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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) September 10, 1997
Prudential Securities Secured Financing Corporation
(Exact name of registrant as specified in its charter)
New York 33-84918 13-3526694
(State or Other (Commission Application Pending
Jurisdiction of Incorporation) File Number) (I.R.S. Employer
Identification No.)
One New York Plaza, 10292
New York, New York (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212) 778-1000
No Change
(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
Prudential Securities Secured Financing Corporation, as
Depositor (the "Depositor") has registered issuances of an aggregate of up to
$600,000,000 in principal amount of lease-backed securities, on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Act"), by a Registration Statement on Form S-3 (Registration File
No. 33-84918) (as amended, the "Registration Statement"). Pursuant to the
Registration Statement, the Depositor formed a trust, the First Sierra Equipment
Contract Trust 1997-1 (the "Trust"), pursuant to which the Trust issued Notes
under an Indenture (the "Indenture"), dated as of September 1, 1997, 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 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 were issued pursuant to an Indenture attached hereto
as Exhibit 4.1, dated as of September 1, 1997 (the "Indenture"), between the
Trust, the Servicer, the Originator and the Trustee. The Notes consist of eight
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
($32,998,000) of the Class A-1 Notes and monthly interest at a rate of 5.7325%
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 ($85,479,000) of the Class A-2 Notes and monthly interest at a rate of
6.3500% 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 ($51,527,000) of the Class A-3 Notes and monthly interest at a
rate of 6.3500% 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 ($38,238,000) of the Class A-4 Notes and monthly
interest at a rate of 6.3500% 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 operating and finance leases received after the close of
business on September 1, 1997 (the "Cut-Off Date") (such leases, the
"Contracts"), 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 September 10, 1997 (the "Closing Date"), First Sierra
transferred the Contracts and the related Equipment to First Sierra Receivables
IV, Inc. (Receivables IV") pursuant to the Receivables Transfer Agreement, dated
as of September 1, 1997 (the "Receivables Transfer Agreement") attached hereto
as Exhibit 10.1, between First Sierra, First Sierra Receivables III, Inc.,
Prudential Securities Credit Corporation, First Union National Bank, Variable
Funding Capital Corporation, the Trustee and Receivables IV.
On the Closing Date, Receivables IV transferred the Contracts
and the related Equipment to the Trust pursuant to the Depositor Transfer
Agreement, dated as of September 1, 1997 (the "Depositor Transfer Agreement")
attached hereto as Exhibit 10.2, between First Sierra and the Depositor.
Principal and interest will be paid to the Class A Noteholders
monthly on the 10th day (or
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the next succeeding business day thereafter) of each month, commencing October
10, 1997 (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 September 10, 1997.
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 certificate insurance
policy (the "Certificate Insurance Policy") to be issued by MBIA Corporation and
attached hereto as Exhibit 10.3.
As of the Closing Date, the Contracts possessed the
characteristics described in the Prospectus dated December 2, 1994 and the
Prospectus Supplement dated August 28, 1997, filed pursuant to Rule 424(b) of
the Act.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated August 28, 1997, between
Prudential Securities Secured Financing Corporation and Prudential Securities
Incorporated.
4.1 Indenture, dated as of September 1, 1997, among First
Sierra Equipment Contract Trust 1997-1, First Sierra Financial, Inc., as
servicer and originator and Bankers Trust Company, as trustee.
10.1 Receivables Transfer Agreement, dated as of September 1,
1997, among First Sierra Financial, Inc., First Sierra Receivables III, Inc.,
Prudential Securities Credit Corporation, First Union National Bank, Variable
Funding Capital Corporation, Bankers Trust Company and First Sierra Receivables
IV, Inc.
10.2 Depositor Transfer Agreement, dated as of September 1,
1997, among First Sierra Financial, Inc., First Sierra Receivables IV, Inc.,
First Sierra Equipment Contract Trust 1997-1 and Prudential Securities Secured
Financing Corporation.
10.3 Certificate Insurance Policy of MBIA Insurance
Corporation.
