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Class A-2 Notes.
MBIA INSURANCE CORPORATION
C-2-9
<PAGE> 83
EXHIBIT C-3
FORM OF CLASS A-3 NOTE
UNLESS THIS NOTE 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 NOTE 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
5.450% EQUIPMENT CONTRACT-BACKED NOTE, CLASS A-3
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class A-3 Note is payable monthly
as set forth herein.
This Class A-3 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
A-3 Notes nor the Contracts are insured by any governmental agency.
CUSIP: 33641N AK1
Class A-3
Note $52,510,447 Initial Class A-3 Percentage
No. A-3 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to CEDE
& CO. the principal sum of FIFTY TWO MILLION FIVE HUNDRED TEN THOUSAND FOUR
HUNDRED FORTY SEVEN Dollars ($52,510,447) in monthly installments and to pay
interest monthly in arrears on the unpaid portion of said principal sum (and, to
the extent that the payment of such interest shall be legally enforceable, on
any overdue installment of interest on this Note) on the 12th day of each month
or, if such 12th day is not a Business Day, the Business Day immediately
following (each, a "Payment Date"), commencing in January 1999, for the period
commencing on and including the immediately preceding Payment Date (or on the
Closing Date with respect to the initial Payment Date) and ending on and
including the day immediately preceding such Payment Date, until such unpaid
principal is fully paid, at a rate per annum equal to 5.450% (the "Class A-3
Note Rate"); provided, however, that interest on any amount of principal or
interest that is not timely paid when due shall accrue interest until paid at
the Class A-3 Note Rate plus 1%. The Issuer hereby agrees to pay to such
registered holder its pro rata share (based on the aggregate Class A-3
Percentage Interest held by such registered Holder) of the amounts which all
Holders of the Class A-3
C-3-1
<PAGE> 84
Notes are entitled to receive, as hereinafter set forth in this Class A-3 Note
and as more fully set forth in the Indenture dated as of December 1, 1998 among
the Issuer, First Sierra, as Servicer and Originator (the "Servicer" and
"Originator") and Bankers Trust Company, as Indenture Trustee (the "Indenture
Trustee"), at all times from the sources and on the terms and conditions
hereinafter set forth and as more fully set forth in the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class A-3 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December 1, 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class A-3 Note is one of the duly authorized Class A-3
Notes designated as "5.450% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class A-3" (the "Class A-3 Notes"). This Class
A-3 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class A-3 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class A-3 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class A-3
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class A-3 Note is registered and at the address
specified in the 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 sum of (i) the Class A-3 Note Interest
and (ii) the Class A Base Principal Distribution Amount. The final payment of
principal and interest on this Class A-3 Note will not be later than the
February, 2002 Payment Date.
Payments on this Class A-3 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class A-3 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class A-3 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
A-3 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class A-3 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class A-3 Notes are limited in right of payment to
certain collections and recoveries respecting the Contracts, all as more
specifically set forth above in the Indenture. Pursuant to the Indenture, the
Indenture Trustee shall, in addition to the Class A-3 Notes, issue Class A-1
Notes, Class A-2 Notes and Class A-4 Notes (together with the Class A-3 Notes,
the "Class A Notes" or the "Offered Notes") and Class B-1 Notes, Class B-2 Notes
and Class B-3 Notes (collectively the "Subordinate Notes") and pursuant to the
Trust Agreement, the Owner Trustee shall issue the Trust Certificate. THE RIGHT
TO RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS
PARI PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND THE RIGHT TO RECEIVE
PAYMENTS OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS ON A
SEQUENTIAL-PAY BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL
C-3-2
<PAGE> 85
BALANCE OF THE CLASS A NOTES THEN OUTSTANDING AND HAVING THE LOWEST NUMERICAL
DESIGNATION (E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE ANY PRINCIPAL
PAYMENT IS MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO
THE SUBORDINATE NOTES 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 NOTES ON EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class A-3
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class A-3 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class A-3 Note and of
any Class A-3 Note 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-3
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class A-3 Noteholders.
By its acceptance of this Class A-3 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class A-3
Note is registrable in the Register upon surrender of this Class A-3 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class A-3
Notes of authorized denominations evidencing the same aggregate Class A-3
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
Each transferee of a beneficial interest in this Class A-3
Note shall be deemed to represent either (i) that it is not (A) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and is not acting on
behalf of or investing the assets of a Benefit Plan, or (ii) that its
acquisition and continued holding of this Class A-3 Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
The Class A-3 Notes are issuable only as registered Class A-3
Notes without coupons in minimum denominations of $1,000 of the Initial Class
A-3 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class A-3 Notes are exchangeable for new Class
A-3 Notes of authorized denominations evidencing the same aggregate Class A-3
Percentage Interest, as requested by the Class A-3 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the Notes as of any
Payment Date following the date on which the aggregate Class A Note Principal
Balance and the Subordinate Note Principal Balance is less than 10% of the
Initial Class A Note Principal Amount and the Initial Subordinate Note Principal
Amount. In the event of such redemption, the entire outstanding Class A Note
Principal Balance and the Subordinate Note Principal Balance, together with
accrued interest thereon at the related Note Rate, will be required to be paid
to the respective Class A Noteholders and the respective Subordinate Noteholders
on such Payment Date. If an Event of Default as defined in the Indenture shall
occur and be continuing, the principal of all the Notes may become or be
declared due and payable in the manner and with the effect provided in the
Indenture.
C-3-3
<PAGE> 86
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class A-3
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
C-3-4
<PAGE> 87
IN WITNESS WHEREOF, the Issuer has caused this Class A-3 Note to be duly
executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
C-3-5
<PAGE> 88
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
C-3-6
<PAGE> 89
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1998-1
$52,510,447 First Sierra Equipment Contract Backed Notes
Series 1998-1
Class A-3 Notes, 5.450% Interest Rate
MBIA Insurance Corporation (the "Insurer") has issued a Note
Guaranty Insurance Policy (the "Policy") relating to the Class A-3 Notes
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee (as defined herein).
The Insurer, in consideration of the payment of the premium
and subject to the terms of 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 under the Policy 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 the Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Class A-3 Notes, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the 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 Class A-3 Notes 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 Class A-3 Notes 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 under the Policy
no later than 12:00 noon, New York City time, on the later of the Payment Date
on which the related Deficiency Amount is due or the second 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 under the
Policy, 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 under the Policy, unless otherwise stated
in the Policy, 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.
C-3-7
<PAGE> 90
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 the Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Class A-3
Notes to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Indenture dated as of December 1, 1998
among First Sierra Financial, Inc. as Servicer and as Originator, First Sierra
Equipment Contract Trust 1998-1, a common law trust acting through its trustee,
First Union Trust Company, National Association, not in its individual capacity
but solely as Owner Trustee, as Issuer, and the Trustee, as Indenture Trustee,
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.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, 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-3 Note (other than the
Servicer or any subservicer) who, on the applicable Payment Date, is entitled
under the terms of the applicable Class A-3 Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Class A-3 Notes 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 in the Policy and not otherwise defined
in the Policy shall have the respective meanings set forth in the Agreement as
of the date of execution of the 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 under the Policy 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.
The 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 the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
C-3-8
<PAGE> 91
The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Class A-3 Notes.
MBIA INSURANCE CORPORATION
C-3-9
<PAGE> 92
EXHIBIT C-4
FORM OF CLASS A-4 NOTE
UNLESS THIS NOTE 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 NOTE 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
5.628% EQUIPMENT CONTRACT-BACKED NOTE, CLASS A-4
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class A-4 Note is payable monthly
as set forth herein.
This Class A-4 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
A-4 Notes nor the Contracts are insured by any governmental agency.
CUSIP: 33641N AL9
Class A-4
Note $70,687,140 Initial Class A-4 Percentage
No. A-4 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to CEDE
& CO. the principal sum of SEVENTY MILLION SIX HUNDRED EIGHTY SEVEN THOUSAND ONE
HUNDRED FORTY Dollars ($70,687,140) in monthly installments and to pay interest
monthly in arrears on the unpaid portion of said principal sum (and, to the
extent that the payment of such interest shall be legally enforceable, on any
overdue installment of interest on this Note) on the 12th day of each month or,
if such 12th day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), commencing in January 1999, for the period commencing
on and including the immediately preceding Payment Date (or on the Closing Date
with respect to the initial Payment Date) and ending on and including the day
immediately preceding such Payment Date, until such unpaid principal is fully
paid, at a rate per annum equal to 5.628% (the "Class A-4 Note Rate"); provided,
however, that interest on any amount of principal or interest that is not timely
paid when due shall accrue interest until paid at the Class A-4 Note Rate plus
1%. The Issuer hereby agrees to pay to such registered holder its pro rata share
(based on the aggregate
C-4-1
<PAGE> 93
Class A-4 Percentage Interest held by such registered Holder) of the amounts
which all Holders of the Class A-4 Notes are entitled to receive, as hereinafter
set forth in this Class A-4 Note and as more fully set forth in the Indenture
dated as of December 1, 1998 among the Issuer, First Sierra, as Servicer and
Originator (the "Servicer" and "Originator") and Bankers Trust Company, as
Indenture Trustee (the "Indenture Trustee"), at all times from the sources and
on the terms and conditions hereinafter set forth and as more fully set forth in
the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class A-4 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December 1, 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class A-4 Note is one of the duly authorized Class A-4
Notes designated as "5.628% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class A-4" (the "Class A-4 Notes"). This Class
A-4 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class A-4 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class A-4 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class A-4
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class A-4 Note is registered and at the address
specified in the 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 sum of (i) the Class A-4 Note Interest
and (ii) the Class A Base Principal Distribution Amount. The final payment of
principal and interest on this Class A-4 Note will not be later than the August,
2004 Payment Date.
Payments on this Class A-4 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class A-4 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class A-4 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
A-4 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class A-4 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class A-4 Notes are limited in right of payment to
certain collections and recoveries respecting the Contracts, all as more
specifically set forth above in the Indenture. Pursuant to the Indenture, the
Indenture Trustee shall, in addition to the Class A-4 Notes, issue Class A-1
Notes, Class A-2 Notes and Class A-3 Notes (together with the Class A-4 Notes,
the "Class A Notes" or the "Offered Notes") and Class B-1 Notes, Class B-2 Notes
and Class B-3 Notes (collectively the "Subordinate Notes") and pursuant to the
Trust Agreement, the Owner Trustee shall issue the Trust Certificate. THE RIGHT
TO RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS
PARI PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND THE RIGHT TO RECEIVE
PAYMENTS OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS ON A
C-4-2
<PAGE> 94
SEQUENTIAL-PAY BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL
BALANCE OF THE CLASS A NOTES THEN OUTSTANDING AND HAVING THE LOWEST NUMERICAL
DESIGNATION (E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE ANY PRINCIPAL
PAYMENT IS MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO
THE SUBORDINATE NOTES 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 NOTES ON EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class A-4
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class A-4 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class A-4 Note and of
any Class A-4 Note 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-4
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class A-4 Noteholders.
By its acceptance of this Class A-4 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class A-4
Note is registrable in the Register upon surrender of this Class A-4 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class A-4
Notes of authorized denominations evidencing the same aggregate Class A-4
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
Each transferee of a beneficial interest in this Class A-4
Note shall be deemed to represent either (i) that it is not (A) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and is not acting on
behalf of or investing the assets of a Benefit Plan, or (ii) that its
acquisition and continued holding of this Class A-4 Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
The Class A-4 Notes are issuable only as registered Class A-4
Notes without coupons in minimum denominations of $1,000 of the Initial Class
A-4 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class A-4 Notes are exchangeable for new Class
A-4 Notes of authorized denominations evidencing the same aggregate Class A-4
Percentage Interest, as requested by the Class A-4 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the Notes as of any
Payment Date following the date on which the aggregate Class A Note Principal
Balance and the Subordinate Note Principal Balance is less than 10% of the
Initial Class A Note Principal Amount and the Initial Subordinate Note Principal
Amount. In the event of such redemption, the entire outstanding Class A Note
Principal Balance and the Subordinate Note Principal Balance, together with
accrued interest thereon at the related Note Rate, will be required to be paid
to the respective Class A Noteholders and the respective Subordinate Noteholders
on such Payment Date. If an Event of Default as defined in the Indenture shall
occur and be continuing, the principal of all the Notes may become or be
declared due and payable in the manner and with the effect provided in the
Indenture.
C-4-3
<PAGE> 95
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class A-4
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
C-4-4
<PAGE> 96
IN WITNESS WHEREOF, the Issuer has caused this Class A-4 Note to be duly
executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
C-4-5
<PAGE> 97
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
C-4-6
<PAGE> 98
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1998-1
$70,687,140 First Sierra Equipment Contract Backed Notes
Series 1998-1
Class A-4 Notes, 5.628% Interest Rate
MBIA Insurance Corporation (the "Insurer") has issued a Note
Guaranty Insurance Policy (the "Policy") relating to the Class A-4 Notes
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee (as defined herein).
The Insurer, in consideration of the payment of the premium
and subject to the terms of 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 under the Policy 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 the Policy, and no accelerated Insured Payments shall
be made regardless of any acceleration of the Class A-4 Notes, unless such
acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the 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 Class A-4 Notes 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 Class A-4 Notes 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 under the Policy
no later than 12:00 noon, New York City time, on the later of the Payment Date
on which the related Deficiency Amount is due or the second 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 under the
Policy, 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 under the Policy, unless otherwise stated
in the Policy, 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.
C-4-7
<PAGE> 99
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 the Policy.
Subject to the terms of the Agreement, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Class A-4
Notes to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Indenture dated as of December 1, 1998
among First Sierra Financial, Inc. as Servicer and as Originator, First Sierra
Equipment Contract Trust 1998-1, a common law trust acting through its trustee,
First Union Trust Company, National Association, not in its individual capacity
but solely as Owner Trustee, as Issuer, and the Trustee, as Indenture Trustee,
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.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, 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-4 Note (other than the
Servicer or any subservicer) who, on the applicable Payment Date, is entitled
under the terms of the applicable Class A-4 Notes to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Class A-4 Notes 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 in the Policy and not otherwise defined
in the Policy shall have the respective meanings set forth in the Agreement as
of the date of execution of the 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 under the Policy 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.
The 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 the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
C-4-8
<PAGE> 100
The Policy is not cancelable for any reason. The premium on
the Policy is not refundable for any reason including payment, or provision
being made for payment, prior to maturity of the Class A-4 Notes.
MBIA INSURANCE CORPORATION
C-4-9
<PAGE> 101
EXHIBIT D-1
CLASS B-1 NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE 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 NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE 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
INDENTURE APPLICABLE TO SUCH TRANSFER. NO RESALE OR OTHER TRANSFER OF THIS NOTE
MAY BE MADE TO A NONRESIDENT ALIEN INDIVIDUAL, FOREIGN CORPORATION OR OTHER
NON-UNITED STATES PERSON.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
7.340% EQUIPMENT CONTRACT-BACKED NOTE, Class B-1
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class B-1 Note is payable monthly
as set forth herein.
This Class B-1 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
B-1 Notes nor the Contracts are insured by any governmental agency.
CUSIP: 33641N AM7
Class B-1
Note $5,385,687 Initial Class B-1 Percentage
No. B-1 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to Auer
& Co. the principal sum of FIVE MILLION THREE HUNDRED EIGHTY FIVE THOUSAND SIX
HUNDRED EIGHTY SEVEN Dollars ($5,385,687) in monthly installments and to pay
interest monthly in arrears on the unpaid portion of said principal
D-1-1
<PAGE> 102
sum (and, to the extent that the payment of such interest shall be legally
enforceable, on any overdue installment of interest on this Note) on the 12th
day of each month or, if such 12th day is not a Business Day, the Business Day
immediately following (each, a "Payment Date"), commencing in January 1999, for
the period commencing on and including the immediately preceding Payment Date
(or on the Closing Date with respect to the initial Payment Date) and ending on
and including the day immediately preceding such Payment Date, until such unpaid
principal is fully paid, at a rate per annum equal to 7.340% (the "Class B-1
Note Rate"); provided, however, that interest on any amount of principal or
interest that is not timely paid when due shall accrue interest until paid at
the Class B-1 Note Rate plus 1%. The Issuer 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 Notes are entitled to receive, as hereinafter set forth
in this Class B-1 Note and as more fully set forth in the Indenture dated as of
December 1, 1998 among the Issuer, First Sierra, as Servicer and Originator (the
"Servicer" and "Originator") and Bankers Trust Company, as Indenture Trustee
(the "Indenture Trustee"), at all times from the sources and on the terms and
conditions hereinafter set forth and as more fully set forth in the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class B-1 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December 1, 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class B-1 Note is one of the duly authorized Class B-1
Notes designated as "7.340% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class B-1" (the "Class B-1 Notes"). This Class
B-1 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class B-1 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class B-1 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class B-1
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class B-1 Note is registered and at the address
specified in the 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 sum of (i) the Class B-1 Note Interest and
(ii) the Class B-1 Base Principal Distribution Amount. The final payment of
principal and interest on this Class B-1 Note will not be later than the August,
2004 Payment Date.
Payments on this Class B-1 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class B-1 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class B-1 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
B-1 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class B-1 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class B-1 Notes are limited in right of
D-1-2
<PAGE> 103
payment to certain collections and recoveries respecting the Contracts, all as
more specifically set forth above in the Indenture. Pursuant to the Indenture,
the Indenture Trustee shall, in addition to the Class B-1 Notes, issue Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes (together, the
"Class A Notes" or the "Offered Notes") and the Class B-2 Notes and Class B-3
Notes (collectively with the Class B-1 Notes, the "Subordinate Notes") and
pursuant to the Trust Agreement, the Owner Trustee shall issue the Trust
Certificate. THE RIGHT TO RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH
CLASS OF CLASS A NOTES IS PARI PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND
THE RIGHT TO RECEIVE PAYMENTS OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A
NOTES IS ON A SEQUENTIAL-PAY BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE
NOTE PRINCIPAL BALANCE OF THE CLASS A NOTES THEN OUTSTANDING AND HAVING THE
LOWEST NUMERICAL DESIGNATION (E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE
ANY PRINCIPAL PAYMENT IS MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS
WITH RESPECT TO THE CLASS B-1 NOTES IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL
OF ALL AMOUNTS OF PRINCIPAL AND INTEREST DUE AND PAYABLE ON THE CLASS A NOTES ON
EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class B-1
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class B-1 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class B-1 Note and of
any Class B-1 Note 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
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class B-1 Noteholders.
By its acceptance of this Class B-1 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class B-1
Note is registrable in the Register upon surrender of this Class B-1 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture 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
Notes of authorized denominations evidencing the same aggregate Class B-1
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
The transfer of this Class B-1 Note shall not be registered
unless the transferee has executed and delivered to the Indenture Trustee a
certification to the effect that either (i) the transferee is not (A) an
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1)
of the Internal Revenue Code of 1986, as amended (the "Code")) that is subject
to Section 4975 of the Code (each of the foregoing, a "Benefit Plan"), and is
not acting on behalf of or investing the assets of a Benefit Plan, or (ii) that
the transferee's acquisition and continued holding of this Class B-1 Note will
be covered by a U.S. Department of Labor Prohibited Transaction Class Exemption.
The Class B-1 Notes are issuable only as registered Class B-1
Notes without coupons in minimum denominations of $1,000 of the Initial Class
B-1 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class B-1 Notes are exchangeable for new Class
B-1 Notes of authorized denominations evidencing the same aggregate Class B-1
Percentage Interest, as requested by the Class B-1 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the
D-1-3
<PAGE> 104
Notes as of any Payment Date following the date on which the aggregate Class A
Note Principal Balance and the Subordinate Note Principal Balance is less than
10% of the Initial Class A Note Principal Amount and the Initial Subordinate
Note Principal Amount. In the event of such redemption, the entire outstanding
Class A Note Principal Balance and the Subordinate Note Principal Balance,
together with accrued interest thereon at the related Note Rate, will be
required to be paid to the respective Class A Noteholders and the respective
Subordinate Noteholders on such Payment Date. If an Event of Default as defined
in the Indenture shall occur and be continuing, the principal of all the Notes
may become or be declared due and payable in the manner and with the effect
provided in the Indenture.
