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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) April 26, 1999
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)
<TABLE>
<S> <C> <C>
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Delaware 333-12199 76-0543174
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Delaware (Commission File 76-0589331
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(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification
No.)
c/o First Sierra Financial, Inc. 77002
Attention: E. Roger Gebhart ----------
600 Travis Street, Suite 7050 (Zip Code)
Houston, Texas
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(Address of Principal Executive Offices)
</TABLE>
Registrant's telephone number, including area code (713) 221-8822
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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 1999-1, 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 April 1, 1999, 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 ($70,688,994) of the Class A-1 Notes
and monthly interest at a rate of 4.967% 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 ($57,258,085) of the
Class A-2 Notes and monthly interest at a rate of 5.450% 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
($48,068,516) of the Class A-3 Notes and monthly interest at a rate of 5.540%
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 ($84,119,903) of the Class A-4 Notes and monthly interest at
a rate of 5.730% 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 April 1, 1999 (the "Initial Cut-Off Date") (such leases,
the "Initial Contracts"), and other finance leases and commercial loans
received after April 26, 1999 (the "Subsequent Contracts", and together with
the Initial Contracts, 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 April 26, 1999 (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 April 1, 1999 (the "Receivables Transfer Agreement"), attached hereto as
Exhibit 10.1, between First Sierra, the Depositor, 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 15th day (or the next succeeding business day thereafter) of each month,
commencing May 17, 1999 (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 April 26, 1999.
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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 April 21, 1999, filed pursuant to Rule 424(b)(5) 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 April 21, 1999, between First Sierra
Financial, Inc. and First Union Capital Markets Corp., as Representative of the
Several Underwriters.
4.1 Indenture, dated as of April 1, 1999, among First Sierra Equipment
Contract Trust 1999-1, 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
April 26, 1999.
10.1 Receivables Transfer Agreement, dated as of April 1, 1999, among
First Sierra Financial, Inc., First Sierra Receivables III, Inc., First Union
National Bank, Variable Funding Capital Corporation, Bankers Trust Company and
First Sierra Equipment Contract Trust 1999-1, 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/ Sandy B. Ho
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Name: Sandy B. Ho
Title: Senior Vice President
FIRST SIERRA RECEIVABLES III, INC.
By: /s/ Sandy B. Ho
--------------------------
Name: Sandy B. Ho
Title: Senior Vice President
Dated: May 7, 1999
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EXHIBIT INDEX
1.1 Underwriting Agreement, dated April 21, 1999, between First Sierra
Financial, Inc. and First Union Capital Markets Corp., as Representative of the
Several Underwriters.
4.1 Indenture, dated as of April 1, 1999, among First Sierra Equipment
Contract Trust 1999-1, 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
April 26, 1999.
10.1 Receivables Transfer Agreement, dated as of April 1, 1999, among
First Sierra Financial, Inc., First Sierra Receivables III, Inc., First Union
National Bank, Variable Funding Capital Corporation, Bankers Trust Company and
First Sierra Equipment Contract Trust 1999-1, 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
April 21, 1999
First Union Capital Markets Corp.
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0610
First Sierra Financial, Inc. (the "Company") hereby confirms its
agreement to sell certain equipment contract backed notes to First Union
Capital Markets Corp. (the "Representative"), Nesbitt Burns Securities, Inc.
("Nesbitt Burns") and PNC Capital Markets, Inc. ("PNC Capital Markets" and
together with the Representative and Nesbitt Burns, 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 1999-1, 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 April 1, 1999 (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 April 1, 1999 (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.
1. Securities. The securities will be issued in classes as follows: (i)
four classes of senior notes consisting of: (a) 4.967% % Equipment
Contract-Backed Notes, Class A-1 (the "Class A-1 Notes"), 5.450% % Equipment
Contract-Backed Notes, Class A-2 (the "Class A-2 Notes"), 5.540% Equipment
Contract-Backed Notes, Class A-3 (the "Class A-3 Notes") and
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5.730% 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 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
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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 April 1, 1999 (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 April 1, 1999 (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 April 21,
1999 (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 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
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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 earnings, business or operations of the Company or its
subsidiaries, taken as a whole, from March 31, 1999.
L. The Agreements will conform in all material respects to the
descriptions thereof, if any, contained in the Prospectus.
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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
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 $260,135,498, by a same day federal
funds wire payable to the order of the Company.
Settlement shall take place at the offices of Dewey Ballantine LLP,
333 South Hope Street, Los Angeles, California 90071 at 10 a.m., on April 26,
1999, or at such other time thereafter as each of 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 Los Angeles not later than 10 a.m. Los
Angeles 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 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
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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 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
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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:
(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
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<PAGE> 8
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.
(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.
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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;
(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;
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<PAGE> 10
(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 March 31,
1999, and no such amendment has been authorized. No event has occurred
since April 26, 1999, 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
March 31, 1999; 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 March 31, 1999, 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:
(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;
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<PAGE> 11
(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 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 Underwriters 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
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<PAGE> 12
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 December
31, 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, 1998 and December 31, 1997 and for the three years ended December 31,
1998, 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, 1998, incorporated by referenced into the Prospectus, fairly
present in all material respects the financial condition of the Insurer as
of such date and for the period covered by such statements in accordance
with generally accepted accounting principles consistently applied; and
(7) to the best knowledge of such officer, since December 31,
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.
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<PAGE> 13
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 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
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<PAGE> 14
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.
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.
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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.
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
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<PAGE> 16
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 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
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<PAGE> 17
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 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.
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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 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
18
<PAGE> 19
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 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 exceeds the Aggregate Resale Price.
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 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 First Union Capital Markets Corp., 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 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
19
<PAGE> 20
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.
13. Successors. 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.
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.
20
<PAGE> 21
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)
FIRST UNION CAPITAL MARKETS CORP.
as Representative of the Several Underwriters
By: /s/ William W. Ingram
-------------------------------------------
Name: William W. Ingram
Title: Managing Director
[Underwriting Agreement Signature Page]
<PAGE> 22
Annex A
Underwriting
Class A-1 Notes
---------------
<TABLE>
<CAPTION>
Principal
Underwriter Percentage Amount
- ------------------------------- ---------- ----------
<S> <C> <C>
First Union Capital Markets 60% 42,413,397
Nesbitt Burns Securities, Inc. 30% 21,206,698
PNC Capital Markets, Inc. 10% 7,068,899
Class A-2 Notes
---------------
Principal
Underwriter Percentage Amount
- ------------------------------- ---------- ----------
First Union Capital Markets 60% 34,354,851
Nesbitt Burns Securities, Inc. 30% 17,177,426
PNC Capital Markets, Inc. 10% 5,725,808
Class A-3 Notes
---------------
Principal
Underwriter Percentage Amount
- ------------------------------- ---------- ----------
First Union Capital Markets 60% 28,841,110
Nesbitt Burns Securities, Inc. 30% 14,420,555
PNC Capital Markets, Inc. 10% 4,806,851
Class A-4 Notes
---------------
Principal
Underwriter Percentage Amount
- ------------------------------- ---------- ----------
First Union Capital Markets 60% 50,471,942
Nesbitt Burns Securities, Inc. 30% 25,235,971
PNC Capital Markets, Inc. 10% 8,411,990
</TABLE>
<PAGE> 1
===============================================================================
EXHIBIT 4.1
INDENTURE
by and between
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1, 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 April 1, 1999
--------------------------------------------------
First Sierra Equipment Contract Trust 1999-1
Equipment Contract-Backed Notes
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <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 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 Pre-Funding Account and Capitalized Interest Account...................................7
Section 3.03 Investment of Monies Held in the Accounts; Subaccounts.................................8
Section 3.04 The Note Insurance Policy..............................................................8
Section 3.05 Disbursements From Collection Account..................................................9
Section 3.06 Statements to Noteholders.............................................................13
Section 3.07 Compliance With Withholding Requirements..............................................16
ARTICLE IV. REMOVAL OF NON-CONFORMING PLEDGED PROPERTY; SUBSTITUTION OF CONTRACTS................................16
Section 4.01 Removal of Non-Conforming Pledged Property............................................16
Section 4.02 Substitution of Contracts.............................................................16
Section 4.03 Release of Trust Property.............................................................17
ARTICLE V. THE NOTES.............................................................................................18
Section 5.01 The Notes.............................................................................18
Section 5.02 Initial Issuance of Notes.............................................................21
Section 5.03 Registration of Transfer and Exchange of Notes........................................21
Section 5.04 Mutilated, Destroyed, Lost or Stolen Notes............................................22
Section 5.05 Persons Deemed Owners.................................................................22
Section 5.06 Access to List of Noteholders' Names and Addresses....................................22
Section 5.07 Acts of Noteholders...................................................................23
Section 5.08 No Proceedings........................................................................23
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VI. THE TRUST............................................................................................23
Section 6.01 Liability of the Trust................................................................23
Section 6.02 Limitation on Liability of the Trust..................................................23
Section 6.03 Indemnity for Liability Claims........................................................24
Section 6.04 Liabilities...........................................................................24
Section 6.05 [Reserved.]...........................................................................24
Section 6.06 Annual Statement as to Compliance.....................................................24
Section 6.07 Payment of Principal and Interest.....................................................25
Section 6.08 Maintenance of Office or Agency.......................................................25
Section 6.09 Money for Payments to be Held in Trust................................................25
Section 6.10 Existence.............................................................................26
Section 6.11 Protection of Trust Property..........................................................27
Section 6.12 Performance of Obligations; Servicing of Receivables..................................27
Section 6.13 Negative Covenants....................................................................28
Section 6.14 Trust May Consolidate, Etc. Only on Certain Terms.....................................29
Section 6.15 Successor or Transferee...............................................................30
Section 6.16 No Other Business.....................................................................30
Section 6.17 No Borrowing..........................................................................31
Section 6.18 Guarantees, Loans, Advances and Other Liabilities.....................................31
Section 6.19 Capital Expenditures..................................................................31
Section 6.20 Compliance with Laws..................................................................31
Section 6.21 Further Instruments and Acts..........................................................31
ARTICLE VII. THE INDENTURE TRUSTEE...............................................................................31
Section 7.01 Duties of Indenture Trustee...........................................................31
Section 7.02 Eligible Investments..................................................................33
Section 7.03 Indenture Trustee's Assignment of Contracts...........................................33
Section 7.04 Certain Matters Affecting the Indenture Trustee.......................................34
Section 7.05 Indenture Trustee Not Liable for Notes or Contracts...................................35
Section 7.06 Indenture Trustee May Own Notes.......................................................36
Section 7.07 Indenture Trustee's Fees and Expenses.................................................36
Section 7.08 Eligibility Requirements for Indenture Trustee........................................37
Section 7.09 Preferential Collection of Claims Against Issuer......................................37
Section 7.10 Resignation or Removal of Indenture Trustee...........................................37
Section 7.11 Successor Indenture Trustee...........................................................38
Section 7.12 Merger or Consolidation of Indenture Trustee..........................................39
Section 7.13 Appointment of Co-Indenture Trustee or Separate Indenture Trustee.....................39
Section 7.14 Indenture Trustee May Enforce Claims Without Possession of Note.......................41