25.1 Trust Certificate (Form T-1) of Bankers Trust Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, on behalf of First
Sierra Equipment Contract Trust 1997-1
By: /s/ Norman Chaleff
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Name: Norman Chaleff
Title: Vice President
Dated: September 10, 1997
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EXHIBIT INDEX
1.1 Underwriting Agreement, dated August 28, 1997 between
Prudential Securities Secured Financing Corporation and Prudential Securities
Incorporated.
4.1 Indenture, dated as of September 1, 1997, among First
Sierra Financial, Inc., as servicer and originator, First Sierra Equipment
Contract Trust 1997-1, as issuer, and Bankers Trust Company, as trustee.
10.1 Receivables Transfer Agreement, dated as of September 1,
1997, among First Sierra Financial, Inc., First Sierra Receivables III, Inc.,
Prudential Securities Credit Corporation, First Union National Bank, Variable
Funding Capital Corporation, Bankers Trust Company and First Sierra Receivables
IV, Inc.
10.2 Depositor Transfer Agreement, dated as of September 1,
1997, among First Sierra Financial, Inc., First Sierra Receivables IV, Inc.,
First Sierra Equipment Contract Trust 1997-1 and Prudential Securities Secured
Financing Corporation.
10.3 Certificate Insurance Policy of MBIA Insurance
Corporation.
25.1 Trust Certificate (Form T-1) of Bankers Trust Company.
Conformed Copy
August 28, 1997
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
as representative of the several Underwriters
Prudential Securities Secured Financing Corporation (the
"Company") hereby confirms its agreement to sell certain equipment contract
backed notes to Prudential Securities Incorporated (the "Representative") and
First Union Capital Markets Corp. (together, 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 operating and finance
leases and commercial loans (the "Contracts") the security interest of First
Sierra Financial, Inc., as originator (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. The Company
intends to purchase the Receivables from First Sierra Receivables IV, Inc. (the
"Transferor"), pursuant to the Depositor Transfer Agreement to be dated as of
September 1, 1997 (the "Depositor Transfer Agreement") among the Company, the
Transferor, First Sierra Financial, Inc. ("First Sierra") and First Sierra
Equipment Contract Trust 1997-1, a Delaware business trust (the "Issuer") or
(the "Trust"), established pursuant to the Trust Agreement dated as of September
1, 1997 (the "Trust Agreement") among the Company, the Transferor and Delaware
Trust Capital Management, Inc., as the owner trustee (the "Owner Trustee"). The
Trust, pursuant to the Indenture to be dated as of September 1, 1997 (the
"Indenture"), between the Trust and Bankers Trust Company, as indenture trustee
(the "Indenture Trustee"), will pledge the Receivables to the Indenture Trustee
and issue the Class A Notes and the Class B 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
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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) 5.7325% Equipment
Contract-Backed Notes, Class A-1 (the "Class A-1 Notes"), 6.3500% Equipment
Contract-Backed Notes, Class A-2 (the "Class A-2 Notes"), 6.3500% Equipment
Contract-Backed Notes, Class A-3 (the "Class A-3 Notes") and 6.3500% 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 subordinate notes with respect 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.
1. 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. 33-84918) 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 December 2, 1994 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
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hereinafter called the "Registration Statement"; such prospectus dated August
28, 1997, 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 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
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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 Depositor Transfer Agreement, the Trust Agreement, the
Insurance Agreement dated as of September 1, 1997 (the "Insurance Agreement")
among the Insurer, the Company, the Issuer, First Sierra and the Owner Trustee,
the Indemnification Agreement dated September 10, 1997 (the "Indemnification
Agreement" and together with this Agreement, the Trust Agreement, the Depositor
Transfer Agreement and the Insurance Agreement, the "Agreements") among the
Company, the Issuer, First Sierra, 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
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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 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.
E. 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.
F. 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.
G. 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, dated as of September 1, 1997, among First Sierra, as
servicer (the "Servicer") and Originator, the Trust and the Indenture Trustee
(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.