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class B-1
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
D-1-4
<PAGE> 105
IN WITNESS WHEREOF, the Issuer has caused this Class B-1 Note
to be duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
D-1-5
<PAGE> 106
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-1 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
D-1-6
<PAGE> 107
EXHIBIT D-2
CLASS B-2 NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE 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 NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE 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
INDENTURE APPLICABLE TO SUCH TRANSFER. NO RESALE OR OTHER TRANSFER OF THIS NOTE
MAY BE MADE TO A NONRESIDENT ALIEN INDIVIDUAL, FOREIGN CORPORATION OR OTHER
NON-UNITED STATES PERSON.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
9.510% EQUIPMENT CONTRACT-BACKED NOTE, Class B-2
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class B-2 Note is payable monthly
as set forth herein.
This Class B-2 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
B-2 Notes nor the Contracts are insured by any governmental agency.
CUSIP: 33641N AN5
Class B-2
Note $2,692,843 Initial Class B-2 Percentage
No. B-2 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to Auer
& Co. the principal sum of TWO MILLION SIX HUNDRED NINETY TWO THOUSAND EIGHT
HUNDRED FORTY THREE Dollars ($2,692,843) in monthly installments and to pay
interest monthly in arrears on the unpaid portion of said principal
D-2-1
<PAGE> 108
sum (and, to the extent that the payment of such interest shall be legally
enforceable, on any overdue installment of interest on this Note) on the 12th
day of each month or, if such 12th day is not a Business Day, the Business Day
immediately following (each, a "Payment Date"), commencing in January 1999, for
the period commencing on and including the immediately preceding Payment Date
(or on the Closing Date with respect to the initial Payment Date) and ending on
and including the day immediately preceding such Payment Date, until such unpaid
principal is fully paid, at a rate per annum equal to 9.510% (the "Class B-2
Note Rate"); provided, however, that interest on any amount of principal or
interest that is not timely paid when due shall accrue interest until paid at
the Class B-2 Note Rate plus 1%. The Issuer 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 Notes are entitled to receive, as hereinafter set forth
in this Class B-2 Note and as more fully set forth in the Indenture dated as of
December 1, 1998 among the Issuer, First Sierra, as Servicer and Originator (the
"Servicer" and "Originator") and Bankers Trust Company, as Indenture Trustee
(the "Indenture Trustee"), at all times from the sources and on the terms and
conditions hereinafter set forth and as more fully set forth in the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class B-2 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December 1, 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class B-2 Note is one of the duly authorized Class B-2
Notes designated as "9.510% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class B-2" (the "Class B-2 Notes"). This Class
B-2 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class B-2 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class B-2 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class B-2
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class B-2 Note is registered and at the address
specified in the 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 sum of (i) the Class B-2 Note Interest
and (ii) the Class B-2 Base Principal Distribution Amount. The final payment of
principal and interest on this Class B-2 Note will not be later than the August,
2004 Payment Date.
Payments on this Class B-2 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class B-2 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class B-2 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
B-2 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class B-2 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class B-2 Notes are limited in right of
D-2-2
<PAGE> 109
payment to certain collections and recoveries respecting the Contracts, all as
more specifically set forth above in the Indenture. Pursuant to the Indenture,
the Indenture Trustee shall, in addition to the Class B-2 Notes, issue Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes (together, the
"Class A Notes" or the "Offered Notes") and Class B-1 Notes and Class B-3 Notes
(collectively with the Class B-2 Notes, the "Subordinate Notes") and pursuant to
the Trust Agreement, the Owner Trustee shall issue the Trust Certificate. THE
RIGHT TO RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH CLASS OF CLASS A
NOTES IS PARI PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND THE RIGHT TO
RECEIVE PAYMENTS OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS ON
A SEQUENTIAL-PAY BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL
BALANCE OF THE CLASS A NOTES THEN OUTSTANDING AND HAVING THE LOWEST NUMERICAL
DESIGNATION (E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE ANY PRINCIPAL
PAYMENT IS MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO
THE CLASS B-2 NOTES IS SUBORDINATE TO THE PRIOR PAYMENT IN FULL OF ALL AMOUNTS
OF PRINCIPAL AND INTEREST DUE AND PAYABLE ON THE CLASS A NOTES AND THE CLASS B-1
NOTES ON EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class B-2
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class B-2 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class B-2 Note and of
any Class B-2 Note 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
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class B-2 Noteholders.
By its acceptance of this Class B-2 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class B-2
Note is registrable in the Register upon surrender of this Class B-2 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture 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
Notes of authorized denominations evidencing the same aggregate Class B-2
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
The transfer of this Class B-2 Note shall not be registered
unless the transferee has executed and delivered to the Indenture Trustee a
certification to the effect that either (i) the transferee is not (A) an
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title I of ERISA or (B) a plan (as defined in Section 4975(e)(1)
of the Internal Revenue Code of 1986, as amended (the "Code")) that is subject
to Section 4975 of the Code (each of the foregoing, a "Benefit Plan"), and is
not acting on behalf of or investing the assets of a Benefit Plan, or (ii) that
the transferee's acquisition and continued holding of this Class B-2 Note will
be covered by a U.S. Department of Labor Prohibited Transaction Class Exemption.
The Class B-2 Notes are issuable only as registered Class B-2
Notes without coupons in minimum denominations of $1,000 of the Initial Class
B-2 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class B-2 Notes are exchangeable for new Class
B-2 Notes of authorized denominations evidencing the same aggregate Class B-2
Percentage Interest, as requested by the Class B-2 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the
D-2-3
<PAGE> 110
Notes as of any Payment Date following the date on which the aggregate Class A
Note Principal Balance and the Subordinate Note Principal Balance is less than
10% of the Initial Class A Note Principal Amount and the Initial Subordinate
Note Principal Amount. In the event of such redemption, the entire outstanding
Class A Note Principal Balance and the Subordinate Note Principal Balance,
together with accrued interest thereon at the related Note Rate, will be
required to be paid to the respective Class A Noteholders and the respective
Subordinate Noteholders on such Payment Date. If an Event of Default as defined
in the Indenture shall occur and be continuing, the principal of all the Notes
may become or be declared due and payable in the manner and with the effect
provided in the Indenture.
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class B-2
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
D-2-4
<PAGE> 111
IN WITNESS WHEREOF, the Issuer has caused this Class B-2 Note
to be duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
D-2-5
<PAGE> 112
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-2 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
D-2-6
<PAGE> 113
EXHIBIT D-3
CLASS B-3 NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE 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 NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE 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
INDENTURE APPLICABLE TO SUCH TRANSFER. NO RESALE OR OTHER TRANSFER OF THIS NOTE
MAY BE MADE TO A NONRESIDENT ALIEN INDIVIDUAL, FOREIGN CORPORATION OR OTHER
NON-UNITED STATES PERSON.
THE PRINCIPAL OF THIS NOTE IS PAYABLE ON THE PAYMENT DATES AND IN THE AMOUNTS
DESCRIBED HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF AND MAY BE
ASCERTAINED ONLY BY OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE INDENTURE
TRUSTEE NAMED HEREIN OR ITS SUCCESSOR.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1
6.242% EQUIPMENT CONTRACT-BACKED NOTE, CLASS B-3
Secured by the property of which includes a pool of equipment,
the related equipment leases, loans and contracts and other property appurtenant
thereto pledged to the Indenture Trustee by First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner Trustee
(the "Issuer").
Principal in respect of this Class B-3 Note is payable monthly
as set forth herein.
This Class B-3 Note does not represent any interest in or
obligation of First Sierra Financial, Inc. ("First Sierra"), First Sierra
Receivables III, Inc. (the "Depositor") or any Affiliate of First Sierra or the
Depositor or First Union Trust Company, National Association. Neither the Class
B-3 Notes nor the Contracts are insured by any governmental agency.
Class B-3
Note $5,385,687 Initial Class B-3 Percentage
No. B-3 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to
FIRST SIERRA RECEIVABLES III, INC. the principal sum of FIVE MILLION EIGHTY FIVE
THOUSAND SIX HUNDRED EIGHTY SEVEN Dollars ($5,385,687) in monthly installments
and to pay interest monthly in arrears on the unpaid portion of said principal
sum (and, to the extent that the payment of such interest shall be legally
enforceable, on any overdue
D-3-1
<PAGE> 114
installment of interest on this Note) on the 12th day of each month or, if such
12th day is not a Business Day, the Business Day immediately following (each, a
"Payment Date"), commencing in January 1999, for the period commencing on and
including the immediately preceding Payment Date (or on the Closing Date with
respect to the initial Payment Date) and ending on and including the day
immediately preceding such Payment Date, until such unpaid principal is fully
paid, at a rate per annum equal to 6.242% (the "Class B-3 Note Rate"); provided,
however, that interest on any amount of principal or interest that is not timely
paid when due shall accrue interest until paid at the Class B-3 Note Rate plus
1%. The Issuer hereby agrees to pay to such registered holder its pro rata share
(based on the aggregate Class B-3 Percentage Interest held by such registered
Holder) of the amounts which all Holders of the Class B-3 Notes are entitled to
receive, as hereinafter set forth in this Class B-3 Note and as more fully set
forth in the Indenture dated as of December 1, 1998 among the Issuer, First
Sierra, as Servicer and Originator (the "Servicer" and "Originator") and Bankers
Trust Company, as Indenture Trustee (the "Indenture Trustee"), at all times from
the sources and on the terms and conditions hereinafter set forth and as more
fully set forth in the Indenture.
The property pledged by the Owner Trustee, on behalf of the
Issuer, to the Indenture Trustee as security for the Class B-3 Notes includes
the Contracts, the Equipment, all Scheduled Payments, Final Scheduled Payments,
Defaulted Contract Recoveries and other monies due thereunder after the close of
business on December, 1 1998 (the "Cut-Off Date"), and other property. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture.
This Class B-3 Note is one of the duly authorized Class B-3
Notes designated as "6.242% Equipment Contract Backed Notes of First Sierra
Equipment Contract Trust 1998-1, Class B-3" (the "Class B-3 Notes"). This Class
B-3 Note is issued under and is subject to the terms, provisions and conditions
of the Indenture, to which Indenture the Holder of this Class B-3 Note, by
virtue of the acceptance hereof, assents and by which such Holder is bound.
This Class B-3 Note does not purport to summarize the
Indenture and reference is made to the Indenture for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and immunities of the Issuer. Copies of the
Indenture and all amendments thereto will be provided to any Class B-3
Noteholder, at its expense, upon a written request to the Servicer: 600 Travis
Street, Suite 7050, Houston, Texas 77002; Attention: Sandy Ho, Chief Financial
Officer.
Under the Indenture, the Issuer is obligated to cause the
Indenture Trustee to pay, to the extent that monies are available in the
Collection Account for such distributions, on the 12th day of each Payment Date,
to the person in whose name this Class B-3 Note is registered and at the address
specified in the 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 sum of (i) the Class B-3 Note Interest
and (ii) the Class B-3 Base Principal Distribution Amount. The final payment of
principal and interest on this Class B-3 Note will not be later than the
December, 2005 Payment Date.
Payments on this Class B-3 Note will be made by the Indenture
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 Indenture or by such other means
as the Person entitled thereto and the Indenture Trustee shall agree, without
the presentation or surrender of this Class B-3 Note or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class B-3 Note,
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 Indenture for
payment hereunder and that the Indenture Trustee in its individual capacity is
not personally liable to the Holder hereof for any amounts due under this Class
B-3 Note or the Indenture. In addition, the Holder hereof, by its acceptance of
this Note, agrees to treat such Note as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat such Note as indebtedness of the Issuer
for purposes of Federal, state and local income and franchise and any other
income taxes.
The Class B-3 Notes do not represent an obligation of, or an
interest in, First Union Trust Company, National Association, First Sierra or
any Affiliate thereof. The Class B-3 Notes are limited in right of
D-3-2
<PAGE> 115
payment to certain collections and recoveries respecting the Contracts, all as
more specifically set forth above in the Indenture. Pursuant to the Indenture,
the Indenture Trustee shall, in addition to the Class B-3 Notes, issue Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes (together, the
"Class A Notes" or the "Offered Notes") and Class B-1 Notes and Class B-2 Notes
(collectively with the Class B-3 Notes, the "Subordinate Notes") and pursuant to
the Trust Agreement, the Owner Trustee shall issue the Trust Certificate. THE
RIGHT TO RECEIVE PAYMENTS OF INTEREST WITH RESPECT TO EACH CLASS OF CLASS A
NOTES IS PARI PASSU WITH EACH OTHER CLASS OF CLASS A NOTES AND THE RIGHT TO
RECEIVE PAYMENTS OF PRINCIPAL WITH RESPECT TO EACH CLASS OF CLASS A NOTES IS ON
A SEQUENTIAL-PAY BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL
BALANCE OF THE CLASS A NOTES THEN OUTSTANDING AND HAVING THE LOWEST NUMERICAL
DESIGNATION (E.G., FIRST TO THE CLASS A-1 NOTES) TO ZERO BEFORE ANY PRINCIPAL
PAYMENT IS MADE TO THE NEXT CLASS. THE RIGHT TO RECEIVE PAYMENTS WITH RESPECT TO
THE CLASS B-3 NOTES 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 NOTES, THE CLASS B-1 NOTES AND THE CLASS B-2 NOTES ON EACH PAYMENT DATE.
The Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Servicer and the rights of the Class B-3
Noteholders under the Indenture at any time by the Servicer, the Issuer and the
Indenture Trustee with the consent of the Majority Holders and the Note Insurer.
Any such consent by the Holder of this Class B-3 Note shall be conclusive and
binding on such Holder and upon all future Holders of this Class B-3 Note and of
any Class B-3 Note 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-3
Note. The Indenture also permits the amendment thereof, in certain limited
circumstances, without the consent of the Class B-3 Noteholders.
By its acceptance of this Class B-3 Note, each Holder shall be
deemed to have agreed that such Holder will not directly or indirectly
institute, or cause to be instituted, against the Residual Holder 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 Trust.
As provided in the Indenture, the transfer of this Class B-3
Note is registrable in the Register upon surrender of this Class B-3 Note for
registration of transfer at the offices or agencies maintained by the Indenture
Trustee accompanied by a written instrument of transfer in form satisfactory to
the Indenture Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class B-3
Notes of authorized denominations evidencing the same aggregate Class B-3
Percentage Interest in the Trust Property will be issued to the designated
transferee or transferees.
The transfer of this Class B-3 Note shall not be registered
unless the transferee has executed and delivered to the Indenture Trustee a
certification to the effect that the tranferee is not (A) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of
ERISA or (B) a plan (as defined in Section 4975(e)(1) of the Internal Revenue
Code of 1986, as amended (the "Code")) that is subject to Section 4975 of the
Code (each of the foregoing, a "Benefit Plan"), and is not acting on behalf of
or investing the assets of a Benefit Plan.
The Class B-3 Notes are issuable only as registered Class B-3
Notes without coupons in minimum denominations of $1,000 of the Initial Class
B-3 Note Principal Amount. As provided in the Indenture and subject to certain
limitations therein set forth, Class B-3 Notes are exchangeable for new Class
B-3 Notes of authorized denominations evidencing the same aggregate Class B-3
Percentage Interest, as requested by the Class B-3 Noteholder surrendering the
same.
Unless earlier declared, or they otherwise become, due and
payable by reason of an Event of Default, the Notes are payable only at the time
and in the manner provided in the Indenture and are not redeemable or prepayable
before such time except that the Residual Holder will have the option, subject
to certain conditions set forth in the Indenture, including the deposit of the
sum specified in the Indenture, to cause early retirement of the Notes as of any
Payment Date following the date on which the aggregate Class A Note Principal
Balance and the
D-3-3
<PAGE> 116
Subordinate Note Principal Balance is less than 10% of the Initial Class A Note
Principal Amount and the Initial Subordinate Note Principal Amount. In the event
of such redemption, the entire outstanding Class A Note Principal Balance and
the Subordinate Note Principal Balance, together with accrued interest thereon
at the related Note Rate, will be required to be paid to the respective Class A
Noteholders and the respective Subordinate Noteholders on such Payment Date. If
an Event of Default as defined in the Indenture shall occur and be continuing,
the principal of all the Notes may become or be declared due and payable in the
manner and with the effect provided in the Indenture.
No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Servicer, the Issuer and the Indenture Trustee and any
agent of any of the foregoing may treat the person in whose name this Class B-3
Note is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by any notice to the contrary.
D-3-4
<PAGE> 117
IN WITNESS WHEREOF, the Issuer has caused this Class B-3 Note
to be duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1,
A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS OWNER TRUSTEE
Dated: December 17, 1998
By:
------------------------------------------
Name:
Title:
D-3-5
<PAGE> 118
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-3 Notes of the Series designated herein, issued under
the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By:
---------------------------------------
Name:
Title:
D-3-6
<PAGE> 119
EXHIBIT E
FORM OF TRANSFEREE CERTIFICATION
(NON-144A)
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: First Sierra Equipment Contract Trust 1998-1, Class
[B-1][B-2][B-3] Contract-Backed Note, Series 1998-1, No. __,
issued under that certain Indenture, dated as of December 1,
1998, among First Sierra Financial, Inc., as servicer (the
"Servicer"), First Sierra Equipment Contract Trust 1998-1, a
common law trust acting through its trustee, First Union Trust
Company, National Association, not in its individual capacity
but solely as Owner Trustee, (the "Trust") and Bankers Trust
Company, as indenture trustee (the "Indenture Trustee")
Dear Sirs:
________________________________________ as registered holder
("Seller") intends to transfer the captioned Note to
____________________________ ("Purchaser"), for registration in the name of
___________________________.
1. In connection with such transfer and in accordance with
Article V of the captioned Indenture, 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 Note, any interest in
the Note or any other similar security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the Note, any interest in the
Note 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 Note under
the Securities Act of 1933, as amended (the "1933 Act"), or which would render
the disposition of the Note 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 Seller, the Trustee and the Servicer pursuant to Article V of the
Indenture as follows:
a. The Purchaser understands that the Note 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 Note.
d. The Purchaser has been furnished with all
information regarding the Note that it has requested from the Issuer,
the Indenture Trustee or the Servicer.
e. Neither the Purchaser nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise disposed of
the Note, any interest in the Note or any other similar security to, or
solicited any offer to buy or accept a transfer, pledge or other
disposition of the Note, any interest in the Note or any other similar
security from, or otherwise approached or negotiated with respect to
the Note, any interest in the Note 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
E-1
<PAGE> 120
distribution of the Note under the 1933 Act or that would render the
disposition of the Note 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 Note.
3. The Purchaser warrants and represents to, and covenants
with, the Servicer, the Trust and the Trustee that (i) the Purchaser is not an
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title I of ERISA, or a plan (as defined in Section 4975(e)(1) of
the Internal Revenue Code of 1986 (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and the Purchaser is not
directly or indirectly purchasing the Note on behalf of, as investment manager
of, as named fiduciary of, as trustee of, or with assets of a Benefit Plan or
(ii) with respect to any transfer of a Class B-1 Note or a Class B-2 Note, the
Purchaser's acquisition and continued holding of the Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
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:
-------------------------------- -------------------------------
E-2
<PAGE> 121
EXHIBIT F
FORM OF TRANSFEREE CERTIFICATION
(144A QIB)
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: First Sierra Equipment Contract Trust 1998-1, Class
[B-1][B-2][B-3] Contract-Backed Notes, No. ___, issued under
that certain Indenture, dated as of December 1, 1998, by and
among First Sierra Financial, Inc., as servicer (the
"Servicer"), First Sierra Equipment Contract Trust 1998-1, a
common law trust acting through its trustee, First Union Trust
Company, National Association, not in its individual capacity
but solely as Owner Trustee (the "Trust") and Bankers Trust
Company, as indenture trustee (the "Indenture Trustee")
Dear Sirs:
________________________________________ as registered holder
("Seller") intends to transfer the captioned Note to
____________________________ ("Purchaser"), for registration in the name of
___________________________.
1. In connection with such transfer and in accordance with
Article V of the captioned Indenture, 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 Note, any interest in
the Note or any other similar security, offer to buy or accept a transfer,
pledge or other disposition of the Note, any interest in the Note 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 Note under the
Securities Act of 1933, as amended (the "1933 Act"), or which would render the
disposition of the Note 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 Trust, the Trustee and the Servicer pursuant to Article V of the
Indenture as follows:
a. The Purchaser understands that the Note has not
been registered under the 1933 Act or the securities laws of any state.
b. The Purchaser is acquiring the Note 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 Note.
d. The Purchaser has been furnished with all
information regarding the Note that it has requested from the Issuer,
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 Note for its own account or for the account of a
qualified institutional buyer, understands that the Note 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
F-1
<PAGE> 122
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 Trust and the Trustee that (i) the Purchaser is not an
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title I of ERISA, or a plan (as defined in Section 4975(e)(1) of
the Internal Revenue Code of 1986 (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and the Purchaser is not
directly or indirectly purchasing the Note on behalf of, as investment manager
of, as named fiduciary of, as trustee of, or with assets of a Benefit Plan or
(ii) with respect to any transfer of a Class B-1 Note or a Class B-2 Note, the
Purchaser's acquisition and continued holding of the Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
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:
-------------------------------- -------------------------------
F-2
<PAGE> 123
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 Note 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.