Section 7.15 Suits for Enforcement.................................................................41
Section 7.16 Undertaking for Costs.................................................................41
Section 7.17 Representations and Warranties of Indenture Trustee...................................41
Section 7.18 Tax Returns...........................................................................42
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES........................................................................42
Section 8.01 Events of Default.....................................................................42
Section 8.02 Acceleration of Maturity, Rescission and Annulment....................................43
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 8.03 Remedies..............................................................................44
Section 8.04 Notice of Event of Default............................................................44
Section 8.05 Exercise of Power by Indenture Trustee................................................44
Section 8.06 Indenture Trustee May File Proofs of Claim............................................44
Section 8.07 Allocation of Money Collected.........................................................45
Section 8.08 Waiver of Events of Default...........................................................46
Section 8.09 Limitation On Suits...................................................................46
Section 8.10 Unconditional Right of Noteholders to Receive Principal and Interest..................47
Section 8.11 Restoration of Rights and Remedies....................................................47
Section 8.12 Rights and Remedies Cumulative........................................................47
Section 8.13 Delay or Omission Not Waiver..........................................................48
Section 8.14 Control by Controlling Parties........................................................48
Section 8.15 Sale of Pledged Property..............................................................48
Section 8.16 Action on Notes.......................................................................49
ARTICLE IX. TERMINATION..........................................................................................49
Section 9.01 Termination of Obligations and Responsibilities.......................................49
Section 9.02 Optional Redemption of Notes; Final Disposition of Funds..............................49
ARTICLE X. Noteholders' Lists and Reports........................................................................51
Section 10.01 Trust To Furnish To Indenture Trustee Names and Addresses of Noteholders..............51
Section 10.02 Preservation of Information; Communications to Noteholders............................51
Section 10.03 Reports by the Trust..................................................................51
Section 10.04 Reports by Indenture Trustee..........................................................52
Section 10.05 Compliance Certificates and Opinions, etc.............................................52
ARTICLE XI. MISCELLANEOUS PROVISIONS.............................................................................53
Section 11.01 Amendment.............................................................................53
Section 11.02 Conformity With Trust Indenture Act...................................................53
Section 11.03 Limitation on Rights of Noteholders...................................................54
Section 11.04 Counterparts..........................................................................54
Section 11.05 Governing Law.........................................................................54
Section 11.06 Notices...............................................................................55
Section 11.07 Severability of Provisions............................................................55
Section 11.08 Conflict with Trust Indenture Act.....................................................55
Section 11.09 Third Party Beneficiary...............................................................56
Section 11.10 Assignment............................................................................56
Section 11.11 Binding Effect........................................................................56
Section 11.12 Survival of Agreement.................................................................56
Section 11.13 Captions..............................................................................56
Section 11.14 Exhibits..............................................................................56
Section 11.15 Calculations..........................................................................56
Section 11.16 No Proceedings........................................................................56
</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 1999-1
Reconciliation and Tie between the Indenture
dated as of April 1, 1999 and the
Trust Indenture Act of 1939, as amended
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
<S> <C>
Section 310(a)(1) Section 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
</TABLE>
v
<PAGE> 7
This INDENTURE, dated as of April 1, 1999, is made by and between
First Sierra Equipment Contract Trust 1999-1, 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 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 and upon each execution and
delivery of each Subsequent Transfer Agreement, 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
2
<PAGE> 9
Transfer Agreement, each Subsequent Transfer Agreement and the Servicing
Agreement, each as executed and delivered in accordance therewith, (g) all
amounts on deposit in the Collection Account, the Lockbox Account, the
Pre-Funding Account and the Capitalized Interest 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
Initial Contracts, in accordance with the Filing Requirements, prepared for
filing;
3
<PAGE> 10
(f) A certificate listing the Servicing Officers as of the Closing
Date;
(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 Initial Contract on the List of Initial
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
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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.
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
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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 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 1999-1 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 (excluding Pre-Funding Earnings), as
described in Section 3.03(a) hereof;
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(v) The Indenture Trustee shall transfer from the Capitalized
Interest Account the Capitalized Interest Requirement, if any, with respect
to each Payment Date occurring during the Pre-Funding Period; and
(vi) 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 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 Pre-Funding Account and Capitalized Interest Account. (a)
The Indenture Trustee shall establish and maintain the Pre-Funding Account as
one or more segregated trust accounts in the name of "First Sierra Equipment
Contract-Backed Notes 1999-1 Pre-Funding Account, in trust for the registered
holders of Equipment Contract-Backed Notes." The Indenture Trustee will make or
permit withdrawals from the Pre-Funding Account only as provided in this
Indenture. On the Closing Date, the Indenture Trustee will deposit from the
proceeds of the sale of the Notes, the Original Pre-Funded Amount in the
Pre-Funding Account. On each Subsequent Transfer Date occurring during the
Pre-Funding Period, the Servicer, on behalf of the Trust, shall instruct the
Indenture Trustee in writing to withdraw from the Pre-Funding Account and
release to the Trust an amount equal to 96.25% of the aggregate Discounted
Contract Principal Balance of the Subsequent Contracts to be transferred to the
Trust as of the applicable Subsequent Cut-Off Date upon satisfaction of each of
the conditions set forth in Section 2.02 of the Receivables Transfer Agreement
with respect to the transfer of Subsequent Contracts to the Trust. In addition,
on or prior to each Payment Date, all income and gain realized from investment
of funds deposited in the Pre-Funding Account shall be transferred to the
Capitalized Interest Account prior to the withdrawal of the Capitalized
Interest Requirement from the Capitalized Interest Account. Any amount
remaining on deposit in the Pre-Funding Account at the end of the Pre-Funding
Period, less any undistributed investment earnings on deposit in the
Pre-Funding Account, shall be distributed by the Indenture Trustee on the
Payment Date immediately following the end of the Pre-Funding Period to the
Noteholders as a prepayment of principal.
(b) The Indenture Trustee shall establish and maintain the Capitalized
Interest Account as one or more segregated trust accounts in the name of "First
Sierra Equipment Contract-Backed Notes 1999-1 Capitalized Interest Account, in
trust for the registered holders of
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Equipment Contract-Backed Notes." The Indenture Trustee shall make or permit
withdrawals from the Capitalized Interest Account only as provided in this
Indenture. On the Closing Date, the Indenture Trustee will deposit from the
proceeds of the sale of the Notes, the Capitalized Interest Account Deposit in
the Capitalized Interest Account. On each Payment Date occurring during the
Pre-Funding Period only, the Indenture Trustee shall transfer from the
Capitalized Interest Account into the Collection Account the Capitalized
Interest Requirement, if any, for such Payment Date. If, on any Payment Date,
the amount on deposit in the Capitalized Interest Account exceeds the
Capitalized Interest Required Reserve Amount, the Indenture Trustee will
distribute such excess to First Sierra. Any amount remaining on deposit in the
Capitalized Interest Account on the Payment Date immediately following the end
of the Pre-Funding Period (after taking into account any transfer to be made
from the Capitalized Interest Account into the Collection Account on such
Payment Date) shall be released by the Indenture Trustee to First Sierra, and
the Capitalized Interest Account shall thereafter be closed.
Section 3.03 Investment of Monies Held in the Accounts; Subaccounts.
(a) The Servicer shall direct the Indenture Trustee in writing to invest the
amounts in each Account in Eligible Investments that mature not later than the
Business Day immediately preceding the next Payment Date following the
investment of such amounts. Eligible Investments shall not be sold or disposed
of prior to their maturities. Investment Earnings on amounts held in any
Account (other than the Pre-Funding Earnings) 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 3.04 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 3.05
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hereof to the Class A Noteholders exclusively. The parties hereto recognize
that the making of an Insured Payment does not relieve any of the parties
hereto of any obligation hereunder or under any of the Transaction Documents.
(d) The 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 3.05 hereof.
The Note Insurer shall be entitled to receive the related Reimbursement Amount
pursuant to Sections 3.05(b)(xii) 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 3.05(b)(xii) 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 3.05 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,
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however, that in the event the Servicer fails to deliver a Monthly Statement by
a Payment Date 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;
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(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 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, 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, 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 Balance up to the amount
necessary to reduce the Class A Note Principal
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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 Trust Certificate Holder, any remaining amounts; provided,
however, that during the continuance of a Restricting Event, no
distribution will be made to the Trust Certificate 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 3.06 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,
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Class A-3, Class A-4, Class B-1, Class B-2 or Class B-3 Note Interest and
Class A-1, 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 3.05 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, 2000,
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
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such Subordinate Noteholder all such reports or information to be provided by
and in accordance 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 3.07 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 Substitute Conveyed Assets 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 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 Conveyed Assets 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 Substitute 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 sum of the Aggregate Discounted Contract Principal Balance of all
Contracts as of the Initial Cut-Off Date plus the aggregate Discounted
Contract Principal Balance of all Subsequent Contracts as of the related
Subsequent Cut-Off Date;
(ii) as of the related Substitute Cut-Off Date, the Substitute
Contracts then being transferred have a Discounted Contract Principal
Balance 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 the 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, any subaccounts thereof, the
Pre-Funding
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Account and the Capitalized Interest Account as may have been established
pursuant to Sections 3.01 and 3.02. 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 accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 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
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shall be registered in the Register in the name of Cede & Co., or any successor
thereto, as nominee for the Trustee.
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.
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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
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.
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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 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
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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 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 Owner Trustee, 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
3.05 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 Owner Trustee, the Servicer and the Indenture
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Trustee that none of the Trust, the Owner Trustee, 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.
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 Owner 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 Trust Certificate
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 Trust Certificate 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,
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the Noteholders, First Sierra, the Servicer, the Trust Certificate 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, 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 Trust Certificate
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 Trust Certificate Holder pursuant to Section 3.05(b)(xviii)
hereof.
Section 6.04 Liabilities. Notwithstanding any provision of this
Indenture, by entering into this Indenture, the Trust and the Trust Certificate
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 6.06 [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, 1999), 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.
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Section 6.07 Payment of Principal and Interest. The Indenture Trustee
on behalf of the Trust will pay or cause to be duly and punctually paid the
principal of and interest on the Notes in accordance with the terms of the
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 Note Registrar
shall, and the Indenture Trustee, as initial Note Registrar agrees to, 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
Indenture Trustee will give prompt written notice to the Trust of the location,
and of any change in the location, of any such office or agency.
Section 6.09 Money for Payments to be Held in Trust. On or before each
Payment Date, the Servicer on behalf of 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 Servicer on behalf of 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 Servicer on behalf of 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 Servicer on behalf of
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,
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(D) 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, the Pre-Funding
Account and the Capitalized Interest 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
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Trustee's name or the names of the Noteholders and the Note Insurer and (ii)
executing 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
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cost, expense or liability as a condition to so proceeding. The reasonable
expense of every such examination shall be paid by the requesting party or,
if paid by the 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
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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.