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H. 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.
I. 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.
J. 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 June 30, 1997.
K. The Agreements will conform in all material
respects to the descriptions thereof, if any, contained in the
Prospectus.
L. 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.
2. 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.
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3. Purchase, Sale and Delivery of the Class A Notes. The
Company hereby agrees, subject to the terms and conditions hereof, to sell the
Class A Notes to the Underwriters, who, upon the basis of the representations
and warranties herein contained, but subject to the conditions hereinafter
stated, hereby severally and not jointly agree to purchase the principal amount
of the Class A Notes set forth in Annex A hereto. At the time of issuance of the
Class A Notes, the Receivables will be transferred by the Transferor, at the
direction of the Company, to the Trust pursuant to the Sale 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 $207,605,649.94, by a same day federal
funds wire payable to the order of the Company.
Settlement shall take place at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York at 9 a.m., on
September 10, 1997, or at such other time thereafter as the Underwriters and the
Company determine (such time being herein referred to as the "Closing Date").
The Class A Notes will be prepared in definitive form and in such authorized
denominations as each Underwriter may request, registered in the name of Cede &
Co., as nominee of DTC.
The Company agrees to have the Class A Notes available for
inspection and review by the Underwriters in New York City not later than 10
a.m. New York City time on the business day prior to the Closing Date.
4. 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 threatening of any
proceeding for such purpose. The Company will not file any
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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 12 months beginning after the effective date of the
Registration Statement which will satisfy the provisions of Section 11(a) of the
Act and, at the option of the Company, will satisfy the requirements of Rule 158
under the Act.
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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 either Underwriter 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 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.
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5. 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, counsel to the Company with respect to the following items,
dated the Closing Date, to the effect that:
(a) The Company has been duly organized and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, and is qualified to do business
in each state necessary to enable it to perform its
obligations under each of the Agreements. The Company has the
requisite power and authority to execute and deliver, engage
in the transactions contemplated by, and perform and observe
the conditions of each of the Agreements.
(b) 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.
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(c) 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.
(d) 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.
(e) 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.
(f) 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
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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.
(g) To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the
effectiveness of the Registration Statement or any order
directed to any prospectus relating to the Class A Notes
(including the Prospectus), and has not initiated or
threatened any proceeding for that purpose.
In rendering their opinions, the counsel described in this
Paragraph C may rely, as to matters of fact, on certificates of responsible
officers of the Company, the Indenture Trustee and public officials. Such
opinions may also assume the due authorization, execution and delivery of the
instruments and documents referred to therein by the parties thereto other than
the Company.
D. The Underwriters shall have received a letter from Arthur
Anderson, 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") and "A-1+" by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies ("S&P") 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, 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:
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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;
4. the information set forth in the List of Contracts required
to be furnished pursuant to the Sale 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
September 10, 1997, and no such amendment has been authorized. No event
has occurred since September 10, 1997, 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
June 30, 1997; 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
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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 June 30, 1997, 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;
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 are the valid and binding obligations of the
Insurer enforceable in accordance with its terms except that the
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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 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
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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 Underwriter shall have received from the Insurer a
certificate, signed by the President, a senior vice president or a vice
president of the Insurer, dated the Closing Date, to the effect that the signer
of such certificate has carefully examined the Policy, the Insurance Agreement,
the Indemnification Agreement and the related documents and that, to the best of
his or her knowledge based on reasonable investigation:
1. there are no actions, suits or proceedings pending or
threatened against or affecting the Insurer which, if adversely
determined, individually or in the aggregate, would adversely affect
the Insurer's performance under the Policy, the Insurance Agreement or
the Indemnification Agreement;
2. each person who as an officer or representative of the