___ 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.
- ---------------
(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.
1
<PAGE> 124
___ 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
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
Notes 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.
____ ___ Will the Purchaser be purchasing the Note
Yes No only for the Purchaser's own account?
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 Note will constitute
a reaffirmation of this certification as of the date of such purchase.
------------------------------------------
Print Name of Purchaser
By:
---------------------------------------
Name:
Title:
Date:
2
<PAGE> 125
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 to the Note 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).
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 Notes 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.
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<PAGE> 126
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 Note 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> 127
EXHIBIT G
FORM OF TRANSFEREE CERTIFICATION
(INVESTMENT COMPANY)
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: First Sierra Equipment Contract Trust 1998-1, Class
[B-1][B-2][B-3] Contract-Backed Note, Series 1998-1, No. ____,
issued under that certain Indenture, dated as of December 1,
1998, among First Sierra Financial, Inc., as servicer (the
"Servicer"), First Sierra Equipment Contract Trust 1998-1, a
common law trust acting through its trustee, First Union Trust
Company, National Association, not in its individual capacity
but solely as Owner Trustee, (the "Trust") and Bankers Trust
Company, as indenture trustee (the "Indenture Trustee").
Dear Sirs:
_________________________________________ as registered holder
("Seller") intends to transfer the captioned Note 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 Trust and the Trustee that (i) the Purchaser is not an
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title I of ERISA, or a plan (as defined in Section 4975(e)(1) of
the Internal Revenue Code of 1986 (the "Code")) that is subject to Section 4975
of the Code (each of the foregoing, a "Benefit Plan"), and the Purchaser is not
directly or indirectly purchasing the Note on behalf of, as investment manager
of, as named fiduciary of, as trustee of, or with assets of a Benefit Plan or
(ii) with respect to any transfer of a Class B-1 Note or a Class B-2 Note, the
Purchaser's acquisition and continued holding of the Note will be covered by a
U.S. Department of Labor Prohibited Transaction Class Exemption.
3. [Address for Payment / Wire Transfer Instructions].
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:
-------------------------------- -------------------------------
G-1
<PAGE> 128
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:
--------------------------------------
1
<PAGE> 129
EXHIBIT H
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 Noteholder, in, to and
under that certain Indenture (the "Indenture"), dated as of December 1, 1998
among First Sierra Financial, Inc., as servicer (the "Servicer"), First Sierra
Equipment Contract Trust 1998-1, a common law trust acting through its trustee,
First Union Trust Company, National Association, not in its individual capacity
but solely as Owner Trustee (the "Trust") and Bankers Trust Company, as
indenture trustee (the "Indenture Trustee") and that certain Class
[B-1][B-2][B-3] Note, No. ____, Series 1998-1 (the "Note") issued thereunder by
the Indenture Trustee.
B. For the purpose of inducing Assignee to purchase the Note
from Assignor, Assignor warrants and represents that:
a. Assignor is the lawful owner of the Note with the
full right to transfer the Note 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 Indenture or the Note; and
c. The Assignor has no knowledge of and has not
received notice of any amendments to the Indenture or the Note.
C. By execution hereof Assignee agrees to be bound, as
Noteholder, by all of the terms, covenants and conditions of the Indenture and
the Note and from and after the date hereof Assignee assumes for the benefit of
each of the Trust, the Servicer, the Transferor, the Indenture Trustee and the
Assignor all of Assignor's obligations as Noteholder 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 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.
----------- ----------------
[Payment Address / Wire Transfer
Instructions]
H-1
<PAGE> 130
EXHIBIT I
LIST OF CONTRACTS SUBJECT TO
OPTIONAL REDEMPTION PURSUANT TO
SECTION 9.02(B) OF THE INDENTURE
[ON FILE WITH DEWEY BALLANTINE LLP]
I-1
<PAGE> 131
Annex A - Defined Terms
"Account" means any account established pursuant to Article
III of the Indenture.
"Actual Payment" means, with respect to a Collection Period
and a Contract, all Scheduled Payments, Prepayments, proceeds from any Contract
subject to a Casualty Loss, Final Scheduled Payments and Defaulted Contract
Recoveries received by the Servicer from or on behalf of a Obligor with respect
to such Contract during such Collection Period. Actual Payments do not include
Initial Unpaid Amounts, Excluded Amounts, Repurchase Amounts, Advance Payments
and Servicer Advances.
"Advance Payment" means, with respect to a Contract and a
Collection Period, any Scheduled Payment, Final Scheduled Payment or portion of
either made by or on behalf of an Obligor and received by the Servicer during
such Collection Period, which Scheduled Payment, Final Scheduled Payment or
portion thereof 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 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 Contracts.
"Aggregate Initial Note Principal Balance" means the aggregate
of the Initial Class A Note Principal Balance, the Initial Class B-1 Note
Principal Balance, the Initial Class B-2 Note Principal Balance and the Initial
Class B-3 Note Principal Balance.
"Applicable Securities" means, for so long as the Class A Note
Principal Balance is greater than zero, the Class A Notes; following reduction
of the Class A Note Principal Balance to zero, and for so long as the Class B-1
Note Principal Balance is greater than zero, the Class B-1 Notes; following
reduction of the Class B-1 Note Principal Balance to zero, and for so long as
the Class B-2 Note Principal Balance is greater than zero, the Class B-2 Notes;
following reduction of the Class B-2 Note Principal Balance to zero, and for so
long as the Class B-3 Note Principal Balance is greater than zero, the Class B-3
Notes; and following reduction of the Class B-3 Note Balance to zero, the Trust
Certificate.
"Applicant" has the meaning specified in Section 5.06 of the
Indenture.
<PAGE> 132
"Authorized Officer" means, with respect to the Issuer and the
Servicer, any officer or agent acting pursuant to a power of attorney of the
Owner Trustee or the Servicer, as applicable, who is authorized to act for the
Owner Trustee or the Servicer, as applicable, in matters relating to the Trust
and who is identified on the list of Authorized Officers delivered by each of
the Owner Trustee and the Servicer to the Indenture Trustee and the Note Insurer
on the Closing Date (as such list may be modified or supplemented from time to
time thereafter).
"Available Distribution Amount" means, with respect to a
Collection Period, the total of (a) the Available Funds with respect to the
related Collection Period minus (b) the Trust Operating Expenses.
"Available Funds" means, with respect to a Payment Date, all
amounts held in the Collection Account on the related Determination Date, after
taking into account all deposits to be made on such Determination Date, plus
proceeds of any Servicer Advances to be made on the Business Day immediately
prior to the Payment Date, other than any such amounts which relate to any
subsequent Collection Period, and any Repurchase Amounts to be deposited by the
Residual Holder two Business Days prior to the Payment Date pursuant to Section
9.02 of the Indenture.
"Available Funds Shortfall" means an event which occurs on a
Payment Date if the Class A Insured Distribution Amount for such Payment Date
exceeds the Available Distribution Amount for such Payment Date.
"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 Collection
Period, an amount equal to the excess of (x) the Aggregate Discounted Contract
Principal Balances of the Contracts as of the close of business on the last day
of the second preceding Collection Period over (y) the Aggregate Discounted
Contract Principal Balances of the Contracts as of the close of business on the
last day of the immediately preceding Collection Period.
"Benefit Plan" has the meaning as specified in Section 5.03(f)
of the Indenture.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in New York, New York, Houston, Texas,
Charlotte, North Carolina, in the city and State where the Indenture Trustee's
principal corporate trust office is located, or in the city and State where the
Servicer's principal office is 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 and the Note Insurer, 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.
2
<PAGE> 133
"Casualty Loss" means, with respect to a Contract, 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 Contract, in a reduction in the number or amount of any future
Scheduled Payments due thereunder or in the termination of the Obligor's
obligation to make future Scheduled Payments thereunder.
"Certificate of Title" means, with respect to a Vehicle, the
certificate of title naming the Obligor as titleholder of such Vehicle and, in
each case, with a notation thereon evidencing the security interest of Bankers
Trust Company, as custodian or trustee, in such Vehicle.
"Class" means all of the Class A-1 Notes, all of the Class A-2
Notes, all of the Class A-3 Notes, all of the Class A-4 Notes, all of the Class
B-1 Notes, all of the Class B-2 Notes or all of the Class B-3 Notes, as
applicable.
"Class A Base Principal Distribution Amount" means with
respect to any Payment Date, the product of (a) the Class A Percentage and (b)
the Base Principal Amount for the related Collection Period.
"Class A Insured Distribution Amount" means (a) with respect
to any Payment Date (other than the Payment Date which is the Class A-1 Maturity
Date, the Class A-2 Maturity Date, the Class A-3 Maturity Date, or the Class A-4
Maturity Date, as applicable), the sum of (i) the sum of (A) Class A-1 Note
Interest, (B) Class A-2 Note Interest, (C) Class A-3 Note Interest and (D) Class
A-4 Note Interest, and (ii) the excess if any, of (A) the Class A Note Principal
Balance over (B) the Aggregate Discounted Contract Principal Balance as of the
end of the immediately preceding Collection Period and (b) with respect to the
Payment Date which is a Class A Maturity Date, the sum of (i) the Class A Note
Interest and (ii) the greater of (x) the amount due under clause (a)(ii) above
and (y) with respect to the Class A Notes relating to such Class A Maturity
Date, the applicable Class A Note Principal Balance.
"Class A Maturity Date" means the Class A-1 Maturity Date, the
Class A-2 Maturity Date, the Class A-3 Maturity Date or the Class A-4 Maturity
Date, as applicable.
"Class A Note" means any one of the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes or the Class A-4 Notes.
"Class A Note 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 Indenture Trustee and the Note Insurer on
the related Determination Date representing the ratio of (a) the Class A Note
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 Note Principal Balance.
"Class A Noteholder" means the Person in whose name a Class A
Note is registered in the Register.
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<PAGE> 134
"Class A Note Interest" means the Class A-1 Note Interest, the
Class A-2 Note Interest, the Class A-3 Note Interest or the Class A-4 Note
Interest, as applicable.
"Class A Note Principal Balance" means, at any time, the
Initial Class A Note Principal Balance minus all payments theretofore received
by the Class A Noteholders on account of principal.
"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 Noteholders on all prior Payment Dates.
"Class A Percentage" means 94.845%.
"Class A Percentage Interest" means the interest in the Class
A Portion of the Trust that is evidenced by a Class A Note and that is set forth
on the face of such Note; provided, however, that the Issuer shall only issue
Class A Notes evidencing in the aggregate Class A Percentage Interests totaling
100%. To the extent that, for federal income tax purposes, the Class A Notes
constitute indebtedness, all references in this Agreement to Holders of Class A
Notes owning a specified percentage of the outstanding Class A Note Principal
Balance shall be construed to mean Holders of Class A Notes evidencing such
specified percentage of the then outstanding indebtedness.
"Class A Portion" means the aggregate interest in the Trust
evidenced by the Class A Notes.
"Class A Termination Date" means the date on which all amounts
owing to the Class A Noteholders, and as certified in writing by the Note
Insurer to the Indenture Trustee, all amounts owing to the Note Insurer, have
each been paid in full.
"Class A-1 Maturity Date" means January 12, 2000.
"Class A-1 Note" means any one of the Class A-1 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
C-1 to the Indenture.
"Class A-1 Note Current Interest" means, with respect to any
Collection Period, the interest accrued during the related Interest Accrual
Period, equal to the product of (x) a fraction, the numerator of which is the
number of actual days elapsed during the related Interest Accrual Period and the
denominator of which is 360, (y) the Class A-1 Note Rate and (z) the aggregate
Class A-1 Note Principal Balance outstanding immediately prior to such Payment
Date.
"Class A-1 Noteholder" means the Person in whose name a Class
A-1 Note is registered in the Register.
"Class A-1 Note Interest" means, with respect to any
Collection Period, the Class A-1 Note Current Interest and the Class A -1
Overdue Interest.
4
<PAGE> 135
"Class A-1 Note Principal Balance" means, at any time, the
Initial Class A-1 Note Principal Balance minus all payments theretofore received
by the Class A-1 Noteholders on account of principal.
"Class A-1 Note Rate" means 5.215% per annum.
"Class A-1 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of (i) the excess, if any, of
any Class A-1 Note Interest due on the immediately preceding Payment Date over
the Class A-1 Note Interest paid on such immediately preceding Payment Date,
(ii) without duplication of the amount described in clause (i), the amount of
the Class A-1 Overdue Interest due and unpaid as of the immediately preceding
Payment Date and (iii) the product of (x) the sum of clauses (i) and (ii), (y) a
fraction, the numerator of which is the number of actual days elapsed during the
related Interest Accrual Period and the denominator of which is 360, and (z) the
sum of the Class A-1 Note Rate plus 1%, and (b) any Class A-1 Overdue Interest
paid on such Payment Date.
"Class A-1 Percentage Interest" means the interest in the
Class A-1 Portion of the Trust that is evidenced by a Class A-1 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class A-1 Notes evidencing in the aggregate Class A-1 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class A-1 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class A -1 Notes owning a specified percentage of the
outstanding Class A-1 Note Principal Balance shall be construed to mean Holders
of Class A -1 Notes evidencing such specified percentage of the then outstanding
indebtedness.
"Class A-1 Portion" means the aggregate interest in the Trust
evidenced by the Class A-1 Notes.
"Class A-2 Maturity Date" means April 12, 2001.
"Class A-2 Note" means any one of the Class A-2 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
C-2 to the Indenture.
"Class A-2 Note Current Interest" means, with respect to any
Collection Period, the interest accrued during the related Interest Accrual
Period, equal to the product of (x) one-twelfth of the Class A-2 Note Rate and
(y) the aggregate Class A-2 Note Principal Balance outstanding immediately prior
to such Payment Date.
"Class A-2 Noteholder" means the Person in whose name a Class
A-2 Note is registered in the Register.
"Class A-2 Note Interest" means, with respect to any
Collection Period, the Class A-2 Note Current Interest and the Class A-2
Overdue Interest.
"Class A-2 Note Principal Balance" means, at any time, the
Initial Class A-2 Note Principal Balance minus all payments theretofore received
by the Class A-2 Noteholders on account of principal.
5
<PAGE> 136
"Class A-2 Note Rate" means 5.490% per annum.
"Class A-2 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of (i) the excess, if any, of
any Class A-2 Note Interest due on the immediately preceding Payment Date over
the Class A-2 Note Interest paid on such immediately preceding Payment Date,
(ii) without duplication of the amount described in clause (i), the amount of
the Class A-2 Overdue Interest due and unpaid as of the immediately preceding
Payment Date and (iii) the product of (x) the sum of clauses (i) and (ii) and
(y) one-twelfth of the sum of the Class A-2 Note Rate plus 1%, and (b) any Class
A-2 Overdue Interest paid on such Payment Date.
"Class A-2 Percentage Interest" means the interest in the
Class A-2 Portion of the Trust that is evidenced by a Class A-2 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class A-2 Notes evidencing in the aggregate Class A-2 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class A-2 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class A-2 Notes owning a specified percentage of the
outstanding Class A-2 Note Principal Balance shall be construed to mean Holders
of Class A-2 Notes evidencing such specified percentage of the then outstanding
indebtedness.
"Class A-2 Portion" means the aggregate interest in the Trust
evidenced by the Class A-2 Notes.
"Class A-3 Maturity Date" means February 12, 2002.
"Class A-3 Note" means any one of the Class A-3 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
C-3 to the Indenture.
"Class A-3 Note Current Interest" means, with respect to any
Collection Period, the interest accrued during the related Interest Accrual
Period, equal to the product of (x) one-twelfth of the Class A-3 Note Rate and
(y) the aggregate Class A-3 Note Principal Balance outstanding immediately prior
to such Payment Date.
"Class A-3 Noteholder" means the Person in whose name a Class
A-3 Note is registered in the Register.
"Class A-3 Note Interest" means, with respect to any
Collection Period, the Class A-3 Note Current Interest and the Class A-3
Overdue Interest.
"Class A-3 Note Principal Balance" means, at any time, the
Initial Class A-3 Note Principal Balance minus all payments theretofore received
by the Class A-3 Noteholders on account of principal.
"Class A-3 Note Rate" means 5.450% per annum.
"Class A-3 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of (i) the excess, if any, of
any Class A-3 Note Interest due on the
6
<PAGE> 137
immediately preceding Payment Date over the Class A-3 Note Interest paid on such
immediately preceding Payment Date, (ii) without duplication of the amount
described in clause (i), the amount of the Class A-3 Overdue Interest due and
unpaid as of the immediately preceding Payment Date and (iii) the product of (x)
the sum of clauses (i) and (ii) and (y) one-twelfth of the sum of the Class A-3
Note Rate plus 1%, and (b) any Class A-3 Overdue Interest paid on such Payment
Date.
"Class A-3 Percentage Interest" means the interest in the
Class A-3 Portion of the Trust that is evidenced by a Class A-3 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class A-3 Notes evidencing in the aggregate Class A-3 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class A-3 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class A-3 Notes owning a specified percentage of the
outstanding Class A-3 Note Principal Balance shall be construed to mean Holders
of Class A-3 Notes evidencing such specified percentage of the then outstanding
indebtedness.
"Class A-3 Portion" means the aggregate interest in the Trust
evidenced by the Class A-3 Notes.
"Class A-4 Maturity Date" means August 12, 2004.
"Class A-4 Note" means any one of the Class A-4 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
C-4 to the Indenture.
"Class A-4 Note Current Interest" means, with respect to any
Collection Period, the interest accrued during the related Interest Accrual
Period, equal to the product of (x) one-twelfth of the Class A-4 Note Rate and
(y) the aggregate Class A-4 Note Principal Balance outstanding immediately prior
to such Payment Date.
"Class A-4 Noteholder" means the Person in whose name a Class
A-4 Note is registered in the Register.
"Class A-4 Note Interest" means, with respect to any
Collection Period, the Class A-4 Note Current Interest and the Class A-4 Overdue
Interest.
"Class A-4 Note Principal Balance" means, at any time, the
Initial Class A-4 Note Principal Balance minus all payments theretofore received
by the Class A-4 Noteholders on account of principal.
"Class A-4 Note Rate" means 5.628% per annum.
"Class A-4 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of (i) the excess, if any, of
any Class A-4 Note Interest due on the immediately preceding Payment Date over
the Class A-4 Note Interest paid on such immediately preceding Payment Date,
(ii) without duplication of the amount described in clause (i), the amount of
the Class A-4 Overdue Interest due and unpaid as of the immediately preceding
Payment Date and (iii) the product of (x) the sum of clauses (i) and (ii) and
(y) one-twelfth of the
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sum of the Class A-4 Note Rate plus 1%, and (b) any Class A-4 Overdue Interest
paid on such Payment Date.
"Class A-4 Percentage Interest" means the interest in the
Class A-4 Portion of the Trust that is evidenced by a Class A-4 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class A-4 Notes evidencing in the aggregate Class A-4 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class A-4 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class A-4 Notes owning a specified percentage of the
outstanding Class A-4 Note Principal Balance shall be construed to mean Holders
of Class A-4 Notes evidencing such specified percentage of the then outstanding
indebtedness.