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 Trust Certificate Holder agrees:
(i) to pay to the Indenture Trustee, pursuant to Section
3.05(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 3.05(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
3.05(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.
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(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 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 Section
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 Section 310(b),
including the optional provision permitted by the second sentence of TIA Section
310(b)(9); provided, however, that there shall be excluded from the operation of
TIA Section 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 Section 310(b)(1) are met.
Section 7.09 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 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
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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
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
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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 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 alone 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
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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 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
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permitted by law, without the appointment of a new or successor separate
Indenture Trustee or successor co-Indenture Trustee.
(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.
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(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 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
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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 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 have 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.
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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:
(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;
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(b) to petition for lifting of the automatic stay and thereupon to
foreclose upon the Pledged Property as elsewhere provided herein; and
(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. Any money collected by the
Indenture Trustee with respect to the Notes pursuant to the remedies set forth
in Section 8.03 (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; provided, however, that the provisions of
this Section 8.07 shall not preclude the Indenture Trustee from receiving
indemnities satisfactory to it from the Noteholders against the costs, expenses
and liabilities it may incur in acting in compliance with the written
directions of any Noteholder or Noteholders; provided, further, that any such
indemnities shall not be withheld or offset from the amounts payable to any
Noteholders pursuant to clauses THIRD through SEVENTH, NINTH and TENTH below:
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;
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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 3.05(b)(xi) hereof);
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 Trust Certificate 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:
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(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;
(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.
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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 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.
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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
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 Trust Certificate 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 Trust
Certificate 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 sum
of the Aggregate Discounted Contract Principal Balance as of the Closing Date
plus the aggregate Discounted Contract Principal Balance of all Subsequent
Contracts as of the related Subsequent Cut-Off Date, the Trust Certificate
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 Trust Certificate Holder elects to redeem the Notes in
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accordance with this Section 9.02(a), the Trust Certificate 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 sum of
the Aggregate Discounted Contract Principal Balance for such Contracts as of
the Closing Date plus the aggregate Discounted Contract Principal Balance of
such Contracts as of the related Subsequent Cut-Off Date purchased by the Trust
during the Pre-Funding Period as identified in Schedule II to each Subsequent
Transfer Agreement, the Trust Certificate 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 Trust Certificate Holder elects to redeem the
Notes in part in accordance with this Section 9.02(b), the Trust Certificate
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 3.05 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 3.05 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
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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 Note Registrar To Furnish To Indenture Trustee Names and
Addresses of Noteholders. The Note Registrar 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 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 Note
Registrar 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 Section 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 Section 312(c).
Section 10.03 Reports by the Trust. (a) The Servicer, on behalf of 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;
(ii) 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
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(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section 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.
Section 10.04 Reports by Indenture Trustee. If required by TIA Section
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 Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 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
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(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 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.
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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 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.
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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 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 Sections 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.
55
<PAGE> 62
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 the
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 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 Trust Certificate
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.
56
<PAGE> 63
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
1999-1, 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/ Craig Kantor
------------------------------------------
Name: Craig Kantor
Title: Vice President
[Signature Page to Indenture]
<PAGE> 64
EXHIBIT A
INDENTURE TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1
Bankers Trust Company, in its capacity as Indenture Trustee (the
"Indenture Trustee") under that certain Indenture (the "Indenture"), dated as
of April 1, 1999, by and among First Sierra, as Servicer and Originator, First
Sierra Equipment Contract Trust 1999-1, 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 Initial
Contract on the List of Initial Contracts.
The List of Initial Contracts relating to the Issuer is attached to
this Receipt.
BANKERS TRUST COMPANY
as Indenture Trustee
By:
-------------------------------------
Name:
Title:
Dated: , 1999
----------
<PAGE> 65
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 1999-1, Issued by, First
Sierra Equipment Contract Trust 1999-1, 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> 66
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 1999-1
4.967% 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 1999-1, 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: 33641NAPO
Class A-1
Note $70,688,994 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 Eight Thousand Nine
Hundred Ninety Four Dollars ($70,688,994) 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 15th day of each
month or, if such 15th day is not a Business Day, the Business Day immediately
following (each, a "Payment Date"), commencing in May 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 4.967% (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 Notes are entitled to
C-1-1
<PAGE> 67
receive, as hereinafter set forth in this Class A-1 Note and as more fully set
forth in the Indenture dated as of April 1, 1999 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 April 1, 1999 (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 "4.967% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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 May, 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> 68
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 Trust Certificate 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 Trust Certificate 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
in whole as of any Payment Date following any Calculation Date on which the
Aggregate Discounted Contract Principal Balance is less than 10% of the sum of
the Aggregate Discounted Contract Principal Balance as of the Closing Date and
the aggregate Discounted Contract Principal Balance of Subsequent Contracts as
of the related Subsequent Cut-Off Date or to cause early retirement of the
Notes in part as of any Payment Date following any Calculation Date on which
the Aggregate Discounted Contract Principal Balance of the Contracts identified
in Exhibit I to the Indenture and Schedule II to any Subsequent Transfer
Agreement is less than 15% of the sum of the aggregate Discounted Contract
Principal Balance for such Contracts as of the Closing Date and the Aggregate
Discounted Contract Principal Balance of such Contracts as of the related
Subsequent Cut-Off Date purchased by the Trust during the Pre-Funding Period.
If an Event of Default as defined in the Indenture shall occur
C-1-3
<PAGE> 69
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 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> 70
IN WITNESS WHEREOF, the Issuer has caused this Class A-1 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
Dated: April 26, 1999
By:
-----------------------------------------
Name:
Title:
C-1-5
<PAGE> 71
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> 72
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1999-1
$70,688,994 First Sierra Equipment Contract Backed Notes
Series 1999-1
Class A-1 Notes, 4.967% 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> 73
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 April 1, 1999 among First
Sierra Financial, Inc. as Servicer and as Originator, First Sierra Equipment
Contract Trust 1999-1, 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> 74
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> 75
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 1999-1
5.450% 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 1999-1, 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: 33641NAQ8
Class A-2
Note $57,258,085 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 Seven Million Two Hundred Fifty Eight Thousand
Eighty Five Dollars ($57,258,085) 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 15th day of each month or,
if such 15th day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), commencing in May 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-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 the Class A-2 Notes are
entitled to receive, as
C-2-1
<PAGE> 76
hereinafter set forth in this Class A-2 Note and as more fully set forth in the
Indenture dated as of April 1, 1999 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 April 1, 1999 (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 "5.450% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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 August, 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 BASIS WHEREBY PRINCIPAL IS APPLIED TO REDUCE THE NOTE PRINCIPAL
BALANCE OF THE
C-2-2
<PAGE> 77
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 Trust Certificate 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 Trust Certificate 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
in whole as of any Payment Date following any Calculation Date on which the
Aggregate Discounted Contract Principal Balance is less than 10% of the sum of
the Aggregate Discounted Contract Principal Balance as of the Closing Date and
the aggregate Discounted Contract Principal Balance of Subsequent Contracts as
of the related Subsequent Cut-Off Date or to cause early retirement of the
Notes in part as of any Payment Date following any Calculation Date on which
the Aggregate Discounted Contract Principal Balance of the Contracts identified
in Exhibit I to the Indenture and Schedule II to any Subsequent Transfer
Agreement is less than 15% of the sum of the aggregate Discounted Contract
Principal Balance for such Contracts as of the Closing Date and the Aggregate
Discounted Contract Principal Balance of such Contracts as of the related
Subsequent Cut-Off Date purchased by the Trust during the Pre-Funding Period.
If an Event of Default as defined in the Indenture shall occur
C-2-3
<PAGE> 78
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 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> 79
IN WITNESS WHEREOF, the Issuer has caused this Class A-2 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
Dated: April 26, 1999
By:
-----------------------------------------
Name:
Title:
C-2-5
<PAGE> 80
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> 81
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1999-1
$57,258,085 First Sierra Equipment Contract Backed Notes
Series 1999-1
Class A-2 Notes, 5.450% 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> 82
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 April 1, 1999 among First
Sierra Financial, Inc. as Servicer and as Originator, First Sierra Equipment
Contract Trust 1999-1, 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> 83
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> 84
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 1999-1
5.540% 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 1999-1, 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: 33641NAR6
Class A-3
Note $48,068,516 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 Forty Eight Million Sixty Eight Thousand Five Hundred
Sixteen Dollars ($48,068,516) 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 15th day of each month or,
if such 15th day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), commencing in May 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 5.540% (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 Notes are
entitled to receive, as
C-3-1
<PAGE> 85
hereinafter set forth in this Class A-3 Note and as more fully set forth in the
Indenture dated as of April 1, 1999 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 April 1, 1999 (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 "5.540% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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 June, 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> 86
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 Trust Certificate 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 Trust Certificate 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
in whole as of any Payment Date following any Calculation Date on which the
Aggregate Discounted Contract Principal Balance is less than 10% of the sum of
the Aggregate Discounted Contract Principal Balance as of the Closing Date and
the aggregate Discounted Contract Principal Balance of Subsequent Contracts as
of the related Subsequent Cut-Off Date or to cause early retirement of the
Notes in part as of any Payment Date following any Calculation Date on which
the aggregate Discounted Contract Principal Balance of the Contracts identified
in Exhibit I to the Indenture and Schedule II to any Subsequent Transfer
Agreement is less than 15% of the sum of the Aggregate Discounted Contract
Principal Balance for such Contracts as of the Closing Date and the Aggregate
Discounted Contract Principal Balance of such Contracts as of the related
Subsequent Cut-Off Date purchased by the Trust during the Pre-Funding Period.
If an Event of Default as defined in the Indenture shall occur
C-3-3
<PAGE> 87
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 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> 88
IN WITNESS WHEREOF, the Issuer has caused this Class A-3 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, A COMMON LAW TRUST ACTING THROUGH
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS OWNER TRUSTEE
Dated: April 26, 1999
By:
-----------------------------------------
Name:
Title:
C-3-5
<PAGE> 89
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> 90
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1999-1
$48,068,516 First Sierra Equipment Contract Backed Notes
Series 1999-1
Class A-3 Notes, 5.540% 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> 91
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 April 1, 1999 among First
Sierra Financial, Inc. as Servicer and as Originator, First Sierra Equipment
Contract Trust 1999-1, 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> 92
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> 93
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 1999-1
5.730% 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 1999-1, 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: 33641NAS4
Class A-4
Note $84,119,903 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 Eighty Four Million One Hundred and Nineteen Thousand Nine
Hundred Three Dollars ($84,119,903) 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 15th day of each month or,
if such 15th day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), commencing in May 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 5.730% (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 Class A-4 Percentage
C-4-1
<PAGE> 94
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 April
1, 1999 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 April 1, 1999 (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 "5.730% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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 September 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> 95
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 Trust Certificate 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 Trust Certificate 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
in whole as of any Payment Date following any Calculation Date on which the
Aggregate Discounted Contract Principal Balance is less than 10% of the sum of
the Aggregate Discounted Contract Principal Balance as of the Closing Date and
the aggregate Discounted Contract Principal Balance of Subsequent Contracts as
of the related Subsequent Cut-Off Date or to cause early retirement of the
Notes in part as of any Payment Date following any Calculation Date on which
the aggregate Discounted Contract Principal Balance of the Contracts identified
in Exhibit I to the Indenture and Schedule II to any Subsequent Transfer
Agreement is less than 15% of the sum of the Aggregate Discounted Contract
Principal Balance for such Contracts as of the Closing Date and the Aggregate
Discounted Contract Principal Balance of such Contracts as of the related
Subsequent Cut-Off Date purchased by the Trust during the Pre-Funding Period.