Insurer, signed or signs the Policy, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection with
the transactions described in this Agreement was, at the respective
times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and
the signatures of such persons appearing on such documents are their
genuine signatures;
3. the information contained in the Prospectus under the
caption "THE NOTE INSURANCE POLICY AND THE NOTE INSURER" is true and
correct in all material respects and does not omit to state a material
fact with respect to the description of the Policy or the ability of
the Insurer to meet its payment obligations under the Policy;
4. the tables regarding the Insurer's capitalization set forth
in the Prospectus under the heading "THE NOTE INSURANCE POLICY AND THE
NOTE INSURER" presents fairly the capitalization of the Insurer as of
June 30, 1997;
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
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<PAGE>
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, 1996 and December 31, 1995 and for the three years ended
December 31, 1996, included in the Annual Report on Form 10-K of MBIA
Inc., for the year ended December 31, 1996, and the consolidated
financial statements of the Insurer and its subsidiaries for the six
months ended June 30, 1997 and for the periods ended June 30, 1997 and
June 30, 1996 included in the Quarterly Report on Form 10-Q of MBIA
Inc., for the period ending March 31, 1997, incorporated by referenced
into the Prospectus, fairly present in all material respects the
financial condition of the Insurer as of such date and for the period
covered by such statements in accordance with generally accepted
accounting principles consistently applied; and
7. to the best knowledge of such officer, since June 30, 1997,
no material adverse change has occurred in the financial position of
the Insurer other than as set forth in the Prospectus.
The officer of the Insurer certifying to items 5 through 7 shall be an officer
in charge of a principal financial function.
The Insurer shall attach to such certificate a true and
correct copy of its certificate or articles of incorporation, as appropriate,
and its bylaws, all of which are in full force and effect on the date of such
certificate.
L. The Underwriters shall have received a favorable opinion of
counsel to the Indenture Trustee, dated the Closing Date and in form and
substance satisfactory to the Underwriters, to the effect that:
1. the Indenture Trustee is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of New York and has the power and authority to enter into and to
take all actions required of it under the Indenture;
2. each of (i) the Indenture and (ii) the Servicing
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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 or the Servicing 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 and the
Servicing 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
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officer or representative of the Indenture Trustee, signed or signs the Notes,
the Indenture, the Servicing Agreement or any other document delivered pursuant
hereto, on the date hereof or on the Closing Date, in connection with the
transactions described in the Indenture was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
N. The Underwriters shall have received a favorable opinion of
counsel to the Owner Trustee, dated the Closing Date and in form and substance
satisfactory to the Underwriters, to the effect that:
1. The Owner Trustee is duly incorporated, validly existing
and in good standing as a banking corporation under the laws of the
State of Delaware.
2. The Owner Trustee has the power and authority to execute,
deliver and perform the Trust Agreement, the Depositor 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
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<PAGE>
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.
P. The Underwriters shall have received from Dewey Ballantine,
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, 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
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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.
6. 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.
7. Indemnification and Contribution.
A. Regardless of whether any Class A Notes are sold, the
Company will indemnify and hold harmless each Underwriter, each of their
respective officers and directors and each person who controls each Underwriter
within the meaning of the Act or the Securities Exchange Act of 1934 (the "1934
Act"), against any and all losses, claims, damages, or liabilities (including
the cost of any investigation, legal and other expenses incurred in connection
with and amounts paid in settlement of any action, suit, proceeding or claim
asserted), joint or several, to which they may become subject, under the Act,
the 1934 Act or other federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration Statement,
or any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact necessary
to make the statements therein, not misleading or (ii) in the Basic Prospectus
or the Prospectus Supplement or any amendment thereto or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and will reimburse
each such indemnified party for any legal or other expenses reasonably incurred
by it in connection with investigating or defending against such loss, claim,
damage, liability or action; provided,
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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
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<PAGE>
than under such Paragraph. The indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such proceeding
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties, and that
all such fees and expenses shall be reimbursed as they are incurred. Such firm
shall be designated in writing by the Underwriters in the case of parties
indemnified pursuant to paragraph A of this Section 8 and by the Company in the
case of parties indemnified pursuant to paragraphs B and E of this Section 8.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
above, the indemnifying party agrees that it shall be liable for any settlement
of any proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
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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.