"Class A-4 Portion" means the aggregate interest in the Trust
evidenced by the Class A-4 Notes.
"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 the related Collection Period.
"Class B-1 Maturity Date" means August 12, 2004.
"Class B-1 Note" means any one of the Class B-1 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
D-1 to the Indenture
"Class B-1 Note Current Interest" means, with respect to any
Payment Date, the interest accrued during the related Interest Accrual Period,
equal to the product of (x) one-twelfth of the Class B-1 Note Rate and (y) the
aggregate Class B-1 Note Principal Balance outstanding immediately prior to such
Payment Date.
"Class B-1 Note 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 Indenture Trustee and the Note Insurer on
the related Determination Date representing the ratio of (a) the Class B-1 Note
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 Note Principal Balance.
"Class B-1 Noteholder" means the Person in whose name a Class
B-1 Note is registered in the Register.
"Class B-1 Note Interest" means, with respect to any Payment
Date, the Class B-1 Note Current Interest and the Class B-1 Overdue Interest.
"Class B-1 Note Principal Balance" means, at any time, the
Initial Class B-1 Note Principal Balance minus all payments theretofore received
by the Class B-1 Noteholders on account of principal.
"Class B-1 Note Rate" means 7.340% per annum.
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"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
any Class B-1 Note Interest due on the immediately preceding Payment Date over
the Class B-1 Note Interest paid on such immediately preceding Payment Date,
(ii) without duplication of the amount described in clause (i), the amount of
the Class B-1 Overdue Interest due and unpaid as of the immediately preceding
Payment Date and (iii) the product of (x) the sum of clauses (i) and (ii) and
(y) one-twelfth of the sum of the Class B-1 Note Rate plus 1%, and (b) any Class
B-1 Overdue Interest paid on such Payment Date.
"Class B-1 Overdue Principal" means, with respect to any
Payment Date, the difference, if any, equal to (a) the 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 Noteholders on all prior Payment Dates.
"Class B-1 Percentage" means 2.062%.
"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 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class B-1 Notes evidencing in the aggregate Class B-1 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class B-1 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class B-1 Notes owning a specified percentage of the
outstanding Class B-1 Note Principal Balance shall be construed to mean Holders
of Class B-1 Notes 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 Notes.
"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 the related Collection Period.
"Class B-2 Interest Available Distribution Amount" has the
meaning set forth in Section 3.03(b)(i) of the Indenture.
"Class B-2 Interest Deficiency" means, with respect to any
Payment Date, the deficiency which results if the Class B-2 Note Interest
payable on such Payment Date exceeds the Class B-2 Interest Available
Distribution Amount.
"Class B-2 Maturity Date" means August 12, 2004.
"Class B-2 Note" means any one of the Class B-2 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
D-2 to the Indenture.
"Class B-2 Note Current Interest" means, with respect to any
Payment Date, the interest accrued during the related Interest Accrual Period,
equal to the product of (x) one-twelfth
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of the Class B-2 Note Rate and (y) the aggregate Class B-2 Note Principal
Balance outstanding immediately prior to such Payment Date.
"Class B-2 Note 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 Indenture Trustee and the Note Insurer on
the related Determination Date representing the ratio of (a) the Class B-2 Note
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 Note Principal Balance.
"Class B-2 Noteholder" means the Person in whose name a Class
B-2 Note is registered in the Register.
"Class B-2 Note Interest" means, with respect to any Payment
Date, the Class B-2 Note Current Interest and the Class B-2 Overdue Interest.
"Class B-2 Note Principal Balance" means, at any time, the
Initial Class B-2 Note Principal Balance minus all payments theretofore received
by the Class B-2 Noteholders on account of principal.
"Class B-2 Note Rate" means 9.510% 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
any Class B-2 Note Interest due on the immediately preceding Payment Date over
the Class B-2 Note Interest paid on such immediately preceding Payment Date,
(ii) without duplication of the amount described in clause (i), the amount of
the Class B-2 Overdue Interest due and unpaid as of the immediately preceding
Payment Date and (iii) the product of (x) the sum of clauses (i) and (ii) and
(y) one-twelfth of the sum of the Class B-2 Note Rate plus 1%, and (b) any Class
B-2 Overdue Interest paid on such Payment Date.
"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 Noteholders on all prior Payment Dates.
"Class B-2 Percentage" means 1.031%.
"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 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class B-2 Notes evidencing in the aggregate Class B-2 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class B-2 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class B-2 Notes owning a specified percentage of the
outstanding Class B-2 Note Principal Balance shall be construed to mean Holders
of Class B-2 Notes evidencing such specified percentage of the then outstanding
indebtedness.
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"Class B-2 Portion" means the aggregate interest in the Trust
evidenced by the Class B-2 Notes.
"Class B-3 Base Principal Distribution Amount" means, with
respect to any Payment Date, the product of (a) the Class B-3 Percentage and (b)
the Base Principal Amount for the related Collection Period.
"Class B-3 Maturity Date" means December, 2005.
"Class B-3 Note" means any one of the Class B-3 Notes executed
and authenticated by the Indenture Trustee, substantially in the form of Exhibit
D-3 to the Indenture.
"Class B-3 Note Current Interest" means, with respect to any
Payment Date, the interest accrued during the related Interest Accrual Period,
equal to the product of (x) one-twelfth of the Class B-3 Note Rate and (y) the
aggregate Class B-3 Note Principal Balance outstanding immediately prior to such
Payment Date.
"Class B-3 Note 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 Indenture Trustee and the Note Insurer on
the related Determination Date representing the ratio of (a) the Class B-3 Note
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-3 Note Principal Balance.
"Class B-3 Noteholder" means the Person in whose name a Class
B-3 Note is registered in the Register.
"Class B-3 Note Interest" means, with respect to any Payment
Date, the Class B-3 Note Current Interest and the Class B-3 Overdue Interest.
"Class B-3 Note Principal Balance" means, at any time, the
Initial Class B-3 Note Principal Balance minus all payments theretofore received
by the Class B-3 Noteholders on account of principal.
"Class B-3 Note Rate" means 6.242% per annum.
"Class B-3 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of (i) the excess, if any, of
any Class B-3 Note Interest due on the immediately preceding Payment Date over
the Class B-3 Note Interest paid on such immediately preceding Payment Date,
(ii) without duplication of the amount described in clause (i), the amount of
the Class B-3 Overdue Interest due and unpaid as of the immediately preceding
Payment Date and (iii) the product of (x) the sum of clauses (i) and (ii) and
(y) one-twelfth of the sum of the Class B-3 Note Rate plus 1%, and (b) any Class
B-3 Overdue Interest paid on such Payment Date.
"Class B-3 Overdue Principal" means, with respect to any
Payment Date, the difference, if any, equal to (a) the aggregate of the Class
B-3 Base Principal Distribution
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Amounts due on all prior Payment Dates and (b) the aggregate amount of the
principal (from whatever source) actually distributed to Class B-3 Noteholders
on all prior Payment Dates.
"Class B-3 Percentage" means 2.062%.
"Class B-3 Percentage Interest" means the interest in the
Class B-3 Portion of the Trust that is evidenced by a Class B-3 Note and that is
set forth on the face of such Note; provided, however, that the Issuer shall
only issue Class B-3 Notes evidencing in the aggregate Class B-3 Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class B-3 Notes constitute indebtedness, all references in the Transaction
Documents to Holders of Class B-3 Notes owning a specified percentage of the
outstanding Class B-3 Note Principal Balance shall be construed to mean Holders
of Class B-3 Notes evidencing such specified percentage of the then outstanding
indebtedness.
"Class B-3 Portion" means the aggregate interest in the Trust
evidenced by the Class B-3 Notes.
"Closing Date" means December 17, 1998.
"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 3.01 of the Indenture.
"Collection Period" means, with respect to any Payment Date,
the period from the opening of business on the second day of the immediately
preceding calendar month through the close of business on the first day of the
calendar month in which such Payment Date occurs.
"Collections" means all payments received on or with respect
to the Contracts or the related Equipment, including, without limitation,
Scheduled Payments, Liquidation Proceeds, Repurchase Amounts, Insurance
Proceeds, Early Termination Contract Proceeds, proceeds from any Contract
subject to a Casualty Loss, Expired Contract 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 Contracts 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 Contracts for such Collection Period, but excluding any
Excluded Amounts.
"Computer Tape" means, collectively, the computer tapes
generated by the Servicer which provide information relating to the Contracts
and which were, or will be, used by the Servicer in selecting the Contracts
conveyed to the Issuer pursuant to the Receivables Transfer Agreement.
"Contract" means each of the agreements evidencing the
indebtedness of the related Obligor conveyed to the Trust, including, as
applicable, schedules, supplements and
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amendments thereto, under which a Source or First Sierra, as applicable, leases
specified Equipment to an Obligor and which are identified on the List of
Contracts delivered on the Closing Date or, with respect to Substitute
Contracts, on the List of Substitute Contracts delivered on the related Transfer
Date.
"Contract File" means, with respect to each Contract, (1) a
certified copy of the master Contract, if applicable, (2) the executed original
counterpart of the Contract that constitutes "chattel paper" or an "instrument"
for purposes of Sections 9-105(1)(b), 9-105(l)(i) or 9-305 of the UCC, (3) an
original certificate, executed by an Obligor, evidencing delivery and acceptance
of the Equipment, (4) Obligor's corporate resolutions and secretary's
certificate, if required under the Credit and Collection Policies and
Procedures, (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 Equipment Cost of more than $35,000), (8)
evidence of filing or copies of all UCC financing statements filed with respect
to the Equipment or the Contract in accordance with the Filing Requirements; all
such UCC financing statements shall include either (a) UCC standard forms
executed by the debtor and the secured party, as required, or (b) evidence of
the electronic filing of such UCC financing statement, in which case
acknowledgement copies shall be forwarded promptly as they are received, (9)
with respect to a Contract originated by a Source, a certified copy of the
related sale and assignment between the Source and First Sierra, as well as any
other Contract assignments, (10) copies of any additional Contract documents
evidencing any changes or modifications of a Contract by the Servicer in
accordance with the terms of the Servicing Agreement, (11) with respect to a
Contract relating to a Vehicle, 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 Contract 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 contract management code
on the Contract Management System and any other documents relating thereto held
by First Sierra, as Servicer.
"Contract Management System" means the computerized electronic
contract management system maintained by First Sierra for all Contracts and
other agreements similar to the Contracts.
"Contract Number" means, with respect to each Contract, its
identifying number.
"Contract Pool" means, at any time, all Contracts held as part
of the Trust Property.
"Controlling Parties" means (i) with respect to an Event of
Default resulting only from the failure to make a required payment on the Class
B-3 Notes, (a) Majority Holders of the Class B-1 Notes, the Class B-2 Notes and
the Class B-3 Notes and (b) the Note Insurer, but if a Note Insurer Default has
occurred and is continuing, the Majority Holders of the Class A Notes, (ii) with
respect to an Event of Default resulting only from the failure to make a
required
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payment on the Class B-2 Notes and the Class B-3 Notes, (a) the Majority Holders
of the Class B-1 Notes and the Class B-2 Notes and (b) the Note Insurer, but if
a Note Insurer Default has occurred and is continuing, the Majority Holders of
the Class A Notes (iii) with respect to an Event of Default resulting only from
the failure to make a required payment on the Class B-1 Notes, the Class B-2
Notes and the Class B-3 Notes, (a) the Majority Holders of the Class B-1 Notes
and (b) the Note Insurer, but if a Note Insurer Default has occurred and is
continuing, the Majority Holders of the Class A Notes; and (iv) with respect to
an Event of Default resulting from the failure to make a required payment on the
Class A Notes, the Note Insurer, but if a Note Insurer Default has occurred and
is continuing, the Majority Holders of the Class A Notes.
"Conveyance Date" means, with respect to the Initial
Contracts, the Closing Date, and with respect to Substitute Contracts, the
Transfer Date.
"Conveyed Assets" means, with respect to the Receivables
Transfer Agreement (a) all of the Sellers' right, title and interest in and to
the Original Equipment and the Substitute Equipment relating to Substitute
Contracts (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 income and proceeds upon any sale or other
disposition of the Equipment, (b) all of the Sellers' right, title and interest
in and to, but not its obligations under, the Initial Contracts, the Substitute
Contracts, 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 Contracts on or after the
related Conveyance Date, including without limitation, all Scheduled Payments
thereunder (whether or not due), any Prepayments, any payments in respect of a
casualty or early termination and any Liquidation Proceeds received with respect
thereto, but excluding any Excluded Amounts, (d) the Contract Files, (e) all
Insurance Proceeds relating to the foregoing and the Sellers' 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 Contract
and any Equipment covered by the Contracts and (g) all proceeds and income of
the foregoing or relating thereto.
"Corporate Trust Office" means the principal office of the
Indenture 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 11.06 of the Indenture.
"Credit and Collection Policies and Procedures" means the
credit and collection policies and procedures of the Servicer.
"Credit File" means, with respect to each Contract, the
following documents: (a) copies of the Contract, any UCC financing statements
and any other original documents related to the Contract, (b) the application of
the related Obligor, (c) documentation evidencing the information with respect
to such Contract input into the Contract Management System and (d) any other
information required by the Servicer pursuant to its customary policies and
procedures or the Note Insurer.
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"Cut-Off Date" means, with respect to the Initial Contracts,
the close of business on December 1, 1998 and with respect to each Substitute
Contract, the related Substitute Contract Cut-Off Date.
"DCR" means Duff & Phelps Credit Rating Co.
"Defaulted Contract" means a Contract that becomes defaulted
at the earlier of the date on which (i) the Servicer has determined in its sole
discretion, in accordance with the Servicing Standard and its customary
servicing procedures, that such Contract is not collectible, (ii) all or part of
a Scheduled Payment thereunder is more than 180 days delinquent, or (iii) such
Contract was repurchased by a Source pursuant to a Source Agreement.
"Defaulted Contract Recoveries" means all proceeds of the sale
of Equipment related to Defaulted Contracts and any amounts collected as
judgments against an Obligor or others related to the failure of such Obligor to
pay any required amounts under the related Contract or to return the Equipment,
in each case as reduced by (i) any unreimbursed Servicer Advances with respect
to such Contract or such Equipment and (ii) any reasonably incurred
out-of-pocket expenses incurred by the Servicer in enforcing such Contract or in
liquidating such Equipment.
"Delinquency Trigger Event" shall exist 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 7.5%.
"Delinquency Trigger Ratio" means, with respect to any Payment
Date, the quotient, expressed as a percentage of (a) the Aggregate Discounted
Contract Principal Balance of all Contracts 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 Contracts as of
the last day of the immediately preceding calendar month (including any
Contracts which were repossessed or substituted).
"Delinquent Contract" means, as of any Determination Date, any
Contract (other than a Contract which became a Defaulted Contract prior to such
Determination Date) with respect to which all or a portion of any 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.
"Depositor" means First Sierra Receivables III, Inc., a
Delaware corporation.
"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 Payment Date, a
date which is the tenth day of the calendar month in the month in which such
Payment Date occurs, 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 two Business Days prior to such Payment Date.
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"Direct Participant" means any broker-dealer, bank or other
financial institution for which the Depository holds the Offered Notes from time
to time as a securities depositary.
"Discounted Contract Principal Balance" means, with respect to
any Contract, on any Determination Date, the sum of the present value of all of
the remaining Scheduled Payments becoming due under such Contract after the end
of the prior Collection Period, discounted monthly at the Discount Rate in the
manner described below; provided, however, that except to the extent expressly
provided in the Indenture or the Servicing Agreement, the Discounted Contract
Principal Balance of any Defaulted Contract, Early Termination Contract, or
Expired Contract or Contract purchased by the Servicer or First Sierra pursuant
to the Servicing Agreement or by the Residual Holder pursuant to the Indenture,
shall be deemed to be equal to zero as of the last day of the immediately
preceding Collection Period.
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 Contract shall be calculated
assuming:
(i) Scheduled Payments are due on the last day of each
Collection Period;
(ii) Scheduled Payments are discounted on a monthly basis
using a 30 day month and a 360 day year; and
(iii) Scheduled Payments are discounted to the last day of the
Collection Period prior to the Determination Date.
"Discount Rate" means, as of any date, 6.2418%. The Discount
Rate is equal to the sum of (a) the weighted average of the Class A-1 Note Rate,
the Class A-2 Note Rate, the Class A-3 Note Rate, the Class A-4 Note Rate, the
Class B-1 Note Rate and the Class B-2 Note Rate, weighted by (x) the Initial
Class A-1 Note Principal Balance, the Initial Class A-2 Note Principal Balance,
the Initial Class A-3 Note Principal Balance, the Initial Class A-4 Note
Principal Balance, the Initial Class B-1 Note Principal Balance and the Initial
Class B-2 Note Principal Balance, as applicable, and (y) the expected weighted
average life of each Class of Notes, as applicable, assuming a constant
prepayment rate of 6%, (b) the Servicing Fee Rate and (c) the Premium Rate.
"Early Termination Contract" means any Contract that has
terminated pursuant to the terms of such Contract prior to its scheduled
expiration date, other than a Defaulted Contract.
"Early Termination Contract Proceeds" means any and all cash
proceeds or rents realized from the sale or re-lease of Equipment under an Early
Termination Contract (net of reasonable remarketing expenses).
"Eligible Bank Account" means a segregated account, which may
be an account maintained with the Indenture Trustee, which is either (a)
maintained with a depository institution or trust company whose long term
unsecured debt obligations are rated at least (i) "A" or better by S&P, (ii)
"A2" or better by Moody's and (iii) BBB+ by DCR and Fitch and whose
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short-term unsecured obligations are rated at least A-1 by S&P and "P-1" by
Moody's; provided, that if DCR does not rate such entity then the ratings of
S&P, Moody's and Fitch 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. ss. 9.10(b).
"Eligible Contract" means any Contract that is not a Defaulted
Contract and with respect to which all of the representations and warranties set
forth in Section 2.02 of the Servicing Agreement were true as of the date made.
"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 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
Indenture 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, or, if not rated by DCR or
Fitch, the highest rating category provided by S&P and
Moody's;
(iii) certificates of deposit having a
rating in the highest rating category by the Rating Agencies,
or, if not rated by DCR or Fitch, the highest rating category
provided by S&P and Moody's; 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 Indenture Trustee or
any of its Affiliates is investment manager or advisor), or,
if not rated by DCR or Fitch, the highest rating category
provided by S&P and Moody's;
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(b) demand deposits in the name of the Indenture
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, or, if not rated
by DCR or Fitch, the highest rating category provided by S&P and
Moody's;
(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, or, if not rated
by DCR or Fitch, the highest rating category provided by S&P and
Moody's;
(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 obligations rated in the highest
rating category by the Rating Agencies, or, if not rated by DCR or
Fitch, the highest rating category provided by S&P and Moody's and
so long as the Note 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 the Note
Insurer has consented in writing.
Any Eligible Investment must mature no later than the Business
Day prior to the next Payment Date.
"Equipment" means the equipment leased or sold, as applicable,
to an Obligor pursuant to any Contract, inventory, accounts and other general
intangibles, as the case may be, that secure payment under such Contract.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" has the meaning specified in Section 8.01
of the Indenture.
"Event of Servicing Termination" has the meaning specified in
Section 6.01 of the Servicing Agreement.
"Excess Amounts" means, with respect to any Contract, any
payment required to be paid by the related Obligor pursuant to such Contract at
the maturity of such Contract in excess of the final Scheduled Payment with
respect to such Contract.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Amounts" means any payments received from an Obligor
or a Source in connection with any application fees, tax processing fees, wire
transfer fees, express mail fees, insurance premiums, late charges and other
penalty amounts, taxes, fees or other charges
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imposed by any governmental authority, any indemnity payments made by an Obligor
for the benefit of the obligee under the related Contract or any payments
collected from an Obligor or received from a Source relating to servicing and/or
maintenance payments pursuant to the related Contract or maintenance agreement,
as applicable, Expired Contract Proceeds (other than any amounts then due from a
related Source under the related Source Agreement) or any other non-rental
charges reimbursable to the Servicer in accordance with the Servicer's customary
policies and procedures plus any collections received following the end of the
immediately preceding Collection Period up to the amount of the Servicer Advance
made on the immediately preceding Payment Date.