If an Event of Default as defined in the Indenture shall occur
C-4-3
<PAGE> 96
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 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> 97
IN WITNESS WHEREOF, the Issuer has caused this Class A-4 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1,
A COMMON LAW TRUST ACTING THROUGH FIRST
UNION TRUST COMPANY, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY
AS OWNER TRUSTEE
Dated: April 26, 1999
By:
-------------------------------------------
Name:
Title:
C-4-5
<PAGE> 98
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> 99
STATEMENT OF INSURANCE
OBLIGATIONS: First Sierra Equipment Contract Trust 1999-1
$84,119,903 First Sierra Equipment Contract Backed Notes
Series 1999-1
Class A-4 Notes, 5.730% 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> 100
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 April 1, 1999 among First
Sierra Financial, Inc. as Servicer and as Originator, First Sierra Equipment
Contract Trust 1999-1, 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> 101
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> 102
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 1999-1
6.610% 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 1999-1, 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: 33641NAT2
Class B-1
Note $5,655,120 Initial Class B-1 Percentage
No. B-1 Note Principal Balance Interest: 100%
The Issuer, for value received, hereby promises to pay to United of
Omaha Life Insurance Company the principal sum of Five Million Six Hundred
Fifty Five Thousand One Hundred Twenty Dollars ($5,655,120) in monthly
installments and to pay interest monthly in arrears on the unpaid portion of
said principal
D-1-1
<PAGE> 103
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 15th
day of each month or, if such 15th day is not a Business Day, the Business Day
immediately following (each, a "Payment Date"), commencing in May 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 6.610% (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 April 1, 1999 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 April 1, 1999 (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 "6.610% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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
September, 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> 104
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 Trust Certificate 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 Trust Certificate 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
D-1-3
<PAGE> 105
retirement of the Notes in whole as of any Payment Date following any
Calculation Date on which the Aggregate Discounted Contract Principal Balance
is less than 10% of the sum of the Aggregate Discounted Contract Principal
Balance as of the Closing Date and the aggregate Discounted Contract Principal
Balance of Subsequent Contracts as of the related Subsequent Cut-Off Date or to
cause early retirement of the Notes in part as of any Payment Date following
any Calculation Date on which the aggregate Discounted Contract Principal
Balance of the Contracts identified in Exhibit I to the Indenture and Schedule
II to any Subsequent Transfer Agreement is less than 15% of the sum of the
Aggregate Discounted Contract Principal Balance for such Contracts as of the
Closing Date and the Aggregate Discounted Contract Principal Balance of such
Contracts as of the related Subsequent Cut-Off Date purchased by the Trust
during the Pre-Funding Period. 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> 106
IN WITNESS WHEREOF, the Issuer has caused this Class B-1 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1,
A COMMON LAW TRUST ACTING THROUGH FIRST
UNION TRUST COMPANY, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY
AS OWNER TRUSTEE
Dated: April 26, 1999
By:
------------------------------------------
Name:
Title:
D-1-5
<PAGE> 107
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> 108
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 1999-1
9.990% 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 1999-1, 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: 33641NAU9
Class B-2
Note $2,827,560 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 Eight Hundred Twenty Seven Thousand Five
Hundred Sixty Dollars ($2,827,560) in monthly installments and to pay interest
monthly in arrears on the unpaid portion of said principal sum (and, to the
extent that the
D-2-1
<PAGE> 109
payment of such interest shall be legally enforceable, on any overdue
installment of interest on this Note) on the 15th day of each month or, if such
15th day is not a Business Day, the Business Day immediately following (each, a
"Payment Date"), commencing in May 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 9.990% (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 April 1, 1999 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 April 1, 1999 (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 "9.990% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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 September, 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> 110
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 Trust Certificate 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 Trust Certificate 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
D-2-3
<PAGE> 111
retirement of the Notes in whole as of any Payment Date following any
Calculation Date on which the Aggregate Discounted Contract Principal Balance
is less than 10% of the sum of the Aggregate Discounted Contract Principal
Balance as of the Closing Date and the aggregate Discounted Contract Principal
Balance of Subsequent Contracts as of the related Subsequent Cut-Off Date or to
cause early retirement of the Notes in part as of any Payment Date following
any Calculation Date on which the aggregate Discounted Contract Principal
Balance of the Contracts identified in Exhibit I to the Indenture and Schedule
II to any Subsequent Transfer Agreement is less than 15% of the sum of the
Aggregate Discounted Contract Principal Balance for such Contracts as of the
Closing Date and the Aggregate Discounted Contract Principal Balance of such
Contracts as of the related Subsequent Cut-Off Date purchased by the Trust
during the Pre-Funding Period. 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> 112
IN WITNESS WHEREOF, the Issuer has caused this Class B-2 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1,
A COMMON LAW TRUST ACTING THROUGH FIRST
UNION TRUST COMPANY, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY
AS OWNER TRUSTEE
Dated: April 26, 1999
By:
------------------------------------------
Name:
Title:
D-2-5
<PAGE> 113
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> 114
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 1999-1
6.328% 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 1999-1, 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 $3,534,450 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 Three Million Five Hundred Thirty
Four Thousand Four Hundred Fifty Dollars ($3,534,450) 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
D-3-1
<PAGE> 115
interest on this Note) on the 15th day of each month or, if such 15th day is
not a Business Day, the Business Day immediately following (each, a "Payment
Date"), commencing in May 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 6.328% (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 April 1, 1999 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 April, 1, 1999 (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 "6.328% Equipment Contract Backed Notes of First Sierra Equipment
Contract Trust 1999-1, 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 15th 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 May, 2006 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 payment to
certain collections and recoveries respecting the Contracts, all as more
specifically set forth above in the
D-3-2
<PAGE> 116
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 Trust Certificate 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 Trust Certificate 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
in whole as of any Payment Date following any Calculation Date on which the
Aggregate Discounted Contract Principal Balance is less than 10% of the sum of
the Aggregate Discounted Contract Principal
D-3-3
<PAGE> 117
Balance as of the Closing Date and the aggregate Discounted Contract Principal
Balance of Subsequent Contracts as of the related Subsequent Cut-Off Date or to
cause early retirement of the Notes in part as of any Payment Date following
any Calculation Date on which the aggregate Discounted Contract Principal
Balance of the Contracts identified in Exhibit I to the Indenture and Schedule
II to any Subsequent Transfer Agreement is less than 15% of the sum of the
Aggregate Discounted Contract Principal Balance for such Contracts as of the
Closing Date and the Aggregate Discounted Contract Principal Balance of such
Contracts as of the related Subsequent Cut-Off Date purchased by the Trust
during the Pre-Funding Period. 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> 118
IN WITNESS WHEREOF, the Issuer has caused this Class B-3 Note to be
duly executed.
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1,
A COMMON LAW TRUST ACTING THROUGH FIRST
UNION TRUST COMPANY, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY
AS OWNER TRUSTEE
Dated: April 26, 1999
By:
-------------------------------------------
Name:
Title:
D-3-5
<PAGE> 119
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> 120
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 1999-1, Class
[B-1][B-2][B-3] Contract-Backed Note, Series 1999-1, No. __,
issued under that certain Indenture, dated as of April 1,
1999, among First Sierra Financial, Inc., as servicer and as
originator (the "Servicer" and the "Originator"), First
Sierra Equipment Contract Trust 1999-1, 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
E-1
<PAGE> 121
means of general advertising or in any other manner, or taken any
other action, that would constitute a 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 has caused this document to be
executed by its duly authorized officers as of the date set forth below.
<TABLE>
<S> <C>
- ---------------------------------------------------- ---------------------------------------------
Seller Purchaser
By: By:
------------------------------------------------ ---------------------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
----------------------------------------- --------------------------------
Date: Date:
------------------------------------------------ ---------------------------------------
</TABLE>
E-2
<PAGE> 122
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 1999-1, Class
[B-1][B-2][B-3] Contract-Backed Notes, No. ___, issued under
that certain Indenture, dated as of April 1, 1999, by and
among First Sierra Financial, Inc., as servicer and as
originator (the "Servicer" and the "Originator"), First
Sierra Equipment Contract Trust 1999-1, 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> 123
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 has caused this document to be
executed by its duly authorized officers as of the date set forth below.
<TABLE>
<S> <C>
- ---------------------------------------------------- ---------------------------------------------
Seller Purchaser
By: By:
------------------------------------------------ ---------------------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
----------------------------------------- --------------------------------
Date: Date:
------------------------------------------------ ---------------------------------------
</TABLE>
F-2
<PAGE> 124
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> 125
___ 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> 126
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.
1
<PAGE> 127
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> 128
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 1999-1, Class
[B-1][B-2][B-3] Contract-Backed Note, Series 1999-1, No.
____, issued under that certain Indenture, dated as of April
1, 1999, among First Sierra Financial, Inc., as servicer and
as originator (the "Servicer" and the "Originator"), First
Sierra Equipment Contract Trust 1999-1, 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.
<TABLE>
<S> <C>
- ----------------------------------------------------- --------------------------------------------
Seller Purchaser
By: By:
-------------------------------------------- -----------------------------------
Name: Name:
Title: Title:
Taxpayer Identification Taxpayer Identification
No. No.
---------------------------------------- -------------------------------
</TABLE>
G-1
<PAGE> 129
<TABLE>
<S> <C>
Date: Date:
------------------------------------------------ ---------------------------------------
</TABLE>
G-2
<PAGE> 130
ADDENDUM 1
RULE 144A
QUALIFIED INSTITUTIONAL BUYER CERTIFICATE
Dear Sirs:
In connection with our purchase(s) from or through you (or others) of
privately offered debt or equity securities ("Rule 144A Eligible Securities")
pursuant to Rule l44A under the Securities Act of 1933, we certify as follows:
1. We are a "qualified institutional buyer" as defined in Rule 144A.
2. As of the date set forth below, which date is subsequent to the
close of our most recent fiscal year on ____________________, we beneficially
owned and/or invested on a discretionary basis an amount of securities (as
determined in accordance with Rule 144A) in excess of $100,000,000.
We represent that we will only purchase Rule 144A Eligible Securities
for our own account or for the account of other qualified institutional buyers.