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
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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 either Underwriter 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
25
<PAGE>
considerations referred to in paragraph G of this Section 8. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph G of this Section 8 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, neither Underwriter shall be required to contribute any amount by
which the Aggregate Resale Price exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission.
I. The Company and each Underwriter each expressly waive, and
agree not to assert, any defense to their respective indemnification and
contribution obligations under this Section 8 which they might otherwise assert
based upon any claim that such obligations are unenforceable under federal or
state securities laws or by reasons of public policy.
J. The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
the Underwriter within the meaning of the Act or the 1934 Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to any
liability that the Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each director of the Company and to each person,
if any, who controls the Company within the meaning of the Act or the 1934 Act;
provided, however, that in no event shall the Company or either Underwriter be
liable for double indemnification.
8. 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.
9. 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 Prudential Securities Incorporated, One New York Plaza,
New York, New York
26
<PAGE>
10292, Attention: Norman Chaleff; and, if sent to the Company, shall be mailed,
delivered or telegraphed and confirmed in writing to Prudential Securities
Secured Financing Corporation, One New York Plaza, 12th Floor, New York, New
York 10292, Attention: General Counsel.
10. 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.
11. Termination. The Underwriters shall have the right to
terminate this Agreement by giving notice as hereinafter specified at any time
at or prior to the Closing Date if (a) trading generally shall have been
suspended or materially limited on or by, as the case may be, the New York Stock
Exchange or the American Stock Exchange, (b) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (c) a general moratorium on commercial banking activities shall have
been declared by either federal or New York State authorities, (d) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis which, in the Underwriters'
reasonable judgment, is material and adverse, and, in the case of any of the
events specified in clauses (a) through (d), such event singly or together with
any other such event makes it in the Underwriters' reasonable judgment
impractical to market the Class A Notes. Any such termination shall be without
liability of any other party except that the provisions of Paragraph G of
Section 5 (except with respect to expenses of the Underwriters) and Sections 7
and 8 hereof shall at all times be effective.
12. 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
27
<PAGE>
successors and assigns, and no other persons will have any right or obligations
hereunder.
13. 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.
14. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall together
constitute but one and the same instrument.
15. 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.
16. Default of Underwriters. If either Underwriter defaults in
its obligations to purchase the Class A Notes offered to it hereunder (such
Underwriter, the "Defaulting Underwriter"), then the remaining Underwriter (the
"Performing Underwriter") 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 the Performing Underwriter elects not to exercise
such option, then this Agreement will terminate without liability on the part of
the Performing Underwriter. Nothing contained herein shall relieve the
Defaulting Underwriter from any and all liabilities to the Company and the
Performing Underwriter resulting from the default of the Defaulting Underwriter.
28
<PAGE>
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,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:__________________________________
Name:
Title:
Agreed to and Accepted by:
(as of the date hereof)
PRUDENTIAL SECURITIES INCORPORATED
as Representative of the several Underwriters
By:__________________________________
Name:
Title:
[Underwriting Agreement Signature Page]
<PAGE>
Annex A
Underwriting
Class A-1 Notes
- --------------------------------------------------------------------------------
Principal
Underwriter Percentage Amount
----------- ---------- ------
Prudential Securities 50% $16,499,000
Incorporated
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $16,499,000
Corp.
- --------------------------------------------------------------------------------
TOTAL 100% $32,998,000
- --------------------------------------------------------------------------------
Class A-2 Notes
- --------------------------------------------------------------------------------
Principal
Underwriter Percentage Amount
----------- ---------- ------
Prudential Securities 50% $42,739,500
Incorporated
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $42,739,500
Corp.
- --------------------------------------------------------------------------------
TOTAL 100% $85,479,000
- --------------------------------------------------------------------------------
<PAGE>
Class A-3 Notes
- --------------------------------------------------------------------------------
Principal
Underwriter Percentage Amount
----------- ---------- ------
Prudential Securities 50% $25,763,500
Incorporated
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $25,763,500
Corp.