"Expired Contract" means any Contract that has terminated on
its scheduled expiration date.
"Expired Contract Proceeds" means any and all cash proceeds or
rents realized from the sale or re-lease of Equipment under an Expired Contract.
"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 Contracts as of the applicable Cut-Off Date.
"Filing Requirements" means (a) a UCC-1 financing statement
with respect to the assignment of all Contracts by the related Sellers to the
Owner Trustee, on behalf of the Issuer pursuant to the Receivables Transfer
Agreement, (b) a UCC-1 financing statement with respect to the pledge by the
Owner Trustee, on behalf of the Issuer, of all Contracts to the Indenture
Trustee pursuant to the Indenture, (c) with respect to Vehicles, a Certificate
of Title naming the Obligor as owner and the Indenture Trustee as lienholder,
(d) with respect to Equipment (other than Vehicles), (i) in each Filing Location
in which Equipment with an Original Equipment Cost of $75,000 or greater is then
located, financing statements on Form UCC-1 for Contracts originated by a
Source, naming the Obligor as debtor and the Source as secured party and First
Sierra as assignee; (ii) in each Filing Location in which Equipment with an
Original Equipment cost of $35,000 or greater is located, financing statements
on Form UCC-1 for Contracts originated by First Sierra, naming the Obligor as
debtor and First Sierra as secured party; and (iii) in each of clause (i) and
(ii), the filings in paragraph (b) above in favor of the Indenture Trustee in
respect of the Contracts shall include all related rights relating to such
Contracts, including the security interests in the Equipment subject to this
clause (d).
"Final Scheduled Payment" means, with respect to any Contract,
any payment set forth in such Contract other than the regular Scheduled Payment
which is required to be paid by the related Obligor at the maturity of such
Contract.
"Financing Statements" means a form UCC-1 financing statement.
"First Sierra" means First Sierra Financial, Inc., a Delaware
corporation.
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"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 First Sierra
is a member, and shall mean any group eligible to file consolidated, combined or
unitary returns for state, local or foreign tax purposes which includes First
Sierra, regardless of the identity of the common parent.
"Fitch" means Fitch IBCA, Inc.
"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" 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 Contracts that become Defaulted
Contracts 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 Contracts 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 Contract which is a
Defaulted Contract shall not be zero, but shall instead be calculated as
provided in the definition of Discounted Contract Principal Balance without
reference to the last proviso in such definition.
"Holder" means the Person in whose name a Note or Trust
Certificate, as the case may be, is registered in the Register.
"Holding Trust Agreement" means First Sierra Holding Trust I
Trust Agreement, dated as of December 1, 1998, between the Depositor of the
Holding Trust and the Owner Trustee of the Holding Trust.
"Holding Trust" means First Sierra Holding Trust I.
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"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
Obligor, (c) to the extent not included in clause (b), above, all capital leases
of such Person as Obligor, (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 non-recourse 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 December 10, 1998, among First Sierra, the Note Insurer and the
Underwriters.
"Indenture" means the Indenture, dated as of December 1, 1998,
among the Trust, First Sierra, the Servicer and the Indenture Trustee.
"Indenture Trustee" means the institution executing the
Indenture and Servicing Agreement as Indenture Trustee, or its successor in
interest, and any successor indenture trustee appointed as provided herein, or
any successor to the Indenture Trustee's corporate trust business (or a
substantial portion thereof) and initially shall mean Bankers Trust Company, a
New York banking corporation.
"Indenture Trustee Fee" means, with respect to each Payment
Date, an amount equal to $416.67.
"Indenture Trustee Expenses" means, the reasonable expenses of
the Indenture Trustee, as set forth in Section 7.07(a)(ii) of the Indenture.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 10.05 of the
Indenture, prepared by an Independent appraiser or other expert appointed
pursuant to an Issuer Order and approved by the Indenture Trustee in the
exercise of reasonable care, and such opinion or certificate shall state that
the signer has read the definition of "Independent" in the Indenture and that
the signer is Independent within the meaning thereof.
"Independent Public Accountant" means any of (a) Arthur
Andersen & Co., (b) Deloitte & Touche, (c) PriceWaterhouseCoopers, (d) Ernst &
Young, and (e) KPMG Peat Marwick (and any successors thereof); provided, that
such firm is independent with respect to
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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 an Offered Note.
"Initial Aggregate Discounted Contract Principal Balance"
means the Aggregate Discounted Contract Principal Balance as of the Cut-Off
Date.
"Initial Class A Note Principal Balance" $247,741,596.
"Initial Class A-1 Note Principal Balance" $70,687,140.
"Initial Class A-2 Note Principal Balance" $53,856,869.
"Initial Class A-3 Note Principal Balance" $52,510,447.
"Initial Class A-4 Note Principal Balance" $70,687,140.
"Initial Class B-1 Note Principal Balance" $5,385,687.
"Initial Class B-2 Note Principal Balance" $2,692,843.
"Initial Class B-3 Note Principal Balance" $5,385,687.
"Initial Subordinate Note Principal Balance" $13,464,217.
"Initial Contracts" means the Contracts pledged by the Trust
to the Indenture Trustee for the benefit of the Noteholders and the Note Insurer
pursuant to the Indenture, on the Closing Date.
"Initial Equipment" means the Equipment transferred to the
Trust on the Closing Date.
"Initial Unpaid Amount" means, with respect to a Contract, the
excess of (x) the aggregate amount of all Scheduled Payments due prior to the
Cut-Off Date over (y) the aggregate of all Scheduled Payments made prior to the
Cut-Off Date with respect to such Contract.
"Insurance Agreement" means the Insurance Agreement, dated as
of December 1, 1998 among First Sierra, as servicer and as originator, the
Depositor, the Trust, Holding Trust I, the Note Insurer and the Indenture
Trustee.
"Insurance Policy" means, with respect to an item of Equipment
and the related Contract, any insurance policy required to be maintained by the
Obligor pursuant to such Contract that covers physical damage to such physical
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 Obligor).
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"Insurance Proceeds" means, with respect to an item of
Equipment and the related Contract, any amount received during a Collection
Period pursuant to an Insurance Policy issued with respect to such Equipment and
related Contract.
"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 any Payment
Date, the period from and including the prior Payment Date to but excluding such
Payment Date and with respect to the initial Payment Date, the period from and
including December 17, 1998 to but excluding such Payment 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 pursuant
to Section 3.02 of the Indenture, net of any losses on any investments held in
such accounts.
"IRS" means the Internal Revenue Service and any successor
thereto.
"Issuer" or "Trust" means First Sierra Equipment Contract
Trust 1998-1, a common law trust acting through First Union Trust Company,
National Association, not in its individual capacity but solely as Owner
Trustee.
"Issuer Order" and "Issuer Request" means a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee and the Note Insurer.
"Late Payment Rate" shall have the meaning specified in the
Insurance Agreement.
"Lien" means any mortgage, pledge, hypothecation, assignment
for security, security interest, encumbrance, levy, lien or charge of any kind,
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 Contract 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
Contract, 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 Contract and the related Equipment,
net of reasonable remarketing expenses and amounts so received that are required
to be refunded to the Obligor on such Contract.
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"List of Contracts" means the List of Initial Contracts and
each List of Substitute Contracts.
"List of Initial Contracts" means the List of Initial
Contracts delivered pursuant to Section 2.03(a) of the Indenture.
"List of Substitute Contracts" means the List of Substitute
Contracts delivered pursuant to Section 4.02 of the Indenture.
"Lockbox Account" means the lockbox account established
pursuant to the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement dated as of
February 13, 1995, among First Sierra and Chase Bank of Texas, N.A.
"Lockbox Bank" means Chase Bank of Texas, N.A.
"Majority Holders" means the holders of the Applicable
Securities that together own Applicable Securities with an aggregate Percentage
Interest in excess of 50%.
"Monthly Statement" has the meaning specified in Section 4.07
of the Servicing Agreement.
"Moody's" means Moody's Investors Service, Inc.
"Necessary Consents" means, with respect to any Person, all
necessary consents to the closing of the transactions contemplated by the
Transaction Documents.
"Notes" means the Class A Notes, the Class B-1 Notes, the
Class B-2 Notes and the Class B-3 Notes.
"Noteholder" means the Person in whose name a Note is
registered in the Register held by the Note Registrar.
"Note Insurance Policy" means the Note Guaranty Insurance
Policy, Policy Number 28237.
"Note Insurer" means MBIA Insurance Corporation or any
successor thereto, as issuer of the Note Insurance Policy.
"Note Insurer Default" means any period during which the Note
Insurer has failed (and continues to fail) to honor proper claims made under the
Note Insurance Policy.
"Note Principal Balance" means, with respect to any Class of
Notes, the Class A-1 Note Principal Balance, the Class A-2 Note Principal
Balance, the Class A-3 Note Principal Balance, the Class A-4 Note Principal
Balance, the Class B-1 Note Principal Balance, the Class B-2 Note Principal
Balance or the Class B-3 Note Principal Balance, as applicable.
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"Note Rate" means, with respect to any Class of Notes, the
Class A-1 Note Rate, the Class A-2 Note Rate, the Class A-3 Note Rate, the Class
A-4 Note Rate, the Class B-1 Note Rate, the Class B-2 Note Rate or the Class B-3
Note Rate, as applicable.
"Note Registrar" means, initially, the Indenture Trustee
pursuant to Section 5.03 of the Indenture.
"Obligor" means, with respect to any Contract, the Person or
Persons obligated to make payments with respect to such Contract, including any
guarantor thereof.
"Offered Notes" means the Class A Notes.
"Officer's Certificate" means a certificate delivered by an
Authorized Officer.
"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 Note Insurer and the addressees thereof.
"Original Equipment" means any of the Equipment relating to
the Initial Contracts.
"Original Equipment Cost" means the invoice price of the
Equipment, exclusive of amounts, if any, paid for taxes, warranty extensions or
service contracts.
"Originator" means First Sierra Financial, Inc., a Delaware
corporation.
"Outstanding" means, as of the date of determination, all
Notes theretofore authenticated and delivered under the Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture Trustee
in trust for the Holders of such Notes (provided, however, that if such Notes
are to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor, satisfactory to the Indenture Trustee, has
been made);
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a bona
fide purchaser; and
(iv) Notes that have been alleged to be destroyed, lost or
stolen for which replacement Notes have been issued as provided for in Section
5.04 of the Indenture;
provided, however, that Notes which have been paid with proceeds of the Note
Insurance Policy shall continue to remain Outstanding for purposes of the
Indenture until the Note Insurer has
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<PAGE> 156
been paid as subrogee hereunder or reimbursed pursuant to the Insurance
Agreement as evidenced by a written notice from the Note Insurer delivered to
the Indenture Trustee, and the Note Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Note Insurer;
provided, further, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Transaction
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Sellers or any Affiliate of any of the foregoing Persons shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Indenture Trustee either actually knows to be so
owned or has received written notice thereof shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Sellers or any Affiliate of any of
the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of
all Notes or class of Notes, as applicable, Outstanding at the date of
determination.
"Owner Trustee" means First Union Trust Company, National
Association, a national banking association, not in its individual capacity but
solely as owner trustee under the Trust Agreement and the Holding Trust
Agreement, and any successor owner trustee.
"Payment Date" means the 12th day of each calendar month, or
if such day is not a Business Day, the immediately following Business Day,
commencing on January 12, 1999 until such time as the Indenture has been
terminated in accordance with Article IX thereof.
"Percentage Interest" means, with respect to a Noteholder and
a Class of Notes on any date of determination, the percentage obtained by
dividing the Note Principal Balance of the Note held by such Noteholder as of
the Closing Date by the related Note Principal Balance of the related Class of
Notes as of the Closing Date.
"Permitted Liens" means:
(a) Liens granted in favor of the Trust under the
Receivables Transfer Agreement or the Indenture Trustee on
behalf of the Noteholders and the Note Insurer pursuant to the
Indenture; and
(b) Liens constituting the rights of Obligors under
Contracts.
"Person" means a natural person, partnership, limited
partnership, limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or any
representative capacity.
"Pledged Property" means the property pledged by the Trust to
the Indenture Trustee on behalf of the Noteholders and the Note Insurer pursuant
to Section 2.01 of the Indenture, except for the Initial Unpaid Amounts relating
thereto.
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"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 Contracts as of
the immediately preceding Calculation Date to (b) the aggregate Discounted
Contract Principal Balance as of the most recent Cut-Off Date.
"Practice" means a dental practice engaged in by a licensed
professional.
"Practice Acquisition Loan" means the Contract relating to any
loan by a Source or the Originator to a professional who is engaged in the
operation and acquisition of a Practice which loan is secured by Equipment.
"Preference Amount" has the meaning specified in the Note
Insurance Policy.
"Premium Amount" means, with respect to any Payment Date, the
product of (a) one-twelfth, (b) the Premium Rate and (c) the Class A Note
Principal Balance as of the end of the immediately preceding Collection Period.
"Premium Rate" shall have the meaning assigned thereto in the
Insurance Agreement.
"Prepayment" means, with respect to a Collection Period and a
Contract (except a Defaulted Contract), the amount received by the Servicer
during such Collection Period from or on behalf of an Obligor with respect to
such Contract in excess of the sum of (x) the Scheduled Payment and any Final
Scheduled Payment due during such Collection Period, plus (y) the aggregate of
any overdue Scheduled Payments, Initial Unpaid Amounts and unpaid Servicing
Charges for such Contract, so long as such amount is designated by the Obligor
as a prepayment and the Servicer has consented to such prepayment. Defaulted
Contract Recoveries are not Prepayments.
"Prepayment Amount" means, with respect to a Payment Date and
a Contract, an amount, without duplication, equal to the sum of (i) the
Discounted Contract Principal Balance as of the close of business on the second
preceding Collection Period (without any deduction for any security deposit paid
by an Obligor, unless such security deposit has been deposited in the Collection
Account pursuant to the Indenture); (ii) the product of (x) such Contract's
Discounted Contract Principal Balance as of the beginning of the immediately
preceding Payment Date and (y) one-twelfth of the Discount Rate; (iii) any
Scheduled Payments theretofore due and not paid by an Obligor; and (iv) any
Final Scheduled Payment due or to become due under the Contract.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"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 any of the Notes.
"Rating Agencies" means DCR, Fitch, Moody's and S&P.
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"Receivables" means the Contracts together with the Equipment.
"Receivables Transfer Agreement" means the Receivables
Transfer Agreement, dated as of December 1, 1998, among First Sierra, the
Depositor, First Union National Bank, Variable Funding Capital Corporation,
Prudential Securities Credit Corporation, Bankers Trust Company, as trustee of
the Sellers, and the Issuer.
"Record Date" means, with respect to any Payment Date other
than the January 12, 1999 Payment Date, the last calendar day of the Interest
Accrual Period of such month. With respect to the January 12, 1999 Payment Date,
the Record Date shall be the Closing Date.
"Register" means the register kept by the Indenture Trustee
pursuant to Section 5.03 of the Indenture.
"Registration Statement" shall mean the Registration Statement
filed with the SEC under the Securities Act (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 Indenture Trustee from
the Note Insurer and not previously repaid to the Note Insurer pursuant to
Section 3.04(b)(xiii) of the Indenture plus (ii) interest accrued on each such
Insured Payment not previously repaid calculated at the Late Payment Rate from
the date the Indenture Trustee received the related Insured Payment to, but not
including, such Payment Date and (y)(i) any amounts then due and owing to the
Note 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 Offered
Notes registered in the Register under the nominee name of the Depository.
"Repurchase Amount" means, with respect to a Payment Date and
a Contract, the sum, without duplication, of (a) the Discounted Contract
Principal Balance as of the close of business on the second preceding Collection
Period (without any deduction for any security deposit paid by an Obligor,
unless such security deposit has been deposited in the Collection Account
pursuant to the Indenture); (b) the product of (i) such Contract's Discounted
Contract Principal Balance as of the beginning of the immediately preceding
Collection Period and (ii) one-twelfth of the Discount Rate; (c) any Scheduled
Payments theretofore due and not paid by an Obligor; and (d) any Final Contract
Payment due or to become due under the Contract.
"Repurchase Contract" means any Contract that has been
repurchased by First Sierra pursuant to Section 4.01 of the Indenture.
"Residual Holder" means the holder of the Trust Certificate
issued pursuant to the Trust Agreement.
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"Responsible Officer" means (i) when used with respect to the
Indenture Trustee, any officer assigned to the Corporate Trust Office, including
any Principal, Managing Director, Vice President, Assistant Vice President,
Secretary, Assistant Secretary, any trust officer or any other officer of the
Indenture 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 and (ii) when
used with respect to the Owner Trustee, any Vice President, Assistant Vice
President, Secretary, Assistant Secretary, Managing Director, any trust officer
or any other officer of the Owner 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 Servicing Agreement and is not cured within the grace period
set forth in the Servicing Agreement, (b) a Gross Charge-Off Event exists, (c) a
Delinquency Trigger Event exists or (d) the Note Insurer makes an Insured
Payment.
"Scheduled Payments" means, with respect to a Contract, the
periodic payment (exclusive of any amounts in respect of insurance, warranty
extensions, service contracts or taxes and reflecting any adjustment for any
partial Prepayment and further reflecting the effect of any permitted
modification to such Contract) set forth in such Contract due from the Obligor
in the related Collection Period; provided, however, that with respect to any
Contract as to which First Sierra retained the security deposit, a Scheduled
Payment shall not include the final payment or payments to be made thereon equal
to the amount of such security deposit.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission and any
successor thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" mean collectively, First Sierra Receivables III,
Inc., First Sierra Equipment Lease Trust 1997-A, First Sierra Equipment Lease
Trust 1997-B and First Sierra Equipment Lease Trust 1997-C.
"Servicer" means the Person performing the duties of the
Servicer under the Indenture and the Servicing Agreement, initially First Sierra
Financial, Inc.
"Servicer Advance" means any amount paid by the Servicer with
respect to a Delinquent Contract pursuant to Section 4.03 of the 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 4 of the Servicing
29
<PAGE> 160
Agreement in an amount equal to the product of (a) one-twelfth of the Servicer
Fee Rate and (b) the Aggregate Discounted Contract Principal Balance as of the
prior Calculation Date.
"Servicer Fee Rate" means 0.50% percent per annum.
"Servicer Termination Notice" means the notice described in
Section 6.01 of the Servicing Agreement.
"Servicer Trigger Event" has the meaning specified in the
Insurance Agreement.
"Servicing Agreement" means the Servicing Agreement, dated as
of December 1, 1998, among the Servicer, First Sierra, the Trust and the
Indenture Trustee.
"Servicing Charges" means the sum of (a) any late payment
charges paid by a Obligor on a Delinquent Contract after application of any such
charges to amounts then due under such Contract and (b) any other incidental
charges or fees received from a Obligor.
"Servicing Officer" means any representative of the Servicer
involved in, or responsible for, the administration and servicing of the
Contracts whose name appears on a list of servicing officers furnished to the
Indenture Trustee and the Note Insurer by the Servicer, as such list may from
time to time be amended.
"Servicing Standard" has the meaning specified in Section
4.01(a) of the Servicing Agreement.
"Source" means the third party from whom the Originator
acquired the Contracts pursuant to the Originator's Private Label Program.
"Source Agreement" means an agreement between the Originator
and a Source pursuant to which the Originator acquired all right, title and
interest of the Source in and to a Contract 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 the
Originator under the Source Agreement with respect to such Source Agreement to
the extent such Source Agreement relates to any Contract and any Equipment
covered by the Contracts.
"State" means any state of the United States of America and,
in addition, the District of Columbia and Puerto Rico.
"Subordinate Note" means a Class B-1 Note, a Class B-2 Note or
a Class B-3 Note.
"Subordinate Noteholder" means the Person in whose name a
Class B-1 Note, a Class B-2 Note or a Class B-3 Note is registered in the
Register.