You, any issuer of Rule 144A Eligible Securities, trustee, paying or
fiscal agent, and other participants in any transaction in Rule 144A Eligible
Securities purchased by us may rely upon this certificate, and we will advise
you promptly should we cease to be a qualified institutional buyer.
This certificate has been executed on our behalf by one of our
executive officers.
--------------------------------------------
Name of Company
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date:
---------------------------------------
<PAGE> 131
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 ________ 1, 1999 among First
Sierra Financial, Inc., as servicer (the "Servicer"), First Sierra Equipment
Contract Trust 1999-1, 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 1999-1 (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> 132
EXHIBIT I
LIST OF INITIAL CONTRACTS SUBJECT TO
OPTIONAL REDEMPTION PURSUANT TO
SECTION 9.02(B) OF THE INDENTURE
[ON FILE WITH DEWEY BALLANTINE LLP]
I-1
<PAGE> 133
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 an 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.
"Addition Notice" means, with respect to any transfer of
Subsequent Contracts to the Trust pursuant to Section 2.02 of the Receivables
Transfer Agreement, notice of a Seller's election to transfer Subsequent
Contracts to the Trust, such notice to designate the related Subsequent Transfer
Date and the approximate aggregate Discounted Contract Principal Balance of the
Subsequent Contracts to be transferred on such Subsequent Transfer Date.
"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
<PAGE> 134
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.
"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, (i)
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,
(ii) 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, (iii) any Repurchase Amounts to be
deposited by the Trust Certificate Holder two Business Days prior to the Payment
Date pursuant to Section 9.02 of the Indenture, (iv) on each Payment Date on or
prior to the Payment Date on July 1999, the Capitalized Interest Requirement, if
any, and (v) on the Payment Date immediately following the termination of the
Pre-Funding Period, the amount on deposit in the Pre-Funding Account at such
time.
"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 sum of (i) 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
plus (ii) on the Payment Date immediately following the termination of the
Pre-Funding Period, the amount on deposit in the Pre-Funding Account at such
time.
"Benefit Plan" has the meaning as specified in Section 5.03(f)
of the Indenture.
2
<PAGE> 135
"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,
Wilmington, Delaware, 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.
"Capitalized Interest Account" means the account established
and maintained pursuant to Section 3.02(b) of the Indenture.
"Capitalized Interest Account Deposit" means $563,561,56.
"Capitalized Interest Requirement" means with respect to any
Payment Date occurring during the Pre-Funding Period, an amount equal to
interest for the related Interest Accrual Period on the amount on deposit in the
Pre-Funding Account, calculated at the sum of (a) the weighted average of the
Note Rates on the Notes plus (b) the Premium Rate.
"Capitalized Interest Required Reserve Amount" means on any
Payment Date, an amount equal to the product of (i) the Discount Rate less the
sum of (a) the Servicing Fee Rate and (b) 2.5%, (ii) the amount on deposit in
the Pre-Funding Account as of such Payment Date, and (iii) a fraction, the
numerator of which is the number of days remaining until the Payment Date
immediately following the termination of the Pre-Funding Period and the
denominator of which is 360.
"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.
"Certificate Register" and "Certificate Registrar" shall mean
the register mentioned and the registrar appointed pursuant to Section 3.4 of
the Trust Agreement.
"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.
3
<PAGE> 136
"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 sum of the Aggregate Discounted Contract Principal Balance
plus, during the Pre-Funding Period, the amount on deposit in the Pre-Funding
Account, each 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.
"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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class A Notes).
"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 95.584%.
4
<PAGE> 137
"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 May 15, 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.
"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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class A-1 Notes).
"Class A-1 Note Rate" means 4.967% 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
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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 August 15, 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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class A-2 Notes).
"Class A-2 Note Rate" means 5.450% 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
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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 June 15, 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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class A-3 Notes).
"Class A-3 Note Rate" means 5.540% 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 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.
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"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 September 15, 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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class A-4 Notes).
"Class A-4 Note Rate" means 5.730% 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 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;
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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 September 15, 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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class B-1 Notes).
"Class B-1 Note Rate" means 6.610% per annum.
"Class B-1 Overdue Interest" means, with respect to any
Payment Date, the difference between (a) the sum of (i) the excess, if any, of
any Class B-1 Note Interest due on the
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<PAGE> 142
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 2.078%.
"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 September 15, 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 of the Class B-2 Note Rate and (y) the
aggregate Class B-2 Note Principal Balance outstanding immediately prior to such
Payment Date.
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"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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class B-2 Notes).
"Class B-2 Note Rate" means 9.990% 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 1.039%.
"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 May 15, 2006.
"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 (including, without
limitation, any amounts released from the Pre-Funding Account at the end of the
Pre-Funding Period as a prepayment of principal on the Class B-3 Notes).
"Class B-3 Note Rate" means 6.328% 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.
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"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 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 1.299%.
"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 April 26, 1999.
"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 and any
Subsequent Transfer Agreement.
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"Contract" means each of the agreements evidencing the
indebtedness of the related Obligor conveyed to the Trust, including, as
applicable, schedules, supplements and 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 Initial Contracts delivered on the Closing
Date, with respect to Subsequent Contracts, on the List of Subsequent Contracts
delivered on the related Subsequent Transfer Date or, with respect to Substitute
Contracts, on the List of Substitute Contracts delivered on the related
Substitute 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
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<PAGE> 147
Class B-1 Notes, the Majority Holders of the Class B-2 Notes and the Majority
Holders of 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 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 Majority Holders of 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, with respect to Subsequent Contracts, the
Subsequent Transfer Date, and with respect to Substitute Contracts, the
Substitute Transfer Date.
"Conveyed Assets" means the Initial Conveyed Assets, the
Subsequent Conveyed Assets and the Substitute Conveyed Assets.
"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.
"Cut-Off Date" means, with respect to the Initial Contracts,
the Initial Cut-Off Date, with respect to each Subsequent Contract, the related
Subsequent Cut-Off Date and with respect to each Substitute Contract, the
related Substitute 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.
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"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.
"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
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Servicing Agreement or by the Trust Certificate 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, 6.328%. 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 6.0%, (b) the Servicer 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 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. Section 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.
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"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;
(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
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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.
"Equipment Cost" means the invoice price of the Equipment,
exclusive of amounts, if any, paid for taxes, warranty extensions or service
contracts.
"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 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
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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.
"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.
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"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, and liquidation
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 is registered
in the Register, or in the case of a Trust Certificate, in the Certificate
Register, as the case may be.
"Holding Trust Agreement" means the Amended and Restated First
Sierra Holding Trust I Trust Agreement, dated as of April 1, 1999, between the
Depositor of the Holding Trust and the Owner Trustee of the Holding Trust, which
Amended and Restated First Sierra Holding Trust I Agreement amends and restates
that certain 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.
"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.
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"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 April 21, 1999, among First Sierra, the Note Insurer and the
Underwriters.
"Indenture" means the Indenture, dated as of April 1, 1999,
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 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.
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"Initial Aggregate Discounted Contract Principal Balance"
means the Aggregate Discounted Contract Principal Balance as of the Initial
Cut-Off Date.
"Initial Class A Note Principal Balance" $260,135,498.
"Initial Class A-1 Note Principal Balance" $70,688,994.
"Initial Class A-2 Note Principal Balance" $57,258,085.
"Initial Class A-3 Note Principal Balance" $48,068,516.
"Initial Class A-4 Note Principal Balance" $84,119,903.
"Initial Class B-1 Note Principal Balance" $5,655,120.
"Initial Class B-2 Note Principal Balance" $2,827,560.
"Initial Class B-3 Note Principal Balance" $3,534,450.
"Initial Subordinate Note Principal Balance" $12,017,130
"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 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, (except for any licensed products that may
accompany the Original Equipment) and any new unit or units of Equipment
substituted for any existing unit or units of Original Equipment, including all
income and proceeds upon any sale or other disposition of the Original
Equipment, (b) all of the Sellers' right, title and interest in and to, but not
its obligations under, the Initial 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 Initial Contracts on or after the Initial Cut-Off 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 Initial Contract and any Original Equipment
covered by the Initial Contracts and (g) all proceeds and income of the
foregoing or relating thereto.
"Initial Cut-Off Date" means the close of business on April 1,
1999.
"Initial Receivables" means the Initial Contracts and the
Original Equipment.
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"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 April 1, 1999 among First Sierra, as servicer and as originator, the
Depositor, the Trust, Holding Trust, 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).
"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 April 26, 1999 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, the
Pre-Funding Account and the Capitalized Interest Account pursuant to Section
3.03 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 1999-1, 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.
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"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.
"List of Contracts" means the List of Initial Contracts, each
List of Subsequent 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 Subsequent Contracts" means the List of Subsequent
Contracts delivered pursuant to Section 2.02(c) of the Receivables Transfer
Agreement.
"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.
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"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 29080.
"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.
"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 Pre-Funded Amount" means $54,430,525.
"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:
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(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 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 15th day of each calendar month, or
if such day is not a Business Day, the immediately following Business Day,
commencing on May 17, 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
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<PAGE> 160
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.
"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.
"Pre-Funded Amount" means the Original Pre-Funded Amount
reduced by amounts used to acquire Subsequent Receivables.
"Pre-Funding Earnings" means with respect to any Payment Date,
the actual Investment Earnings then on deposit in the Pre-Funding Account.
"Pre-Funding Account" means that certain account established
and maintained by the Indenture Trustee pursuant to Section 3.02(a) of the
Indenture.
"Pre-Funding Period" means the period from and including the
Closing Date until the earlier of (i) the date on which the balance of funds on
deposit in the Pre-Funding Account is reduced to an amount less than $100,000,
(ii) the date on which an Event of Default or an Event of Servicing Termination
occurs, or (iii) the close of business on July 26, 1999.
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<PAGE> 161
"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.
"Receivables" means the Contracts together with the Equipment.
"Receivables Transfer Agreement" means the Receivables
Transfer Agreement, dated as of April 1, 1999, 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 May 12, 1999 Payment Date, the last calendar day of the Interest
Accrual Period of such month. With respect to the May 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.
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<PAGE> 162
"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 3.05(b)(xii) 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.
"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
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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 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 April 1, 1999, among the Servicer, First Sierra, the Trust and the Indenture
Trustee.
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"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.
"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.
"Subsequent Contracts" means those contracts listed on the
List of Subsequent Contracts attached to the related Subsequent Transfer
Agreement.
"Subsequent Conveyed Assets" means, with respect to any
Subsequent Transfer Agreement (a) all of the Sellers' right, title and interest
in and to the Subsequent Equipment relating to Subsequent Contracts (except for
any licensed products that may accompany the
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<PAGE> 165
Subsequent Equipment) and any new unit or units of Equipment substituted for any
existing unit or units of Subsequent Equipment, including all income and
proceeds upon any sale or other disposition of the Subsequent Equipment, (b) all
of the Sellers' right, title and interest in and to, but not its obligations
under, the Subsequent 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
Subsequent Contracts on or after the related Subsequent Cut-Off 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 Subsequent Contract and any Subsequent
Equipment covered by the Subsequent Contracts and (g) all proceeds and income of
the foregoing or relating thereto.