- --------------------------------------------------------------------------------
TOTAL 100% $51,527,000
- --------------------------------------------------------------------------------
Class A-4 Notes
- --------------------------------------------------------------------------------
Principal
Underwriter Percentage Amount
----------- ---------- ------
Prudential Securities 50% $19,119,000
Incorporated
- --------------------------------------------------------------------------------
First Union Capital Markets 50% $19,119,000
Corp.
- --------------------------------------------------------------------------------
TOTAL 100% $38,238,000
- --------------------------------------------------------------------------------
Conformed Copy
================================================================================
INDENTURE
by and between
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1997-1
as Issuer,
FIRST SIERRA FINANCIAL, INC
as Servicer and Originator
and
BANKERS TRUST COMPANY
as the Indenture Trustee
--------------------------------------------
Dated as of September 1, 1997
--------------------------------------------
First Sierra Equipment Contract Trust 1997-1
Equipment Contract-Backed Notes
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS---------------------------------------------------------1
Section 1.01 Definitions--------------------------------------------------1
Section 1.02 Incorporation by Reference of the Trust Indenture Act--------1
Section 1.03 General Interpretive Principles------------------------------1
Section 1.04 Conflict with TIA--------------------------------------------2
ARTICLE II. PLEDGE OF INITIAL PLEDGED PROPERTY; ORIGINAL
ISSUANCE OF NOTES AND RESIDUAL CLASS-------------------------------------------2
Section 2.01 Pledge of Pledged Property-----------------------------------2
Section 2.02 Indenture Trustee to Act as Custodian------------------------3
Section 2.03 Conditions to Closing----------------------------------------3
Section 2.04 Acceptance by Indenture Trustee------------------------------5
Section 2.05 Liabilities of the Trust and Parties to this
Indenture; Limitations Thereon----------------------------------------------5
Section 2.06 Intended Tax Characterization--------------------------------6
Section 2.07 Treasury Securities------------------------------------------7
ARTICLE III. ACCOUNTS; ALLOCATION AND APPLICATION OF THE TRUST FUND------------7
Section 3.01 Collection Account-------------------------------------------7
Section 3.02 Investment of Monies Held in the Accounts; Subaccounts-------8
Section 3.03 The Note Insurance Policy and the Letter of Credit.----------8
Section 3.04 Disbursements From Collection Account-----------------------13
Section 3.05 Statements to Noteholders-----------------------------------19
Section 3.06 Compliance With Withholding Requirements--------------------21
ARTICLE IV. REMOVAL OF NON CONFORMING PLEDGED PROPERTY;
SUBSTITUTION OF CONTRACTS-----------------------------------------------------22
Section 4.01 Removal of Non Conforming Pledged Property------------------22
Section 4.02 Substitution of Contracts-----------------------------------22
Section 4.03 Release of Trust Property-----------------------------------23
ARTICLE V. THE NOTES----------------------------------------------------------24
Section 5.01 The Notes---------------------------------------------------24
Section 5.02 Initial Issuance of Notes-----------------------------------27
Section 5.03 Registration of Transfer and Exchange of Notes--------------27
Section 5.04 Mutilated, Destroyed, Lost or Stolen Notes------------------28
Section 5.05 Persons Deemed Owners---------------------------------------28
i
<PAGE>
Section 5.06 Access to List of Noteholders' Names and Addresses----------28
Section 5.07 Acts of Noteholders-----------------------------------------29
Section 5.08 No Proceedings----------------------------------------------29
ARTICLE VI. THE TRUST---------------------------------------------------------29
Section 6.01 Liability of the Trust--------------------------------------29
Section 6.02 Limitation on Liability of the Trust------------------------29
Section 6.03 Indemnity for Liability Claims------------------------------30
Section 6.04 Liabilities-------------------------------------------------30
Section 6.05 [Reserved].-------------------------------------------------30
Section 6.06 Annual Statement as to Compliance---------------------------30
Section 6.07 Payment of Principal and Interest---------------------------31