30
<PAGE> 161
"Subordinate Note Principal Balance" means, at any time, the
Initial Class B-1 Note Principal Balance, the Initial Class B-2 Note Principal
Balance and the Initial Class B-3 Note Principal Balance minus all payments
theretofore received by the Class B-1 Noteholders, the Class B-2 Noteholders and
the Class B-3 Noteholders on account of principal.
"Subordinate Notes" means the Class B-1 Notes, the Class B-2
Notes and the Class B-3 Notes.
"Substitute Contract" has the meaning specified in Section
4.02(a) of the Indenture.
"Substitute Contract Cut-Off Date" means, with respect to a
Substitute Contract, the close of business on the first day of the calendar
month in which the related Transfer Date occurs.
"Substitute Equipment" means the Equipment transferred to the
Trust on each Transfer Date.
"Tape" means the data base with respect to the Contracts used
to calculate the information in the Monthly Statement.
"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 a member of the First Sierra Group with respect to its
liability for taxes (including taxes excluded from the definition of Income
Taxes hereunder) of the First Sierra Group or arising from its contribution to
taxable income or loss of the First Sierra Group.
"TIA" means the Trust Indenture Act of 1939.
"Transaction Documents" means the Receivables Transfer
Agreement, the Indenture, the Servicing Agreement, the Trust Agreement, the
Holding Trust Agreement, the Insurance Agreement and the Indemnification
Agreement.
"Transfer Date" means any date on which a Substitute Contract
is pledged pursuant to Section 4.02 of the Indenture.
"Trust Agreement" shall mean the Trust Agreement, dated as of
December 1, 1998, between the Depositor and the Owner Trustee.
"Trust Certificate" means the Trust Certificate evidencing the
beneficial ownership interest of a Holder of the Trust Certificate in the Trust,
initially issued by the Issuer to the Holding Trust.
"Trust Certificate Principal Balance" means, as of any Payment
Date, the difference, if any, between (i) the sum of (x) the Aggregate
Discounted Contract Principal Balances of all Contracts as of the end of the
immediately preceding Collection Period and (y) the Aggregate Discounted
Contract Principal Balances as of the day prior to such Payment Date
31
<PAGE> 162
of all Substitute Contracts to be conveyed to the Trust on such Payment Date and
(ii) the sum of (w) the outstanding Class A Note Principal Balance, (x) the
outstanding Class B-1 Note Principal Balance, (y) the outstanding Class B-2 Note
Principal Balance and (z) the outstanding Class B-3 Note Principal Balance,
after taking into account any distributions on such Payment Date.
"Trust Operating Expenses" means, with respect to any Payment
Date, the aggregate amount described in clauses (i) through (vi), inclusive, of
Section 3.04(b) of the Indenture with respect to such Payment Date.
"Trust Property" means the Pledged Property, and funds from
time to time deposited in the Collection Account.
"UCC" means the Uniform Commercial Code as in effect in the
applicable jurisdiction.
"Underwriters" means Wheat First Securities, Inc., a North
Carolina corporation, doing business as First Union Capital Markets, Bear,
Stearns & Co. Inc., a Delaware corporation, and Prudential Securities
Incorporated, a Delaware 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 Contracts 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 4.01(a)
of the Indenture.
32
<PAGE> 1
EXHIBIT 4.2
MBIA
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $247,741,596 POLICY NUMBER: 28237
First Sierra Equipment Contract Trust 1998-1
Equipment Contract Backed Notes
Class A-1, Class A-2, Class A-3 and Class A-4 Notes
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Note 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
<PAGE> 2
MBIA
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 Deficiency Amount is due or the second 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 Indenture dated as of December 1, 1998 among
First Sierra Financial, Inc. as Servicer and as Originator, First Sierra
Equipment Contract Trust 1998-1, a common law trust acting through its trustee
First Union Trust Company, National Association, not in its individual capacity
but solely as Owner Trustee, as Issuer, and the Trustee, as Indenture Trustee,
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.
<PAGE> 3
MBIA
"Insured Payment" means (i) as of any Payment Date any Deficiency
Amount and (ii) any Preference Amount.
"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 Note (other than 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.
<PAGE> 4
MBIA
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 17th day of December, 1998.
MBIA INSURANCE CORPORATION
/s/ Richard Weill
-----------------------------------
President
Attest: /s/ Pauline M. Cullen
-----------------------------------
Assistant Secretary
<PAGE> 5
MBIA
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 28237
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 28237
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 Note Guaranty Insurance Policy Number: 28237 (the
"Policy") issued by the Insurer in respect of the $247,741,596 First Sierra
Equipment Contract Trust 1998-1, Equipment Contract Backed Notes, Series 1998-1
Class A (the "Obligations"), that:
(i) the Trustee is the indenture trustee under the Indenture
dated as of December 1, 1998, among First Sierra Financial, Inc., as
Servicer and as Originator, First Sierra Equipment Contract Trust
1998-1, a common law trust acting through its trustee First Union Trust
Company, National Association, not in its individual capacity but
solely as Owner Trustee, as Issuer and the Trustee, as Indenture
Trustee;
(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");
<PAGE> 6
MBIA
(iv) the total Insured Payment due is $____________ which
amount equals the sum of the Deficiency Amount and the Preference
Amount;
(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
--------------------------
2
<PAGE> 1
EXHIBIT 8.1
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK 10019-6092
TEL 212 259-8000 FAX 212 259-6333
December 17, 1998
To the Parties Listed on Schedule I:
Ladies and Gentlemen:
We have acted as special tax counsel to First Sierra
Financial, Inc. ("First Sierra") and First Sierra Receivables III, Inc. (the
"Depositor"), in connection with the issuance by First Sierra Equipment Contract
Trust 1998-1, a Delaware common law trust acting through First Union Trust
Company, National Association, not in its individual capacity but solely as
Owner Trustee (the "Trust"), established pursuant to a Trust Agreement, dated as
of December 1, 1998, between the Depositor and First Union Trust Company,
National Association, not in its individual capacity but solely as owner
trustee, of (i) $70,687,140 of 5.215% Equipment Contract Backed Notes, Class A-1
(the "Class A-1 Notes"), (ii) $53,856,869 of 5.490% Equipment Contract Backed
Notes, Class A-2 (the "Class A-2 Notes"), (iii) $52,510,447 of 5.450% Equipment
Contract Backed Notes, Class A-3 (the "Class A-3 Notes"), (iv) $70,687,140 of
5.628% Equipment Contract Backed Notes, Class A-4 (the "Class A-4 Notes" and,
together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
the "Class A Notes"), (v) $5,385,687 of 7.340% Equipment Contract Backed Notes,
Class B-1 (the "Class B-1 Notes"), (vi) $2,692,843 of 9.510% Equipment Contract
Backed Notes, Class B-2 (the "Class B-2 Notes"), and (vii) $5,385,687 of 6.242%
Equipment Contract Backed Notes, Class B-3 (the "Class B-3 Notes"). The Class A
Notes, the Class B-1 Notes, the Class B-2 Notes and the Class B-3 Notes are
collectively referred to as the "Notes." The Notes were issued pursuant to an
Indenture, dated as of December 1, 1998 (the "Indenture"), among the Trust,
First Sierra, as servicer and as originator, and Bankers Trust Company, as
indenture trustee (the "Indenture Trustee"). Pursuant to the Indenture, the
Pledged Property (as defined in the Indenture) will be pledged by the Trust to
the Indenture Trustee for the benefit of the Noteholders. Capitalized terms used
herein, unless otherwise defined, shall have the meanings set forth in the
Indenture.
You have asked for our opinion concerning the tax treatment
of the Notes for Federal income tax purposes. Although no transaction closely
comparable to the transactions contemplated by the Indenture has been the
subject of any Treasury regulation, revenue ruling, or judicial decision,
subject to the assumptions and qualifications set forth below, it is our opinion
that, for Federal income tax purposes, the Notes, other than the Class B-3
Notes, will be characterized as indebtedness. In addition, it is our opinion for
Federal income tax purposes, that the Trust will not be characterized as an
association or as a publicly traded partnership taxable as a corporation.
Further, it is our opinion that the Notes, other than the Class B-3 Notes, will
be
<PAGE> 2
treated as indebtedness under the laws of the State of New York. In addition,
we confirm that the discussion of federal income tax consequences appearing in
the Prospectus and in the Prospectus Supplement under the caption "Material
Federal Income Tax Consequences" is our opinion as to the material federal
income tax consequences of purchasing, owning and disposing of the securities
and expressly adopt it as such.
Our opinion is based, in part, upon (i) the agreement of the
Company, the Depositor, the Trust, the Indenture Trustee and the Noteholders to
treat the Notes for Federal, state, local, foreign, and other tax purposes as
indebtedness (and assumed compliance with such agreement) and (ii) our
conclusion that the Federal income tax treatment of the Notes will be determined
based on the economic substance of the transactions resulting from the
Indenture. Although there can be no assurance that the Internal Revenue Service
(the "IRS") will not take one or more possible contrary positions, it is our
opinion that none of those positions, if asserted by the IRS, would prevail. Our
opinion is based upon the present provisions of the Internal Revenue Code of
1986 as amended, the regulations promulgated thereunder, and judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
No ruling on any issue discussed above will be sought from the IRS.
Our opinion contained herein is rendered only as of the date
hereof, and we undertake no obligation to update this letter or the opinion
contained herein after the date hereof. We hereby expressly reserve our opinion
with regard to the Class B-3 Notes.
This opinion is furnished by us as counsel in connection with
the issuance of the Notes, and is not to be used, circulated, quoted, or
otherwise referred to for any other purpose without our express written consent.
Very truly yours,
/s/ Dewey Ballantine LLP
2
<PAGE> 3
Schedule I
Bankers Trust Company
Four Albany Street, 10th Floor
New York, New York 10006
First Union Trust Company, National Association
920 King Street, Suite 102
Wilmington, Delaware 19801
Duff & Phelps Credit Rating Co.
55 East Monroe, Suite 4200
Chicago, Illinois 60601
First Sierra Financial, Inc.
600 Travis Street, Suite 7050
Houston, Texas 77002
First Sierra Receivables III, Inc.
600 Travis Street, Suite 7050
Houston, Texas 77002
Wheat First Securities, Inc., doing business
as First Union Capital Markets,
a division of Wheat First Securities, Inc.
One First Union Center, TW-10
301 South College Street
Charlotte, N.C. 28288-0610
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Standard & Poor's Ratings Group, a
division of The Mc-Graw Hill Companies
26 Broadway 15th Floor
New York, New York 10004
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
3
<PAGE> 4
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10004
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
4
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
RECEIVABLES TRANSFER AGREEMENT
----------------------------
between
FIRST SIERRA FINANCIAL, INC.,
FIRST SIERRA RECEIVABLES III, INC.,
PRUDENTIAL SECURITIES CREDIT CORPORATION,
FIRST UNION NATIONAL BANK,
VARIABLE FUNDING CAPITAL CORPORATION,
BANKERS TRUST COMPANY
and
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1, A COMMON LAW TRUST
ACTING THROUGH FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE
----------------------------
Dated as of
December 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................3
SECTION 1.01 Definitions..................................................................................3
SECTION 1.02 Other Definitional Provisions................................................................3
ARTICLE II TRANSFER OF CONVEYED ASSETS............................................................................4
SECTION 2.01 Direction; Acquisition.......................................................................4
SECTION 2.02 Custody of Contract Files....................................................................5
SECTION 2.03 Intention of the Parties; Grant of Security Interest.........................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................5
SECTION 3.01 Representations and Warranties...............................................................5
SECTION 3.02 [Reserved]..................................................................................16
SECTION 3.03 Substitution of Contracts and Equipment by First Sierra.....................................16
ARTICLE IV COVENANTS.............................................................................................17
SECTION 4.01 Seller and First Sierra Covenants...........................................................17
SECTION 4.02 Receivables III Covenants...................................................................19
SECTION 4.03 Transfer of Conveyed Assets.................................................................22
ARTICLE V CONDITIONS PRECEDENT...................................................................................23
SECTION 5.01 Conditions to Trust Obligations.............................................................23
ARTICLE VI TERMINATION...........................................................................................23
SECTION 6.01 Termination.................................................................................23
SECTION 6.02 Effect of Termination.......................................................................24
ARTICLE VII MISCELLANEOUS PROVISIONS.............................................................................24
SECTION 7.01 Amendment...................................................................................24
SECTION 7.02 GOVERNING LAW...............................................................................24
SECTION 7.03 Notices.....................................................................................24
SECTION 7.04 Severability of Provisions..................................................................25
SECTION 7.05 Assignment..................................................................................25
SECTION 7.06 Further Assurances..........................................................................25
SECTION 7.07 No Waiver; Cumulative Remedies..............................................................25
SECTION 7.08 Counterparts................................................................................26
SECTION 7.09 Binding Effect: Third-Party Beneficiaries...................................................26
SECTION 7.10 Merger and Integration......................................................................26
SECTION 7.11 Headings....................................................................................26
SECTION 7.12 Schedules and Exhibits......................................................................26
SECTION 7.13 No Bankruptcy Petition Against Receivables III or the Trust.................................26
</TABLE>
Schedules & Annexes
Schedule 1 LIST OF CONTRACTS
Annex A DEFINED TERMS
i
<PAGE> 3
RECEIVABLES TRANSFER AGREEMENT
THIS RECEIVABLES TRANSFER AGREEMENT (this "Agreement"), dated
as of December 1, 1998 is entered into between FIRST SIERRA FINANCIAL, INC.
("First Sierra"), a Delaware corporation located at 600 Travis Street, Suite
7050, Houston, Texas 77002, in its individual capacity, FIRST SIERRA RECEIVABLES
III, INC. ("Receivables III"), a Delaware corporation located at 600 Travis
Street, Suite 7050, Houston, Texas 77002, PRUDENTIAL SECURITIES CREDIT
CORPORATION ("Prudential") a Delaware corporation located at 1220 N. Market
Street, Wilmington, Delaware 19801, FIRST UNION NATIONAL BANK (formerly First
Union National Bank of North Carolina) ("First Union") a Delaware corporation
located at One First Union Center, 301 South College Street, Charlotte, North
Carolina 28288-0610, VARIABLE FUNDING CAPITAL CORPORATION ("VFCC") a Delaware
corporation located at One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0610, Bankers Trust Company (the "Indenture
Trustee") a New York banking corporation located at Four Albany Street, New
York, New York 10006, not in its individual capacity but as Trustee of the First
Sierra Equipment Lease Trust 1997-A, the First Sierra Equipment Lease Trust
1997-B and the First Sierra Equipment Lease Trust 1997-C (each as defined
herein) and FIRST SIERRA EQUIPMENT CONTRACT TRUST 1998-1, a Delaware common law
trust acting through First Union Trust Company, National Association, not in its
individual capacity but solely as Owner Trustee (the "Issuer" or the "Trust"),
located at One Rodney Square, 920 King Street, Suite 102, Wilmington, Delaware
19801. Receivables III and each Warehouse Trust (as defined below), are
collectively referred to herein as the "Sellers." Prudential, First Union and
VFCC are collectively referred to herein as the "Investors."
WITNESSETH:
WHEREAS, First Sierra in the ordinary course of its business
acquires and originates equipment contracts in the United States; and
WHEREAS, Receivables III, First Sierra and Bankers Trust
Company have entered into an Amended and Restated Master Investment, Pooling and
Servicing Agreement, dated as of March 25, 1998 (the "Investment Agreement")
whereby Receivables III may, from time to time, sell pools of contracts,
contract receivables and equipment to one or more trusts to be formed pursuant
to the Investment Agreement and a supplement thereto; and
WHEREAS, pursuant to the Investment Agreement, the parties
thereto may, from time to time, execute a supplement to the Investment Agreement
and form a trust for the purpose of (i) accepting the transfer of a specific
pool of contracts, contract receivables, equipment and certain rights relating
thereto and arising therefrom from Receivables III, (ii) issuing senior
certificates ("Senior Certificates") and residual certificates ("Residual
Certificates" and, together with the Senior Certificates, the "Certificates")
representing beneficial ownership interests in the assets of each trust and
(iii) selling the Senior Certificates to investors; and
WHEREAS, pursuant to a Series 1997-A Supplement, dated as of
June 30, 1997 (the "Series 1997-A Supplement") among Receivables III, First
Sierra, Bankers Trust Company
<PAGE> 4
and First Union, the parties thereto formed a trust (the "First Sierra Equipment
Lease Trust 1997-A"), issued a Senior Certificate to First Union representing
the senior beneficial ownership interest in the Leases and Equipment conveyed by
Receivables III to the First Sierra Equipment Lease Trust 1997-A and issued a
Residual Certificate to Receivables III representing the residual beneficial
ownership interest in the Contracts and Equipment conveyed to the First Sierra
Equipment Lease Trust 1997-A; and
WHEREAS, First Union and Receivables III, as the beneficial
owners of the Leases and Equipment in the First Sierra Equipment Lease Trust
1997-A, desire that Bankers Trust Company, as the Trustee of such trust, convey
such Contracts and Equipment to the Trust; and
WHEREAS, pursuant to a Series 1997-B Supplement, dated as of
June 26, 1997 (the "Series 1997-B Supplement") among Receivables III, First
Sierra, Bankers Trust Company, VFCC and First Union, the parties thereto formed
a trust (the "First Sierra Equipment Lease Trust 1997-B"), issued a Senior
Certificate to VFCC representing the senior beneficial ownership interest in the
Leases and Equipment conveyed by Receivables III to the First Sierra Equipment
Lease Trust 1997-B and issued a Residual Certificate to Receivables III
representing the residual beneficial ownership interest in the Contracts and
Equipment conveyed to the First Sierra Equipment Lease Trust 1997-B; and
WHEREAS, VFCC and Receivables III, as the beneficial owners of
the Leases and Equipment in the First Sierra Equipment Lease Trust 1997-B,
desire that Bankers Trust Company, as trustee of such trust, convey such
Contracts and Equipment to the Trust; and
WHEREAS, pursuant to a Series 1997-C Supplement, dated as of
March 31, 1997 (the "Series 1997-C Supplement") among Receivables III, First
Sierra, Bankers Trust Company and Prudential, the parties thereto formed a trust
(the "First Sierra Equipment Lease Trust 1997-C" and, together with the First
Sierra Equipment Lease Trust 1997-A and the First Sierra Equipment Lease Trust
1997-B, the "Warehouse Trusts"), issued a Senior Certificate to Prudential
representing the senior beneficial ownership interest in the Leases and
Equipment conveyed by Receivables III to the First Sierra Equipment Lease Trust
1997-C and issued a Residual Certificate to Receivables III representing the
residual beneficial ownership interest in the Contracts and Equipment conveyed
to the First Sierra Equipment Lease Trust 1997-C; and
WHEREAS, Prudential and Receivables III, as the beneficial
owners of the Leases and Equipment in the First Sierra Equipment Lease Trust
1997-C, desire that Bankers Trust Company, as trustee of such trust, convey such
Contracts and Equipment to the Trust; and
WHEREAS, each of the Sellers desires to convey, transfer,
contribute and assign all of its right, title and interest in and to the
Contracts and all of its right, title and interest in and to the Equipment and
certain of its rights under the Source Agreements (as such capitalized terms are
defined below) to the Owner Trustee, on behalf of the Trust, upon the terms and
conditions hereinafter set forth; and
WHEREAS, each of the Sellers and the Trust agree that all
representations, warranties, covenants and agreements made by it herein shall be
for the benefit of the
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Noteholders, the Certificateholders, the Note Insurer, any Owner Trustee and any
Indenture 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 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.
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ARTICLE II
TRANSFER OF CONVEYED ASSETS
SECTION 2.01 Direction; Acquisition.
(a) In accordance with the terms of the Investment Agreement,
each of the Investors, as the Senior Certificateholders of the related Warehouse
Trust, and Receivables III, as the Residual Certificateholder of the Warehouse
Trusts, together representing all of the beneficial ownership interests in the
Warehouse Trusts, hereby direct Bankers Trust Company to convey to the Trust
those assets of each Warehouse Trust and Receivables III related to the leases
set forth in the related schedule (each, a "Release Schedule") listing those
leases being transferred from the related Warehouse Trust and Receivables III.