"Subsequent Cut-Off Date" means with respect those Subsequent
Receivables which are pledged to the Indenture Trustee pursuant to a Subsequent
Transfer Agreement, three Business Days prior to such Subsequent Transfer Date.
"Subsequent Equipment" means the Equipment relating to the
Subsequent Contracts, a security interest in which will be pledged to the
Indenture Trustee on the related Subsequent Transfer Date.
"Subsequent Receivables" means the Subsequent Contracts and
the Subsequent Equipment.
"Subsequent Transfer Agreement" means each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Sellers and the
Trust substantially in the form of Exhibit A to the Receivables Transfer
Agreement, by which Subsequent Receivables are sold to the Trust.
"Subsequent Transfer Date" means any date on which a
Subsequent Contract is pledged to the Indenture Trustee pursuant to Section 2.01
of the Indenture.
"Substitute Contract" has the meaning specified in Section
4.02(a) of the Indenture.
"Substitute Conveyed Assets" means, with respect to the
Receivables Transfer Agreement (a) all of the Sellers' right, title and interest
in and to the Substitute Equipment relating to Substitute Contracts (except for
any licensed products that may accompany the Substitute Equipment) and any new
unit or units of Equipment substituted for any existing unit or units of
Substitute Equipment, including all income and proceeds upon any sale or other
disposition of the Substitute Equipment, (b) all of the Sellers' right, title
and interest in and to, but not its obligations under, 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 Substitute Contracts
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<PAGE> 166
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 Substitute Contract and any Substitute Equipment covered by
the Substitute Contracts and (g) all proceeds and income of the foregoing or
relating thereto.
"Substitute 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 Substitute Transfer Date occurs.
"Substitute Equipment" means the Equipment pledged to the
Indenture Trustee on each Substitute Transfer Date.
"Substitute Transfer Date" means any date on which a
Substitute Contract is pledged pursuant to Section 4.02 of the Indenture.
"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, each Subsequent Transfer Agreement, the Indenture, this Annex A, the
Servicing Agreement, the Trust Agreement, the Holding Trust Agreement, the
Insurance Agreement and the Indemnification Agreement.
"Trust Agreement" shall mean the Trust Agreement, dated as of
April 1, 1999, 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 Holder" means the holder of the Trust
Certificate issued pursuant to the Trust Agreement.
"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
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<PAGE> 167
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 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 (iii) through (vi), inclusive,
of Section 3.05(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 First Union Capital Markets, Corp., a
[North Carolina] corporation, Nesbitt Burns Securities, Inc., a [Delaware]
corporation and PNC Capital Markets, Inc., a Pennsylvania 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.
35
<PAGE> 1
EXHIBIT 4.2
NOTE GUARANTY INSURANCE POLICY
OBLIGATIONS: $260,135,498 POLICY NUMBER: 29080
First Sierra Equipment Contract Trust 1999-1
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 on the Obligations to such receiver or trustee in bankruptcy, in which case
such payment shall be disbursed to such Owner.
<PAGE> 2
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 April 1, 1999 among First
Sierra Financial, Inc., as Servicer and as Originator, First Sierra Equipment
Contract Trust 1999-1, 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.
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<PAGE> 3
"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.
3
<PAGE> 4
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 26th day of April, 1999.
MBIA INSURANCE CORPORATION
/s/ Gary C. Dunton
----------------------------
President
Attest: /s/ Ann D. McKenna
----------------------------
Assistant Secretary
4
<PAGE> 5
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 29080
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 29080
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: 29080 (the "Policy") issued by the
Insurer in respect of the $260,135,498 First Sierra Equipment Contract Trust
1999-1, Equipment Contract Backed Notes, Series 1999-1 Class A (the
"Obligations"), that:
(i) the Trustee is the indenture trustee under the Indenture dated
as of April 1, 1999, among First Sierra Financial, Inc., as Servicer and as
Originator, First Sierra Equipment Contract Trust 1999-1, 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
(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
April 26, 1999
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 1999-1, 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 April 1, 1999,
between the Depositor and First Union Trust Company, National Association, not
in its individual capacity but solely as owner trustee, of (i) $70,688,994 of
4.967% Equipment Contract Backed Notes, Class A-1 (the "Class A-1 Notes"), (ii)
$57,258,085 of 5.450% Equipment Contract Backed Notes, Class A-2 (the "Class A-2
Notes"), (iii) $48,068,516 of 5.540% Equipment Contract Backed Notes, Class A-3
(the "Class A-3 Notes"), (iv) $84,119,903 of 5.730% 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)
$5,655,120 of 6.610% Equipment Contract Backed Notes, Class B-1 (the "Class B-1
Notes"), (vi) $2,827,560 of 9.990% Equipment Contract Backed Notes, Class B-2
(the "Class B-2 Notes"), and (vii) $3,534,450 of 6.328% 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
April 1, 1999 (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. The Class A Notes will be offered for sale pursuant to a
prospectus supplement dated April 21, 1999 (the "Prospectus Supplement"). The
Class B-1 Notes and the Class B-2 Notes will be offered for sale pursuant to a
private placement memorandum dated April 21, 1999 (the "Memorandum").
Capitalized terms used herein, unless otherwise defined, shall have the meanings
set forth in the Indenture.
We have examined the question of whether the Notes issued under the
Indenture will be treated as indebtedness for federal income tax purposes. Our
analysis is based on the provisions of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations promulgated thereunder as in effect on
the date hereof and on existing judicial and administrative interpretations
thereof. These authorities are subject to change and to differing
interpretations,
<PAGE> 2
which could apply retroactively. The opinion of special tax counsel is not
binding on the courts or the Internal Revenue Service (the "IRS").
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
No transaction closely comparable to the transactions contemplated by the
Indenture has been the subject of any Treasury regulation, revenue ruling, or
judicial decision. The IRS and the courts have set forth various factors to be
taken into account in determining whether or not a transaction constitutes the
issuance of indebtedness for federal income tax purposes, which we have
reviewed as they apply to this transaction.
Based on the foregoing, and such legal and factual investigations as
we have deemed appropriate, we are of the opinion that for federal income tax
purposes:
(1) The Notes, other than the Class B-3 Notes, will be characterized
as indebtedness because (i) the characteristics of the transaction strongly
indicate that in economic substance, the transaction is the issuance of
indebtedness; (ii) the form of the transaction is an issuance of indebtedness;
and (iii) the parties have stated unambiguously their intention to treat the
transaction as an issuance of indebtedness for all applicable tax purposes.
(2) Assuming compliance with the terms of the Trust Agreement and
related documents, the Trust will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation.
(3) The statements in the Prospectus Supplement and the Memorandum
under the heading "Material Federal Income Tax Consequences" accurately
describe the material federal income tax consequences to the holders of the
Notes.
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
First Union Capital Markets Corp.
One First Union Center, TW-10
301 South College Street
Charlotte, N.C. 28288-0610
Nesbitt Burns Securities, Inc.
115 LaSalle Street, 20th Floor
Chicago, IL 60603
PNC Capital Markets
Asset-Backed Securities,3rd Floor
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222-2707
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
3
<PAGE> 4
Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies
26 Broadway 15th Floor
New York, New York 10004
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10004
4
<PAGE> 1
EXHIBIT 10.1
RECEIVABLES TRANSFER AGREEMENT
-----------------------------
BETWEEN
FIRST SIERRA FINANCIAL, INC.,
FIRST SIERRA RECEIVABLES III, INC.,
FIRST UNION NATIONAL BANK,
VARIABLE FUNDING CAPITAL CORPORATION,
BANKERS TRUST COMPANY
AND
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1999-1, 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
APRIL 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS..........................................................................2
SECTION 1.01 Definitions...............................................................2
SECTION 1.02 Other Definitional Provisions.............................................3
ARTICLE II TRANSFER OF CONVEYED ASSETS.........................................................3
SECTION 2.01 Direction; Acquisition of Initial Conveyed Assets.........................3
SECTION 2.02 Conveyance of Subsequent Conveyed Assets..................................5
SECTION 2.03 Pre-Funding Account.......................................................7
SECTION 2.04 Capitalized Interest Account..............................................7
SECTION 2.05 Custody of Contract Files.................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................................8
SECTION 3.01 Representations and Warranties............................................8
SECTION 3.02 [Reserved]...............................................................17
SECTION 3.03 Substitution of Contracts and Equipment by First Sierra..................17
ARTICLE IV COVENANTS..........................................................................18
SECTION 4.01 Seller and First Sierra Covenants........................................18
SECTION 4.02 Receivables III Covenants................................................20
SECTION 4.03 Transfer of Conveyed Assets..............................................23
ARTICLE V CONDITIONS PRECEDENT................................................................23
SECTION 5.01 Conditions to Trust Obligations..........................................23
ARTICLE VI TERMINATION........................................................................24
SECTION 6.01 Termination..............................................................24
SECTION 6.02 Effect of Termination....................................................24
ARTICLE VII MISCELLANEOUS PROVISIONS..........................................................25
SECTION 7.01 Amendment................................................................25
SECTION 7.02 GOVERNING LAW............................................................25
SECTION 7.03 Notices..................................................................25
SECTION 7.04 Severability of Provisions...............................................25
SECTION 7.05 Assignment...............................................................26
SECTION 7.06 Further Assurances.......................................................26
SECTION 7.07 No Waiver; Cumulative Remedies...........................................26
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..............27
</TABLE>
i
<PAGE> 3
EXHIBITS, SCHEDULES & ANNEXES
Exhibit A FORM OF SUBSEQUENT TRANSFER AGREEMENT
Schedule 1 LIST OF INITIAL CONTRACTS
Annex A DEFINED TERMS
ii
<PAGE> 4
RECEIVABLES TRANSFER AGREEMENT
THIS RECEIVABLES TRANSFER AGREEMENT (this "Agreement"), dated as of
April 1, 1999, is entered into among 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, 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 and the First Sierra Equipment Lease
Trust 1997-B (each as defined herein) and FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, 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." 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 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
<PAGE> 5
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" and, together with the First
Sierra Equipment Lease Trust 1997-A, the "Warehouse Trusts"), 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, 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 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.
2
<PAGE> 6
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.
ARTICLE II
TRANSFER OF CONVEYED ASSETS
SECTION 2.01 Direction; Acquisition of Initial Conveyed Assets. (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. 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 Initial Conveyed Assets, such
receipt being hereby acknowledged by execution of this Agreement by each
Investor.