Upon receipt of the consideration specified below, each of the Investors hereby
release all of its right, title and interest in, to and under the Conveyed
Assets. Such receipt being hereby acknowledged by execution of this Agreement by
each Investor.
(b) In consideration for (x) the issuance to Holding Trust I
of the Trust Certificate to be issued pursuant to the Trust Agreement, (y) the
receipt of $40,533,048.81 by First Sierra Equipment Lease Trust 1997-A,
$128,563,073.23 by First Sierra Equipment Lease Trust 1997-B and $85,318,497.25
by First Sierra Equipment Lease Trust 1997-C and (z) other good and valuable
consideration, each of the Sellers hereby conveys to the Trust all of its right,
title and interest in, to and under those Conveyed Assets related to the leases
set forth in the related Release Schedule, (such Conveyed Assets, the "Conveyed
Released Assets" with respect to the related Warehouse Trust and Receivables
III) whether now existing or hereinafter arising, without recourse (except as
may be set forth in the Servicing Agreement).
(c) In connection with such sale and conveyance, each Seller
agrees to record and file, at the expense of First Sierra, financing statements
(and thereafter will file continuation statements with respect to such financing
statements) with respect to the related Conveyed Released Assets contributed and
to be transferred to the Trust 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 related Conveyed Released Assets (subject to
the Filing Requirements with respect to the Equipment) from each of the Sellers
to the Trust and the transfer, assignment and pledge of the Pledged Property
from the Trust to the Indenture Trustee on behalf of the Noteholders and the
Note Insurer, pursuant to the Indenture, and to deliver a file-stamped copy of
such financing statements or other evidence of such filings to the Trust (and
copies to the Indenture Trustee and the Note Insurer) on or prior to each
Conveyance Date; provided, however, that the Contract Files (including each
original executed Contract) will not be physically delivered to the Trust but
instead will be held by the Indenture Trustee.
(d) In connection with such assignment and conveyance, First
Sierra shall, at its own expense, on or prior to the Closing Date, and with
respect to Substitute Contracts, as soon as possible, but in no event later than
two (2) Business Days after the related Conveyance Date (i) cause the Contract
Management System to be marked with a specified code (the "Contract Management
Code") to show that the Conveyed Released Assets have been assigned
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<PAGE> 7
and transferred to the Trust in accordance with this Agreement and pledged to
the Indenture Trustee on behalf of the Noteholders and the Note Insurer,
pursuant to the Indenture and (ii) prepare and hold in its capacity as Servicer
on behalf of the Trust and the Indenture Trustee the List of Contracts on or
prior to the Closing Date. Pursuant to Section 3.03, First Sierra from time to
time may convey Substitute Contracts to the Trust at any time by delivering a
supplemented List of Contracts to the Trust on each Conveyance Date containing
for each Substitute Contract transferred on such Conveyance Date the information
set forth in the definition of List of Contracts. Upon delivery of any such
supplement to the List of Contracts, the List of Contracts shall be deemed
amended to incorporate therein the information contained in such supplement.
(e) Except for the obligations of First Sierra pursuant to the
Servicing Agreement and the Indenture with respect to any breach of a
representation, warranty or covenant made herein, the sale and conveyance of the
Contracts will be without recourse to the Sellers.
SECTION 2.02 Custody of Contract Files. In connection with the
sale, assignment, transfer and conveyance of the Contracts to the Trust pursuant
to this Agreement, First Sierra, as Servicer under the Servicing Agreement and
as agent of the Indenture Trustee will retain the Contract Files and any related
evidence of insurance and payments; provided, however, that First Sierra will
physically convey the original executed counterparts of each Contract and the
related Certificate of Title, if applicable, to the Indenture Trustee in
accordance with the terms of the Indenture.
SECTION 2.03 Intention of the Parties; Grant of Security
Interest. It is the intention of the parties hereto that each transfer of the
Conveyed Released Assets to be made pursuant to the terms hereof shall
constitute an absolute assignment and a sale of such Contract by each Seller to
the Trust 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, it is the intention of the parties hereto that this Agreement is deemed to
be a security agreement and that each Seller shall be deemed to have granted to
the Trust as of the date hereof a first priority perfected security interest in
all of such Seller's right, title and interest in, to and under each Conveyed
Released Asset, and all income and proceeds thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties. (a) First Sierra
hereby makes the following representations and warranties for the benefit of the
Indenture Trustee, the Noteholders, the Note Insurer and the Trust. Such
representations and warranties are made as of any Conveyance Date with respect
to Contracts transferred to the Trust on such date and shall survive each
assignment, transfer and conveyance by First Sierra of the Conveyed Assets to
the Trust and its successors and assigns.
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<PAGE> 8
(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 Substitute
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
to which it is a party, and to service the Contracts as required by
the Servicing 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 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 to which it is a party and the
Contracts and any other Transaction Document to which it is a
party, and to carry out their respective terms; and the execution,
delivery, and performance of this Agreement, the Source Agreements,
the Contracts 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 and
each of the other Transaction Documents to which it is a party have
been duly executed and delivered on behalf of First Sierra;
(v) Valid Assignment; Binding Obligations. This
Agreement, and the other Transaction Documents to which First
Sierra is a party, 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 in 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
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<PAGE> 9
Sierra or any of its properties which would have a material
adverse effect on the Conveyed Assets;
(vii) Ability to Perform. No event has occurred
which adversely affects First Sierra's operations or its ability to
perform its obligations under the Transaction Documents to which it
is a party;
(viii) 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
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;
(ix) No Consent Required. First Sierra is not
required to obtain the consent of any other Person, or any consent,
license, approval or authorization or registration or declaration
with, any governmental authority, bureau or agency in connection
with the execution, delivery or performance of this Agreement and
the Transaction Documents to which it is a party, except for such
as have been obtained, effected or made; and
(x) Consolidated Return Taxable Income from the
Equipment and the Related Contracts. The Depositor and 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 the Depositor under the
Transaction Documents or other documents relating to the financing
contemplated hereby. The Depositor shall treat the Contracts as
owned by it for federal, state and local income tax purposes, and
the affiliated group of which the Depositor is a member within the
meaning of Section 1504 of the Code shall treat the Contracts as
owned by the Depositor and shall report and include the rental and
other income from the Equipment and the Contracts in gross income.
(b) Receivables III hereby makes the following representations
and warranties for the benefit of the Indenture Trustee, the Noteholders, the
Note Insurer and the Trust. Such representations and warranties are made as of
the Closing Date and shall survive each sale, assignment, transfer and
conveyance by the Sellers of the respective Conveyed Assets to the Trust and its
successors and assigns.
(i) Organization and Good Standing. Receivables III
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;
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<PAGE> 10
(ii) Due Qualification. Receivables III is
qualified as a foreign corporation in any state where it is
required to be so qualified to conduct its business 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 approved could reasonably
be expected materially and adversely to affect the ability of
Receivables III to comply with the terms of this Agreement or any
other Transaction Document to which it is a party;
(iii) Legal Name. The legal name of Receivables III
is as set forth in the signature line of this Agreement and
Receivables III has not changed its name since its incorporation
and since its incorporation, Receivables III did not use, nor does
Receivables III now use, any trade names, fictitious names, assumed
name of "doing business as" names;
(iv) Power and Authority. Receivables III has the
corporate power and authority to execute and deliver this Agreement
and any other Transaction Document to which it is a party, and to
carry out their respective terms; Receivables III has duly
authorized the sale and assignment to the Owner Trustee, on behalf
of the Trust, of all of its right, title and interest, if any, in
the Conveyed Assets by all necessary corporate action; and the
execution, delivery, and performance of this Agreement, and any
other Transaction Document to which it is a party, has been duly
authorized by Receivables III by all necessary corporate action;
(v) Due Execution and Delivery. This Agreement has
been duly executed and delivered on behalf of Receivables III;
(vi) Valid Assignment; Binding Obligations. This
Agreement constitutes a valid assignment, transfer and conveyance
to the Owner Trustee, on behalf of the Trust, of all right, title,
and interest of Receivables III in, to and under the Conveyed
Assets and the Conveyed Assets will be held by the Trust free and
clear of any Lien of any Person claiming through or under
Receivables III, except the lien on the Conveyed Assets in favor of
the Indenture Trustee granted pursuant to the Indenture; and this
Agreement when duly executed and delivered, will constitute the
legal, valid, and binding obligation of Receivables III enforceable
against Receivables III 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);
(vii) Insolvency. Receivables III 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;
(viii) No Violation. The consummation of the
transactions contemplated by and the fulfillment of the terms of
this Agreement will not conflict with, result in
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<PAGE> 11
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 Receivables III, or any
material term of any indenture, agreement, mortgage, deed of
trust, or other instrument to which Receivables III 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
Receivables III of any court or of any federal or state regulatory
body, administrative agency, or other Governmental Authority
having jurisdiction over Receivables III or any of its properties
which would have a material adverse effect on the Conveyed Assets;
(ix) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of Receivables III,
threatened, before any court, regulatory body, administrative
agency, or other tribunal or Governmental Authority (A) asserting
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 Receivables III) materially and
adversely affect the performance by Receivables III of its
obligations under, or the validity or enforceability of, this
Agreement;
(x) No Consent Required. Receivables III is not
required to obtain the consent of any other Person, or any consent,
license, approval or authorization or registration or declaration
with, any governmental authority, bureau or agency in connection
with the execution, delivery or performance of this Agreement and
the Transaction Documents to which it is a party, except for such
having been obtained, effected or made;
(xi) Fair Consideration. The consideration received
by Receivables III as set forth herein is fair consideration having
value reasonably equivalent to or in excess of the value of the
Conveyed Assets conveyed by it and the performance of Receivables
III's obligation hereunder; and
(xii) Principal Place of Business. The principal
place of business and chief executive office of Receivables III is
located at 600 Travis Street, Suite 7050, Houston, Texas 77002 and,
there are now no, and during the past four months there have not
been, any other locations where Receivables III 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 Indenture Trustee in writing. The principal place
of business and chief executive office of each of the Warehouse
Trusts is located in care of Bankers Trust Company, Four Albany
Street, New York 10006 and, there are now no, and during the past
four months there have not been, any other locations where each
Warehouse Trust is located (as that term is used in the UCC in the
state of such location).
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(xiii) Valid Business Reasons. Receivables III has
valid business reasons for selling its interest in the Conveyed
Assets rather than obtaining a loan with the Conveyed Assets as
collateral;
(xiv) Absence of Event. No event has occurred which
adversely affects Receivables III's operations or its ability to
perform its obligations under the Transaction Documents to which it
is a party;
(xv) Accounting Treatment. Receivables III will
treat the assignment of the Conveyed Assets to the Trust pursuant
to Article II as a sale of the Conveyed Assets to the Trust for
financial reporting and accounting purposes, except with respect to
a portion of the Conveyed Assets which will be treated as owned by
Receivables III and which will be treated as consolidated for
accounting purposes with First Sierra.
(c) Prudential hereby makes the following representations and
warranties for the benefit of the Indenture Trustee, the Noteholders, the Note
Insurer and the Trust. Such representations and warranties are made as of the
Closing Date and shall survive each sale, assignment, transfer and conveyance by
the Sellers of the respective Conveyed Assets to the Trust and its successors
and assigns:
(i) Organization and Good Standing. Prudential 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. Prudential is qualified as
a foreign corporation in any state where it is required to be so
qualified to conduct its business 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 approved could reasonably be expected
materially and adversely to affect the ability of Prudential to
comply with the terms of this Agreement or any other transaction
document to which it is a party;
(iii) Power and Authority. Prudential has the
corporate power and authority to execute and deliver this Agreement
and any other Transaction Document to which it is a party, and to
carry out their respective terms; and the execution, delivery, and
performance of this Agreement and any other Transaction Document to
which it is a party, has been duly authorized by Prudential by all
necessary corporate action;
(iv) Due Execution and Delivery. This Agreement has
been duly executed and delivered on behalf of Prudential;
(v) Valid Assignment; Binding Obligations. This
Agreement constitutes a valid sale, assignment, transfer and
conveyance to the Owner Trustee, on
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behalf of the Trust, of all right, title, and interest of
Prudential in, to and under the Conveyed Assets and the Conveyed
Assets will be held by the Trust free and clear of any Lien of any
Person claiming through or under Prudential, except the lien on
the Conveyed Assets in favor of the Indenture Trustee granted
pursuant to the Indenture; and this Agreement, when duly executed
and delivered, will constitute the legal, valid, and binding
obligation of Prudential enforceable against Prudential 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);
(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 Prudential, or any material term of any
indenture, agreement, mortgage, deed of trust, or other instrument
to which Prudential 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 Prudential of any court or of any
federal or state regulatory body, administrative agency, or other
Governmental Authority having jurisdiction over Prudential or any
of its properties which would have a material adverse effect on the
Conveyed Assets;
(vii) Valid Business Reasons. Prudential has valid
business reasons for selling its interest in the Conveyed Assets
rather than obtaining a loan with the Conveyed Assets as
collateral;
(viii) Absence of Event. No event has occurred
which adversely affects Prudential's operations or its ability to
perform its obligations under the Transaction Documents to which it
is a party;
(ix) Insolvency. Prudential 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;
(x) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of Prudential,
threatened, before any court, regulatory body, administrative
agency, or other tribunal or Governmental Authority (A) asserting
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 Prudential) materially and adversely
affect the performance by Prudential of its obligations under, or
the validity or enforceability of, this Agreement;
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(xi) No Consent Required. Prudential is not
required to obtain the consent of any other Person, or any consent,
license, approval or authorization or registration or declaration
with, any governmental authority, bureau or agency in connection
with the execution, delivery or performance of this Agreement and
the Transaction Documents to which it is a party, except for such
having been obtained, effected or made;
(xii) Fair Consideration. The consideration
received by Prudential as set forth herein is fair consideration
having value reasonably equivalent to or in excess of the value of
the Conveyed Assets conveyed by it and the performance of
Prudential's obligations hereunder; and
(xiii) Accounting Treatment. Prudential will treat
the assignment of the Conveyed Assets to the Trust pursuant to
Article II as a sale of the Conveyed Assets to the Trust for
financial reporting and accounting purposes.
(d) First Union hereby makes the following representations and
warranties for the benefit of the Indenture Trustee, the Noteholders, the Note
Insurer and the Trust. Such representations and warranties are made as of the
Closing Date and shall survive each sale, assignment, transfer and conveyance by
the Sellers of the respective Conveyed Assets to the Trust and its successors
and assigns:
(i) Organization and Good Standing. First Union is
a national bank duly organized, validly existing and in good
standing, under the laws of the United States, 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 Union is qualified as
a foreign corporation in any state where it is required to be so
qualified to conduct its business 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 approved could reasonably be expected
materially and adversely to affect the ability of First Union to
comply with the terms of this Agreement or any other Transaction
Document to which it is a party;
(iii) Power and Authority. First Union has the
corporate power and authority to execute and deliver this Agreement
and any other Transaction Document to which it is a party, and to
carry out their respective terms; and the execution, delivery, and
performance of this Agreement and any other Transaction Document to
which it is a party, has been duly authorized by First Union by all
necessary corporate action;
(iv) Due Execution and Delivery. This Agreement has
been duly executed and delivered on behalf of First Union;
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<PAGE> 15
(v) Valid Assignment; Binding Obligations. This
Agreement constitutes a valid contribution, assignment, transfer
and conveyance to the Owner Trustee, on behalf of the Trust, of all
right, title, and interest of First Union in, to and under the
Conveyed Assets and the Conveyed Assets will be held by the Trust
free and clear of any Lien of any Person claiming, through or under
First Union, except the lien on the Conveyed Assets in favor of the
Indenture Trustee granted pursuant to the Indenture; and this
Agreement, when duly executed and delivered, will constitute legal,
valid, and binding obligation of First Union enforceable against
First Union 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 in 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 Union, or any material term of any
indenture, agreement, mortgage, deed of trust, or other instrument
to which First Union 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 Union of any court or of any
federal or state regulatory body, administrative agency, or other
Governmental Authority having jurisdiction over First Union or any
of its properties which would have a material adverse effect on the
Conveyed Assets;
(vii) Valid Business Reasons. First Union has valid
business reasons for selling its interest in the Conveyed Assets
rather than obtaining a loan with the Conveyed Assets as
collateral;
(viii) Absence of Event. No event has occurred
which adversely affects First Union's operations or its ability to
perform its obligations under the Transaction Documents to which it
is a party;
(ix) Insolvency. First Union 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;
(x) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of First Union,
threatened, before any court, regulatory body, administrative
agency, or other tribunal or Governmental Authority (A) asserting
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
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Union) materially and adversely affect the performance by First
Union of its obligations under, or the validity or enforceability
of, this Agreement;
(xi) No Consent Required. First Union is not
required to obtain the consent of any other Person, or any consent,
license, approval or authorization or registration or declaration
with, any governmental authority, bureau or agency in connection
with the execution, delivery or performance of this Agreement and
the Transaction Documents to which it is a party, except for such
having been obtained, effected or made;
(xii) Fair Consideration. The consideration
received by First Union as set forth herein is fair consideration
having value reasonably equivalent to or in excess of the value of
the Conveyed Assets conveyed by it and the performance of First
Union's obligations hereunder; and
(xiii) Accounting Treatment. First Union will treat
the assignment of the Conveyed Assets to the Trust pursuant to
Article II as a sale of the Conveyed Assets to the Trust for
financial reporting and accounting purposes.
(e) VFCC hereby makes the following representations and
warranties for the benefit of the Indenture Trustee, the Note Insurer and the
Trust. Such representations and warranties are made as of the Closing Date and
shall survive each sale, assignment, transfer and conveyance by the Sellers of
the respective Conveyed Assets to the Trust and its successors and assigns:
(i) Organization and Good Standing. VFCC 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. VFCC is qualified as a
foreign corporation in any state where it is required to be so
qualified to conduct its business 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 approved could reasonably be expected
materially and adversely to affect the ability of VFCC to comply
with the terms of this Agreement or any other Transaction Document
to which it is a party;
(iii) Power and Authority. VFCC has the corporate
power and authority to execute and deliver this Agreement and any
other Transaction Document to which it is a party, and to carry out
their respective terms; and the execution, delivery, and
performance of this Agreement and any other Transaction Document to
which it is a party, has been duly authorized by VFCC by all
necessary corporate action;
(iv) Due Execution and Delivery. This Agreement has
been duly executed and delivered on behalf of VFCC;
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(v) Valid Assignment; Binding Obligations. This
Agreement constitutes a valid sale, assignment, transfer and
conveyance to the Owner Trustee, on behalf of the Trust, of all
right, title, and interest of VFCC in, to and under the Conveyed
Assets and the Conveyed Assets will be held by the Trust free and
clear of any Lien of any Person claiming, through or under VFCC,
except the lien on the Conveyed Assets in favor of the Indenture
Trustee granted pursuant to the Indenture; and this Agreement, when
duly executed and delivered, will constitute the legal, valid, and
binding obligation of VFCC enforceable against VFCC 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
in 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 VFCC, or any material term of any
indenture, agreement, mortgage, deed of trust, or other instrument
to which VFCC 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 VFCC of any court or of any federal or state
regulatory body, administrative agency, or other Governmental
Authority having jurisdiction over VFCC or any of its properties
which would have a material adverse effect on the Conveyed Assets;
(vii) Valid Business Reasons. VFCC has valid
business reasons for selling its interest in the Conveyed Assets
rather than obtaining a loan with the Conveyed Assets as
collateral;
(viii) Absence of Event. No event has occurred
which adversely affects VFCC's operations or its ability to perform
its obligations under the Transaction Documents to which it is a
party;
(ix) Insolvency. VFCC 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
(x) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of VFCC, threatened,
before any court, regulatory body, administrative agency, or other
tribunal or Governmental Authority (A) asserting 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
VFCC) materially and adversely
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affect the performance by VFCC of its obligations under, or the
validity or enforceability of, this Agreement;
(xi) No Consent Required. VFCC is not required to
obtain the consent of any other Person, or any consent, license,
approval or authorization or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery or performance of this Agreement and the
Transaction Documents to which it is a party, except for such
having been obtained, effected or made;
(xii) Fair Consideration. The consideration
received by VFCC as set forth herein is fair consideration having
value reasonably equivalent to or in excess of the value of the
Conveyed Assets conveyed by it and the performance of VFCC's
obligations hereunder; and
(xiii) Accounting Treatment. VFCC will treat the
assignment of the Conveyed Assets to the Trust pursuant to Article
II as a sale of the Conveyed Assets to the Trust for financial
reporting and accounting purposes.
SECTION 3.02 [Reserved]
SECTION 3.03 Substitution of Contracts and Equipment by First
Sierra.
(a) With respect to a substitution of Contracts in accordance
with the provisions of this Section 3.03 and Section 4.02 of the Indenture, each
proposed Substitute Contract must (i) be an Eligible Contract, (ii) satisfy all
of the representations and warranties set forth in Section 2.02 of the Servicing
Agreement, (iii) have a Discounted Contract Principal Balance of not less than
the Discounted Contract Principal Balance of the Contract being replaced and
(iv) is eligible to be substituted by First Sierra under the Indenture. For
purposes of determining compliance with clause (iii) of the preceding sentence,
if more than one Substitute Contract is being provided on any date, the
Discounted Contract Principal Balance of the Substitute Contracts and the
Contracts being replaced shall be determined on an aggregate basis.
(b) Any substitution of a Contract pursuant to this Agreement
will be effected by (i) delivery to the Indenture Trustee of the Contract File
for each such Substitute Contracts, (ii) filing of any UCC financing statements
necessary to perfect the interest of the Indenture Trustee in the Substitute
Contracts, (iii) delivery to the Indenture Trustee of a supplement to the List
of Contracts reflecting such substitution and (iv) delivery to the Indenture
Trustee of a release request and the originally executed trust receipt relating
thereto.
(c) The parties hereto agree that in addition to the
obligation of First Sierra to repurchase or to substitute any Contract and the
related Equipment as to which a breach of the representations set forth in the
Servicing Agreement 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 Contract, First Sierra shall remit the
Repurchase Amount to the Servicer for allocation of such Repurchase Amount
pursuant to the terms of the Indenture. Except as may be set forth in the
Transaction Documents, it is understood and agreed that the obligations of First
Sierra with respect to a breach as provided in this Section 3.03 and Section
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4.01 of the Indenture constitute the sole remedy against First Sierra for such
breach available to the Trust, the Note Insurer, the Indenture Trustee and
Noteholders. The representations and warranties set forth in Sections 3.01 and
3.02 shall survive the assignment of the Conveyed Assets to the Trust and the
pledge of the Pledged Property to the Indenture Trustee.
(d) Except as provided in this Article III, upon each Seller's
transfer of its interest in the Conveyed Assets to the Trust, the Sellers will
not bear any further risk with respect to the ultimate collectibility of the
Contracts or the adequacy of the collateral securing the Contracts or the value
or sufficiency of the Equipment.
ARTICLE IV
COVENANTS
SECTION 4.01 Seller and First Sierra Covenants. First Sierra
and the Sellers, as applicable, hereby covenant and agree with the Trust, the
Note Insurer, the Noteholders and the Indenture Trustee with respect to itself
as follows:
(a) Preservation of Security Interest. The Sellers 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 the Owner Trustee, on behalf of the Trust, and the
Indenture Trustee in the Conveyed Assets. First Sierra shall deliver (or cause
to be delivered) to the Trust file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.
(b) Obligations with Respect to Conveyed Assets. Each of the
Sellers will duly fulfill all obligations on its part to be fulfilled under or
in connection with each Contract and each Source Agreement, and will do nothing
to impair the rights of the Trust, the Note Insurer or the Indenture Trustee in
any of the Conveyed Assets.
(c) 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 the Trust, the
Indenture Trustee, the Note Insurer or the Owner Trustee in the Conveyed Assets.
(d) Conveyance of Conveyed Assets; Security Interests. Except
for the transfers and conveyances hereunder, or under any Transaction Document,
the Sellers 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 the Owner Trustee, on behalf of the Trust, the Indenture Trustee,
the Note Insurer and their respective successors and assigns in, to, and under
the Conveyed Assets, against all claims of third parties claiming, through or
under the Sellers; provided, however, that nothing in this Section 4.01(f) 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
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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 and such contests pose no risk of forfeiture.
(e) Notification of Breach. The Sellers will advise the Trust,
the Indenture Trustee and the Note 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.
(f) Further Assurances. (i) First Sierra will make, execute or
endorse, acknowledge and file or deliver to the Trust and the
Indenture 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 the Trust, the Note
Insurer or the Indenture Trustee may request and reasonably
require, provided that no UCC filing will be required with respect
to the Equipment, except as required by the Filing Requirements.
(ii) The Sellers hereby agree to do all acts,
transactions, and things and to execute and deliver all agreements,
documents, instruments, and papers by and on behalf of the Sellers
as the Trust or its counsel may reasonably request in order to
consummate the transfer of the Conveyed Assets to the Trust and the
subsequent pledge thereof to the Indenture Trustee for the benefit
of the Noteholders and the Note Insurer, and the rating, issuance
and sale of the Notes.
(g) Indemnification. First Sierra agrees to indemnify, defend
and hold the Trust, the Note Insurer and the Indenture Trustee harmless from and
against any and all 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(g)
shall be considered to have been relied upon by the Trust, the Note Insurer and
the Indenture Trustee and shall survive the execution, delivery, and performance
of this Agreement regardless of any investigation made by the Trust, the
Indenture Trustee, the Note 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 THE TRUST, THE INDENTURE TRUSTEE, THE NOTE INSURER OR ANY OF THEIR
RESPECTIVE OFFICERS, EMPLOYEES OR AGENTS.
(h) Notice of Liens. First Sierra shall notify the Trust, the
Note Insurer and the Indenture Trustee, promptly after becoming aware of any
Lien on any Conveyed Asset.
(i) Taxes. First Sierra shall promptly pay all applicable
taxes required to be paid in connection with the assignment of the Conveyed
Assets and acknowledges that the Trust
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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 each such Seller,
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 Trust, the Indenture Trustee, the Note Insurer
and the Noteholders of any material challenge, contest or proceeding pending by
or against First Sierra before any taxing authority. First Sierra and the
Depositor 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
Depositor harmless against any claims of liability for such taxes and (ii) the
Depositor shall be required to make certain payments to First Sierra in respect
of its separate federal income tax liability. So long as any Notes remain
outstanding, First Sierra and the Depositor shall not terminate or amend such
Tax Sharing Agreement without the prior written consent of the Indenture Trustee
acting upon the written direction of the Note Insurer, except that First Sierra
shall not require the Depositor to make any payments to First Sierra, pursuant
to the Tax Sharing Agreement, which exceed the aggregate federal income tax
liability of the Depositor, on a separate return basis for all taxable years
covered by the Tax Sharing Agreement, that would arise if all allowable losses
arising at any time during such period were applied to reduce the Depositor's
aggregate separate taxable income for all such years.
(j) 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, 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 Trust, the Note Insurer and the Indenture Trustee of any material challenge,
contest or proceeding pending by or against First Sierra or the First Sierra
Group before any taxing authority.
(k) Non-Consolidation. First Sierra shall be operated in such
a manner that Receivables III and/or First Sierra Holding Trust I ("Holding
Trust I"), the holder of the trust certificate to be issued by the Trust, would
not be substantively consolidated with First Sierra, such that the separate
corporate existence of First Sierra and Receivables III, on the one hand, and
Holding Trust I, on the other hand, would be ignored in the event of a
bankruptcy of First Sierra.
(l) No Agency. First Sierra will not act as an agent of
Receivables III or Holding Trust I in any capacity except to the limited extent
provided in the Transaction Documents, but instead will present itself to the
public as a corporation separate from Receivables III and/or Holding Trust I;
(m) Financial Statements. The financial statements and books
and records of First Sierra reflect the separate existence of Receivables III
and Holding Trust I.
SECTION 4.02 Receivables III Covenants. Receivables III hereby
covenants and agrees with the Trust, the Note Insurer and the Indenture Trustee
as follows:
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(a) Receivables III Certificate. Prior to each date as of
which Contracts and the interest of Receivables III in the Equipment subject to
such Contracts are to be re-purchased by First Sierra pursuant to the Indenture,
Receivables III shall submit to First Sierra a certificate signed by the
president, executive vice president, any vice president or the treasurer of
Receivables III (a "Receivables III Certificate"), executed by Receivables III
and completed as to its date and the date of this Agreement. Each Receivables
III Certificate shall operate as an assignment, without recourse,
representation, or warranty, to First Sierra of all Receivables III's right,
title, and interest in and to such purchased Contract, Receivables III'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 Repurchase Amount, First Sierra will thereupon own such
Contract, such interest in the related Equipment and all such security and
documents, free of any further obligation to Receivables III with respect
thereto. If in any enforcement suit or legal proceeding it is held that the
Servicer may not enforce a Contract on the ground that it is not a real party in
interest or holder entitled to enforce the Contract, Receivables III shall, at
the Servicer's expense, take such steps as the Servicer deems necessary to
enforce the Contract, including bringing suit in Receivables III's name.
(b) Obligor's Quiet Enjoyment. Receivables III hereby
acknowledges and agrees that its rights in the Equipment are expressly subject
to the rights of the related Obligors in such Equipment pursuant to the
applicable Contracts. Receivables III covenants and agrees that, so long as an
Obligor shall not be in default of any of the provisions of the applicable
Contract, neither Receivables III nor any assignee of Receivables III will
disturb the Obligor's quiet and peaceful possession of the related Equipment and
the Obligor's use thereof for its intended purpose.
(c) Operation of Receivables III. Receivables III 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 Receivables III and such Person would be disregarded) and in that regard,
Receivables III shall:
(i) be a limited purpose corporation whose primary
activities are restricted in its certificate of incorporation;
(ii) not engage in any action that would cause the
separate legal identity of Receivables III 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;
(iii) not be involved in the day-to-day management of
First Sierra and/or Holding Trust I;
(iv) not incur, assume or guarantee any indebtedness
except for such indebtedness as may be incurred by Receivables III in
connection with the issuance of the Notes or as otherwise permitted by
the Note Insurer;
(v) not commingle its funds, assets and records
relating thereto with those of First Sierra or any other entity;
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(vi) entitle the separate creditors of Receivables
III to be satisfied out of Receivables III's assets prior to any
value in Receivables III becoming available to Receivable III's
equityholders, First Sierra's creditors or Holding Trust I's
creditors;
(vii) act solely in its own name in the conduct of
its business, including business correspondence and other
communications, and shall conduct its business so as not to mislead
others as to the identity of the entity with which they are
concerned;
(viii) 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;
(ix) not engage in any business or activity other
than in connection with or relating to its Certificate of
Incorporation and/or Bylaws;
(x) not form, or cause to be formed, any
subsidiaries;
(xi) comply with all restrictions and covenants in,
and shall not fail to comply with the corporate formalities
established in, its Certificate of Incorporation and/or Bylaws;
(xii) maintain its assets separately from the
assets of First Sierra (including through the maintenance of a
separate bank account);
(xiii) manage its day-to-day business without the
involvement of First Sierra and/or Holding Trust I;
(xiv) maintain a separate office from that of First
Sierra and/or Holding Trust I;
(xv) not act as an agent of First Sierra or Holding
Trust I, except to the limited extent provided in the Transaction
Documents; and
(xvi) maintain at all times two independent
directors as required by its Certificate of Incorporation and/or
Bylaws.
(d) Merger or Consolidation. (i) Receivables III will keep in
full effect its existence, rights and franchises as a corporation and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction which permits such qualification and in which it is necessary
to protect the validity and enforceability of this Agreement, any other
Transaction Document to which it is a party or any of the Contracts and to
perform its duties under this Agreement and each other Transaction Document to
which it is a party.
(ii) Any partnership or corporation (i) into which
Receivables III may be merged or consolidated, (ii) resulting from
any merger, conversion, or consolidation to which Receivables III
shall be party, or (iii) succeeding to Receivables III's business
substantially as a whole, shall execute an agreement of
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assumption to perform all of Receivables III's obligations under this
Agreement, and upon such execution will be Receivables III's successor
under this Agreement, without the execution or filing of any document
or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; provided,
however, that (a) immediately after giving effect to such transaction,
no covenant made pursuant to Section 4.02(c) shall have been breached,
(b) Receivables III shall have delivered to the Trust, the Rating
Agencies, the Note Insurer, the Owner Trustee and the Indenture Trustee
an Officer's Certificate and an opinion of counsel, satisfactory to
each of them, each stating that such consolidation, merger, or
succession and such agreement of assumption comply with this Section
4.02(d) and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (c)
Receivables III shall have delivered to the Trust, the Owner Trustee,
the Note Insurer, the Rating Agencies and the Indenture Trustee an
opinion of counsel, satisfactory to each of them, either (1) stating
that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and
filed that are necessary fully to preserve and protect the interest of
the Owner Trustee, on behalf of the Trust, in the Contracts and
reciting the details of such filings, or (2) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve
and protect such interest, (d) such partnership or corporation shall
have organizational documents with similar restrictions as those of
Receivables III, and (e) the Note Insurer has given its prior written
consent.
SECTION 4.03 Transfer of Conveyed Assets. Each Seller,
Receivables III and each Investor understands that the Trust intends to pledge
the Pledged Property to the Indenture Trustee on behalf of the Note Insurer and
the Noteholders, pursuant to the Indenture. Each Seller and each Investor agrees
that such assignee of the Trust may exercise the rights of the Trust hereunder
and shall be entitled to all of the benefits of the Trust hereunder to the
extent provided for in such assignment.
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions to Trust Obligations. The obligations
of the Trust to accept the transfer of the Conveyed Assets on the Closing Date
shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of each Seller,
Receivables III and each Investor 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
the Trust shall be true and correct as of the Cut-Off Date in all material
respects;
(c) Each Seller shall have delivered to the Trust a List of
Contracts with respect to its respective Contracts 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) Each Seller shall have recorded and filed, at its expense,
any financing statement with respect to the Contracts and the other Conveyed
Assets to be transferred from time to time to the Trust from each Seller
pursuant to this Agreement meeting the requirements of applicable state law in
such manner in such jurisdictions as are necessary to perfect the transfer of
the Contracts and the other Conveyed Assets from each such Seller to the Owner
Trustee, on behalf of Trust, and shall deliver a file-stamped copy of such
financing statements or other evidence of such filings to the Trust;
(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 the Trust, and the Trust shall have
received from each Seller copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Trust may reasonably have requested; and
(f) All respective conditions necessary to vest in each Seller
good title, free and clear of all Liens (other than Liens permitted in the
proviso contained in Section 4.01(f) hereof), to its respective Contracts and
interests in Equipment shall have been satisfied.
ARTICLE VI
TERMINATION
SECTION 6.01 Termination. The respective obligations and
responsibilities of each Seller, First Sierra and the Trust created by this
Agreement shall terminate upon the latest of (i) the maturity or other
liquidation of the last Contract and the disposition of any amounts received
upon disposition of any Defaulted Contracts and any Equipment leased thereunder;
and (ii) the termination of the Indenture in accordance with the terms thereof;
provided, however,
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that the indemnifications contained in Section 4.01(g) herein shall survive the
termination of this 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 any Seller or the Trust shall be deemed to impair or affect
the obligations pertaining to any executed sale or executed obligations,
including, without limitation, pre-termination breaches of representations and
warranties by any Seller. Without limiting the foregoing, prior to termination,
neither the failure of the Trust to deliver a Trust Certificate pursuant to
Section 4.02, nor the failure of First Sierra to pay a Repurchase Amount 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 sale executory.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01 Amendment. This Agreement may be amended from
time to time by the parties hereto only with (x) the prior written consent of
the Servicer, the Indenture Trustee and the Note Insurer and (y) prior written
notice to the Rating Agencies by the Servicer.
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 mail, 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: 600 Travis Street, Suite 7050, Houston, Texas 77002, Fax
No.: (713) 221-1818, (b) in the case of Receivables III, at the following
address: 600 Travis Street, Suite 6950, Houston, Texas 77002, Fax No.: (713)
221-1818, (c) in the case of Prudential, 1220 N. Market Street, Wilmington,
Delaware 19801, (d) in the case of First Union, One First Union Center, 301
South College Street, Charlotte, North Carolina 28288-0610, (e) in the case of
the Indenture Trustee, Four Albany Street, New York, New York 10006, Attention:
Corporate Trust and Agency Group - Structure & Finance, Fax No.: (212) 250-6439,
(f) in the case of VFCC, One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0610, (g) in the case of the Trust, c/o First
Union Trust Company, National Association, One Rodney Square, 920 King Street,
Suite 102, Wilmington, Delaware 19801, Attention: Corporate Trust
Administration, Fax No.: (302) 888-7544, and (h) in the case of the Note Insurer
or the Indenture Trustee at their respective
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addresses set forth in Section 11.06 of the Indenture. 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(b) and (c).
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, without the prior written consent of the Trust, the Note Insurer
and the Indenture Trustee (acting upon the written direction of the Controlling
Parties) and, except as provided in Section 4.03, this Agreement may not be
assigned by the Trust without the prior written consent of First Sierra, the
Note Insurer and the Indenture Trustee. Whether or not expressly stated, all
representations, warranties, covenants and agreements of First Sierra,
Receivables III, the Investors and the Trust 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 Indenture Trustee for the
benefit of the Noteholders.
SECTION 7.06 Further Assurances. Each of the parties hereto
agrees to do such further acts and things and to execute and deliver to the
Indenture Trustee such additional assignments, agreements, powers and
instruments as are required by the Indenture Trustee or the Note Insurer to
carry into effect the purposes of this Agreement or to better assure and confirm
unto the Indenture Trustee or the Note 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 the Trust or each Seller,
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.
The Indenture Trustee, the Owner Trustee, the Note Insurer and the Noteholders
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
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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 Receivables III or
the Trust. Each of the parties hereto agrees that, prior to the date that is one
year and one day after the payment in full of the of the latest maturing Notes
issued by the Trust, it will not institute against Receivables III or the Trust,
or join any other Person in instituting against Receivables III or the Trust,
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.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this
Receivables Transfer Agreement to be duly executed by their respective officers
as of the day and year first above written.
FIRST SIERRA FINANCIAL, INC.,
in its individual capacity
By:/s/ E. Rogert Gebhart
---------------------------------------
Name: E. Rogert Gebhart
Title: Senior Vice President
FIRST SIERRA RECEIVABLES III, INC.
By:/s/ E. Rogert Gebhart
---------------------------------------
Name: E. Rogert Gebhart
Title: Senior Vice President
FIRST UNION NATIONAL BANK,
as Certificateholder of the First
Sierra Equipment Lease Trust 1997-A
By:/s/ C. Brand Hosford
---------------------------------------
Name: C. Brand Hosford
Title: Vice President
VARIABLE FUNDING CAPITAL CORPORATION,
as Certificateholder of the First Sierra
Equipment Lease Trust 1997-B
By:/s/ Darrell R. Baber
---------------------------------------
Name: Darrell R. Baber
Title: Director
[Signature Pages To Receivables Transfer Agreement]
<PAGE> 30
PRUDENTIAL SECURITIES CREDIT
CORPORATION, as Certificateholder of
the First Sierra Equipment Lease Trust
1997-C
By:
---------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity, but solely
as Trustee of each of the First
Sierra Equipment Lease Trust
1997-A, the First Sierra
Equipment Lease Trust 1997-B and
the First Sierra Equipment Lease
Trust 1997-C
By:/s/ Craig M. Kantor
---------------------------------------
Name: Craig M. Kantor
Title: Vice President
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1998-1, A COMMON LAW TRUST ACTING
THROUGH FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, NOT IN ITS
INDIVIDUAL CAPACITY BUT SOLELY AS OWNER
TRUSTEE, as Issuer
By:/s/ Stephen J. Kaba
---------------------------------------
Name: Stephen J. Kaba
Title: Vice President
[Signature Pages To Receivables Transfer Agreement]
<PAGE> 31
Schedule I
LIST OF CONTRACTS
[ON FILE WITH DEWEY BALLANTINE LLP]
<PAGE> 32
Annex A
DEFINED TERMS
[SEE ANNEX A TO THE INDENTURE]