3
<PAGE> 7
(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 $_________ by First Sierra Equipment Lease Trust 1997-A, $________ by First
Sierra Equipment Lease Trust 1997-B 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 the Initial Conveyed Assets (with
respect to each Seller individually, to the extent of such Seller's interest in
such Initial Conveyed Assets, 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 Initial Conveyed Assets contributed and
to be transferred to the Trust pursuant to this Agreement, the Subsequent
Conveyed Assets to be contributed and transferred to the Trust pursuant to any
Subsequent Transfer Agreement, and the Substitute Conveyed Assets, 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 Initial Conveyed Assets, the related
Subsequent Conveyed Assets and the related Substitute Conveyed 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 related Conveyance 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 Initial Conveyed Assets, the Subsequent
Conveyed Assets, or the Substitute Conveyed Assets, as the case may be, have
been assigned and transferred to the Trust in accordance with this Agreement
and any Subsequent Transfer 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 Initial Contracts on or prior to the Closing
Date and the List of Subsequent Contracts on or prior to the related Subsequent
Transfer 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 List of
Substitute 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 Substitute Contracts.
(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 Conveyed Assets will be without recourse to the Sellers.
4
<PAGE> 8
(f) It is the intention of the parties hereto that each transfer of
the Conveyed 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 Asset, and
all income and proceeds thereof.
SECTION 2.02 Conveyance of Subsequent Conveyed Assets. (a) Subject to
the conditions set forth in paragraph (c) below in consideration of the Trust's
delivery on the related Subsequent Transfer Date of all or a portion of the
balance of funds in the Pre-Funding Account, each of the Sellers shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey, without
recourse, to the Trust, but subject to the other terms and provisions of this
Agreement, all of the right, title and interest of such Seller in and to the
Subsequent Conveyed Assets identified on the related List of Subsequent
Contracts. The transfer by the Sellers to the Trust of the Subsequent Conveyed
Assets identified on each List of Subsequent Contracts shall be absolute and is
intended by the Sellers and the Trust to constitute and to be treated as a sale
of the Subsequent Conveyed Assets by each Seller to the Trust. Subsequent
Transfer Dates shall occur not more frequently than once a month without the
Note Insurer's prior written consent.
In the event such transactions shall be deemed not to be a sale, all
of the Sellers hereby grant to the Trust as of each Subsequent Transfer Date a
first priority perfected security interest in all of the Sellers' right, title
and interest in, to and under each related Subsequent Conveyed Asset, and all
income and proceeds thereof, to secure all of the Sellers' obligations
hereunder, and this Agreement shall constitute a security agreement under
applicable law, and in such event, the parties hereto acknowledge that the
Indenture Trustee, in addition to holding the Subsequent Conveyed Assets for
the benefit of the Noteholders and the Note Insurer, holds the Subsequent
Conveyed Assets as designee of the Trust.
The related Contract File for each Subsequent Contract shall be
delivered to the Indenture Trustee, on behalf of the Trust, two Business Days
prior to the related Subsequent Transfer Date.
(b) The purchase price paid by the Indenture Trustee, at the direction
of the Depositor on behalf of the Trust, from amounts released from the
Pre-Funding Account shall be equal to 96.25% of the aggregate Discounted
Contract Principal Balance of the Subsequent Contracts so transferred on the
related Subsequent Transfer Date.
(c) The Sellers shall transfer to the Trust the Subsequent Conveyed
Assets and the Depositor on behalf of the Trust shall cause to be released
funds from the Pre-Funding Account, only upon satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) The Sellers shall have delivered to the Indenture Trustee
(with a copy to the Note Insurer) a duly executed Subsequent Transfer
Agreement, substantially in the form of Exhibit A attached hereto,
including a List of Subsequent
5
<PAGE> 9
Contracts attached thereto, and confirming the satisfaction of each
condition precedent specified in this paragraph (c);
(ii) As of each Subsequent Transfer Date, as evidenced by delivery
of the Sellers' Subsequent Transfer Agreement in the form of Exhibit A,
none of the Sellers (a) shall be insolvent or have been made insolvent by
such transfers, nor shall they be aware of any pending insolvency, (b)
shall intend to incur or believe that it shall incur debts that would be
beyond its ability to pay as such debts mature, (c) shall make such
transfer with actual intent to hinder, delay or defraud any Person; and (d)
shall have assets that constitute unreasonably small capital to carry out
its business as then conducted;
(iii) Each such Subsequent Contract must satisfy the
representations and warranties made in the Servicing Agreement and each
Seller shall have performed all obligations to be performed by it hereunder
on or prior to such Subsequent Transfer Date;
(iv) The Sellers shall not have selected such Subsequent Contracts
in a manner that they reasonably believe is adverse to the interests of the
Noteholders or the Note Insurer;
(v) Such sale and transfer shall not result in a material adverse
tax consequence to the Trust or the Noteholders;
(vi) The Pre-Funding Period shall not have terminated;
(vii) The Sellers shall have provided the Indenture Trustee, the
Note Insurer and the Rating Agencies with an Addition Notice not later than
three Business Days prior to such Subsequent Transfer Date and shall have
provided any information reasonably requested by any of the foregoing with
respect to the related Subsequent Contracts;
(viii) The Sellers shall have deposited in the Collection Account
all collections in respect of the related Subsequent Contracts since the
related Subsequent Cut-Off Date;
(ix) The Sellers and the Servicer shall, at its own expense, on or
prior to the related Subsequent Transfer Date, indicate in its computer
files that the Subsequent Contracts identified in the related Subsequent
Transfer Agreement have been sold to the Trust pursuant to such Subsequent
Transfer Agreement and pledged to the Indenture Trustee pursuant to the
Indenture;
(x) Copies of relevant UCC financing statements prepared for
filing by the Servicer pursuant to Section 2.01(c) hereof shall have been
delivered to the Indenture Trustee and the Note Insurer and all Filing
Requirements shall have been complied with;
6
<PAGE> 10
(xi) The Sellers shall have delivered to the Rating Agencies, the
Indenture Trustee and the Note Insurer "bringdown opinions" to the Opinions
of Counsel regarding bankruptcy, corporate enforceability and perfection
delivered on the Closing Date with respect to the transfer of such
Subsequent Contracts in form and substance satisfactory to the Note
Insurer;
(xii) The Note Insurer, in its absolute and sole discretion, shall
have approved the transfer of such Subsequent Contracts to the Trust and
the Note Insurer shall have been reimbursed for any fees and expenses
incurred by the Note Insurer in connection with the granting of such
approval;
(xiii) The Note Insurer shall have received such opinions,
certificates and reports as reasonably requested by the Note Insurer.
SECTION 2.03 Pre-Funding Account. No later than the Closing Date, the
Indenture Trustee shall establish and maintain pursuant to the Indenture, the
Pre-Funding Account. On the Closing Date, the Sellers will deposit in the
Pre-Funding Account the Original Pre-Funded Amount from the net proceeds of the
sale of the Notes.
SECTION 2.04 Capitalized Interest Account. No later than the Closing
Date, the Indenture Trustee shall establish and maintain pursuant to the
Indenture, the Capitalized Interest Account. On the Closing Date, the Sellers
will deposit in the Capitalized Interest Account the Capitalized Interest
Account Deposit from the net proceeds of the sale of the Notes.
SECTION 2.05 Custody of Contract Files. In connection with the sale,
assignment, transfer and conveyance of the Contracts (including the Subsequent
Contracts) to the Trust pursuant to this Agreement and each Subsequent Transfer
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.
7
<PAGE> 11
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 Owner
Trustee, 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.
(i) Organization and Good Standing. First Sierra is a corporation
duly organized, validly existing and in good standing, under the laws of
the State of Delaware, with corporate power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority, and legal right to acquire and own
the Conveyed Assets;
(ii) Due Qualification. First Sierra is qualified as a foreign
corporation in any state where it is required to be so qualified to conduct
its business, to enforce the Source Agreements 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, any Subsequent Transfer 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, any Subsequent
Transfer 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, any Subsequent Transfer 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, any
Subsequent Transfer 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,
8
<PAGE> 12
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 and any
Subsequent Transfer 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 any Subsequent Transfer Agreement, or violate any
law or any order, injunction, writ, rule, or regulation applicable to First
Sierra of any court or of any federal or state regulatory body,
administrative agency, or other Governmental Authority having jurisdiction
over First Sierra or any of its properties which would have a material
adverse effect on the Conveyed Assets;
(vii) 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
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<PAGE> 13
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 each
Conveyance 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;
(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, any Subsequent
Transfer 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, any Subsequent
Transfer 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 and any
Subsequent Transfer Agreement constitute a valid assignment, transfer and
conveyance to the Owner Trustee, on behalf of the Trust, of all right,
title, and interest
10
<PAGE> 14
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 and any Subsequent Transfer Agreement when duly executed
and delivered, will constitute the legal, valid, and binding obligation of
Receivables III enforceable against Receivables III 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);
(vii) Insolvency. Receivables III is not insolvent and will not be
rendered insolvent by the transactions contemplated by this Agreement or
any Subsequent Transfer 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 other 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 and any
Subsequent Transfer 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 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 any Subsequent Transfer
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 or
any Subsequent Transfer Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or any Subsequent
Transfer 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 or any Subsequent Transfer
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
11
<PAGE> 15
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 or any Subsequent Transfer 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, 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).
(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) 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 each
Conveyance 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
12
<PAGE> 16
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, any Subsequent
Transfer 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, any Subsequent Transfer
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;
(v) Valid Assignment; Binding Obligations. This Agreement and any
Subsequent Transfer Agreement constitute 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 and any Subsequent Transfer
Agreement, when duly executed and delivered, will constitute legal, valid,
and binding obligations 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 and any
Subsequent Transfer 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 any Subsequent Transfer 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
13
<PAGE> 17
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 or
any Subsequent Transfer 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 other 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 or any Subsequent
Transfer Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any Subsequent Transfer
Agreement, or (C) seeking any determination or ruling that might (in the
reasonable judgment of First Union) materially and adversely affect the
performance by First Union of its obligations under, or the validity or
enforceability of, this Agreement or any Subsequent Transfer 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.
(d) 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 each Conveyance Date and shall
survive each sale, assignment,
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<PAGE> 18
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, any Subsequent Transfer 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, any
Subsequent Transfer 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;
(v) Valid Assignment; Binding Obligations. This Agreement and any
Subsequent Transfer Agreement constitute 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 and any Subsequent Transfer 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 and any
Subsequent Transfer 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
15
<PAGE> 19
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 any Subsequent Transfer 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 or any
Subsequent Transfer 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 other 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 or any Subsequent
Transfer Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any Subsequent Transfer
Agreement, or (C) seeking any determination or ruling that might (in the
reasonable judgment of VFCC) materially and adversely affect the
performance by VFCC of its obligations under, or the validity or
enforceability of, this Agreement or any Subsequent Transfer 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
16
<PAGE> 20
(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) be 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 Contract, (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 List of Substitute 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 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 hereof shall survive the assignment of the Conveyed Assets to the
Owner Trustee, on behalf of 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.
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<PAGE> 21
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 Owner Trustee, on behalf 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, under any Subsequent Transfer Agreement or
under any other 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(d) shall prevent or be deemed to
prohibit First Sierra from suffering to exist upon any of the Conveyed Assets
any Liens for municipal or other local taxes if such taxes shall not at the
time be due and payable or if First Sierra shall concurrently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto 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.
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<PAGE> 22
(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 and any
Subsequent Transfer 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 Owner Trustee, 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
representations and warranties contained in Section 3.01 or its covenants
contained in Section 4.01, or any information certified or set forth in this
Agreement or any Subsequent Transfer Agreement or in any schedule delivered by
First Sierra hereunder or under any Subsequent Transfer Agreement, 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
Owner Trustee, 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 Owner Trustee, 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 OWNER
TRUSTEE, 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 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
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<PAGE> 23
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:
(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
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<PAGE> 24
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;
(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;
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<PAGE> 25
(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 and/or the assets of the Holding Trust I (including, in each case,
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 assumption to perform all of Receivables III's
obligations under this Agreement and any other Transaction Document, and
upon such execution will be Receivables III's successor under this
Agreement and any other Transaction Document, without the execution or
filing of any document or any further act on the part of any of the parties
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<PAGE> 26
to this Agreement and any other Transaction Document, anything in this
Agreement and any other Transaction Document 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,
conversion, 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.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions to Trust Obligations. The obligations of the
Trust to accept the transfer of the Initial 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 Initial Conveyed Assets provided to
the Trust shall be true and correct as of the Initial Cut-Off Date in all
material respects;
(c) Each Seller shall have delivered to the Trust a List of Initial
Contracts with respect to its respective Initial Contracts as of the Initial
Cut-Off Date and shall have
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<PAGE> 27
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 Initial Contracts and the other Initial
Conveyed Assets to be transferred from time to time to the Owner Trustee, on
behalf of 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 Initial Contracts and the other
Initial Conveyed Assets from each such Seller to the Owner Trustee, on behalf
of the 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 Initial Contracts and
interests in Original 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, that the indemnifications contained in
Section 4.01(g) herein shall survive the termination of this Agreement and the
other Transaction Documents.
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.
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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 and, to the extent such amendment
materially affects the interests of the Owner Trustee, with the prior written
consent of the Owner Trustee.
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 First Union, One First Union Center, 301 South
College Street, Charlotte, North Carolina 28288-0610, (d) 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, (e) in the case of VFCC, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288-0610, (f) 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 (g) in the case of the Note
Insurer or the Indenture Trustee at their respective 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.
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<PAGE> 29
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 Owner Trustee and 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 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.
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<PAGE> 30
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 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]
27
<PAGE> 31
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:
-----------------------------------------
Name:
Title:
FIRST SIERRA RECEIVABLES III, INC.
By:
-----------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Certificateholder of the First Sierra
Equipment Lease Trust 1997-A
By:
-----------------------------------------
Name:
Title:
VARIABLE FUNDING CAPITAL CORPORATION, as
Certificateholder of the First Sierra
Equipment Lease Trust 1997-B
By:
-----------------------------------------
Name:
Title:
[Signature Page To Receivables Transfer Agreement]
<PAGE> 32
BANKERS TRUST COMPANY, not in its individual
capacity, but solely as Trustee of each of
the First Sierra Equipment Lease Trust
1997-A and the First Sierra Equipment Lease
Trust 1997-B
By:
-----------------------------------------
Name:
Title:
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, 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:
-----------------------------------------
Name:
Title:
[Signature Page To Receivables Transfer Agreement]
<PAGE> 33
EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
This Subsequent Transfer Agreement (this "Agreement"), dated as of
_______, 1999, is entered into among 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, 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 and the First Sierra Equipment Lease
Trust 1997-B (each as defined herein) and FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, 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, the First
Sierra Equipment Lease Trust 1997-A and the First Sierra Equipment Lease Trust
1997-B are collectively referred to herein as the "Sellers." First Union and
VFCC are collectively referred to herein as the "Investors."
Pursuant to this Agreement and the Receivables Transfer Agreement,
dated as of April 1, 1999 (the "Receivables Transfer Agreement"), among First
Sierra, Receivables III, First Union, VFCC, the Indenture Trustee and the
Trust, the parties hereto agree to the sale by the Sellers and the purchase by
the Trust of the Subsequent Conveyed Assets listed on the attached List of
Subsequent Contracts, and the pledge of the Subsequent Conveyed Assets by the
Trust to the Indenture Trustee.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in Annex A to the Indenture,
dated as of April 1, 1999 (the "Indenture"), between the Trust, First Sierra,
as Servicer and as Originator, and the Indenture Trustee, which definitions are
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1. Conveyance of Subsequent Conveyed Assets.
(a) Each of the Sellers does hereby sell, transfer, assign, set over
and convey to the Trust, without recourse, (i) all of its respective right,
title and interest in and to the Subsequent Equipment (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 Subsequent
Equipment, (ii) all of its respective right, title and interest in and to, but
not its obligations under, the Subsequent Contracts and all amendments,
additions and supplements including schedules, summary schedules and
subschedules made or hereafter made with respect thereto, (iii) all
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<PAGE> 34
monies due or to become due in payment of the Subsequent Contracts on or after
the related Subsequent Cut-Off 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,
(iv) the Contract Files, (v) all Insurance Proceeds relating to the foregoing
and such Seller's rights and interests in the Insurance Policies relating to
the foregoing, (vi) all Source Agreements and Source Agreement Rights to the
extent they relate to any Subsequent Contract and any Subsequent Equipment
covered by the Subsequent Contracts and (vii) all proceeds and income of the
foregoing or relating thereto.
(b) The parties hereto intend that the transactions set forth herein
constitute a sale by the Sellers to the Trust on the Subsequent Transfer Date
of all the Sellers' right, title and interest in and to the Subsequent Conveyed
Assets. In the event the transactions set forth herein shall be deemed not to
be a sale, all of the Sellers hereby grant to the Trust as of the Subsequent
Transfer Date a first priority perfected security interest in all of the
Sellers' right, title and interest in, to and under the Subsequent Conveyed
Assets and all income and proceeds thereof, to secure all of the Sellers'
obligations hereunder, and this Agreement shall constitute a security agreement
under applicable law, and in such event, the parties hereto acknowledge that
the Indenture Trustee, in addition to holding the Subsequent Conveyed Assets
for the benefit of the Noteholders and the Note Insurer, holds the Subsequent
Conveyed Assets as designee and agent of the Trust.
(c) The expenses and costs relating to the delivery of the Subsequent
Conveyed Assets, this Agreement and such other items required under the
Receivables Transfer Agreement shall be borne by First Sierra.
(d) Annexed hereto is a List of Subsequent Contracts listing the
Contracts that constitute the Subsequent Contracts to be conveyed pursuant to
this Agreement on the date hereof.
Section 2. Representations and Warranties; Conditions Precedent.
(a) Each of the Sellers hereby affirm the representations and
warranties set forth in Section 3.01 of the Receivables Transfer Agreement that
relate to such Seller as of the date hereof.
(b) First Sierra hereby affirms that each Subsequent Contract
satisfies the representations and warranties set forth in Section 2.02 of the
Servicing Agreement relating to the Contracts.
(c) Each of the Sellers is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; each such Seller will not be rendered insolvent by the
execution and delivery of this Agreement or by the performance of its
respective obligations hereunder nor is it aware of any pending insolvency; no
petition of bankruptcy (or similar insolvency proceeding) has been filed by or
against any of the Sellers prior to the date hereof;
A-2
<PAGE> 35
(d) All terms and conditions of the Receivables Transfer Agreement are
hereby ratified and confirmed; provided, however, that in the event of any
conflict the provisions of this Agreement shall control over the conflicting
provisions of the Receivables Transfer Agreement.
(e) Each of the Sellers and First Sierra hereby confirm that each of
the conditions precedent set forth in Sections 2.02 of the Receivables Transfer
Agreement have been satisfied as of the date hereof.
(f) Each of the Sellers and First Sierra represent and warrant that
the aggregate Discounted Contract Principal Balance of the Subsequent Contracts
listed on the List of Subsequent Contracts annexed hereto and conveyed to the
Trust pursuant to this Agreement as of the related Subsequent Cut-Off Date is
$ .
--------------
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<PAGE> 36
Section 3. Grant from Trust to Indenture Trustee.
The Trust hereby grants as of the Subsequent Transfer Date to the
Indenture Trustee, as indenture trustee for the benefit of the Noteholders and
the Note Insurer, to secure all of the Trust's obligations under the Indenture,
all of the Trust's right, title and interest in and to, whether now existing or
hereafter created, (a) the Subsequent Conveyed Assets, (b) all funds on deposit
from time to time in the Collection Account allocable to the Subsequent
Contracts, excluding any investment income from such funds; (c) all its rights
under this Agreement; and (d) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing and all payments
on or under, and all proceeds of every kind and nature whatsoever in respect
of, any or all of the foregoing and all payments on or under, and all proceeds
of every kind and nature whatsoever in the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts acceptances, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing.
Section 4. Governing Law.
This Agreement shall be 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 giving
effect to principles of conflicts of law.
Section 5. Counterparts.
This Agreement 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 instrument.
Section 6. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Sellers, the Trust and the Owner Trustee and their respective successors and
assigns. The Note Insurer and the Indenture Trustee shall be express third
party beneficiaries hereto.
Section 7. Acceptance of Contract Files by Indenture Trustee.
The Indenture Trustee acknowledges receipt of the Contract Files for
each of the Subsequent Contracts listed on the List of Subsequent Contracts
annexed hereto.
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<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first written above.
FIRST SIERRA FINANCIAL, INC., in its
individual capacity
By:
-----------------------------------------
Name:
Title:
FIRST SIERRA RECEIVABLES III, INC.
By:
-----------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK, as
Certificateholder of the First Sierra
Equipment Lease Trust 1997-A
By:
-----------------------------------------
Name:
Title:
VARIABLE FUNDING CAPITAL CORPORATION, as
Certificateholder of the First Sierra
Equipment Lease Trust 1997-B
By:
-----------------------------------------
Name:
Title:
[Signature Page To Subsequent Transfer Agreement]
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<PAGE> 38
BANKERS TRUST COMPANY, not in its individual
capacity, but solely as Trustee of each of
the First Sierra Equipment Lease Trust
1997-A and the First Sierra Equipment Lease
Trust 1997-B
By:
-----------------------------------------
Name:
Title:
FIRST SIERRA EQUIPMENT CONTRACT TRUST
1999-1, 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:
-----------------------------------------
Name:
Title:
[Signature Page To Subsequent Transfer Agreement]
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<PAGE> 39
SCHEDULE I
LIST OF SUBSEQUENT CONTRACTS
[On file with Dewey Ballantine LLP]
<PAGE> 40
SCHEDULE II
LIST OF SUBSEQUENT CONTRACTS
SUBJECT TO OPTIONAL REDEMPTION
PURSUANT TO SECTION 9.02(b) OF THE INDENTURE
[On file with Dewey Ballantine LLP]
<PAGE> 41
Annex A
DEFINED TERMS
[SEE ANNEX A TO THE INDENTURE]