Section 6.08 Maintenance of Office or Agency-----------------------------31
Section 6.09 Money for Payments to be Held in Trust----------------------31
Section 6.10 Existence---------------------------------------------------33
Section 6.11 Protection of Trust Property--------------------------------33
Section 6.12 Performance of Obligations; Servicing of Receivables--------34
Section 6.13 Negative Covenants------------------------------------------34
Section 6.14 Trust May Consolidate, Etc. Only on Certain Terms-----------35
Section 6.15 Successor or Transferee-------------------------------------37
Section 6.16 No Other Business-------------------------------------------37
Section 6.17 No Borrowing------------------------------------------------37
Section 6.18 Guarantees, Loans, Advances and Other Liabilities-----------38
Section 6.19 Capital Expenditures----------------------------------------38
Section 6.20 Compliance with Laws----------------------------------------38
Section 6.21 Further Instruments and Acts--------------------------------38
ARTICLE VII. THE INDENTURE TRUSTEE--------------------------------------------38
Section 7.01 Duties of Indenture Trustee---------------------------------38
Section 7.02 Eligible Investments----------------------------------------40
Section 7.03 Indenture Trustee's Assignment of Contracts-----------------41
Section 7.04 Certain Matters Affecting the Indenture Trustee-------------41
Section 7.05 Indenture Trustee Not Liable for Notes or Contracts---------42
Section 7.06 Indenture Trustee May Own Notes-----------------------------43
Section 7.07 Indenture Trustee's Fees and Expenses-----------------------43
Section 7.08 Eligibility Requirements for Indenture Trustee--------------44
ii
<PAGE>
Section 7.09 Preferential Collection of Claims Against Issuer------------44
Section 7.10 Resignation or Removal of Indenture Trustee-----------------45
Section 7.11 Successor Indenture Trustee---------------------------------46
Section 7.12 Merger or Consolidation of Indenture Trustee----------------46
Section 7.13 Appointment of Co Indenture Trustee or Separate
Indenture Trustee----------------------------------------------------------47
Section 7.14 Indenture Trustee May Enforce Claims Without
Possession of Note---------------------------------------------------------48
Section 7.15 Suits for Enforcement---------------------------------------48
Section 7.16 Undertaking for Costs---------------------------------------49
Section 7.17 Representations and Warranties of Indenture Trustee---------49
Section 7.18 Tax Returns-------------------------------------------------50
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES-------------------------------------50
Section 8.01 Events of Default.------------------------------------------50
Section 8.02 Acceleration of Maturity, Rescission and Annulment.---------51
Section 8.03 Remedies----------------------------------------------------51
Section 8.04 Notice of Event of Default.---------------------------------52
Section 8.05 Exercise of Power by Indenture Trustee----------------------52
Section 8.06 Indenture Trustee May File Proofs of Claim.-----------------52
Section 8.07 Allocation of Money Collected-------------------------------53
Section 8.08 Waiver of Events of Default---------------------------------54
Section 8.09 Limitation On Suits-----------------------------------------55
Section 8.10 Unconditional Right of Noteholders to Receive
Principal and Interest-----------------------------------------------------55
Section 8.11 Restoration of Rights and Remedies.-------------------------56
Section 8.12 Rights and Remedies Cumulative------------------------------56
Section 8.13 Delay or Omission Not Waiver--------------------------------56
Section 8.14 Control by Controlling Parties------------------------------56
Section 8.15 Sale of Pledged Property------------------------------------56
Section 8.16 Action on Notes---------------------------------------------57
ARTICLE IX. TERMINATION-------------------------------------------------------57
Section 9.01 Termination of Obligations and Responsibilities-------------57
Section 9.02 Optional Redemption of Notes; Final Disposition of Funds----58
ARTICLE X. Noteholders' Lists and Reports-------------------------------------59
Section 10.01 Trust To Furnish To Indenture Trustee Names and
Addresses of Noteholders---------------------------------------------------59
Section 10.02 Preservation of Information; Communications to Noteholders--59
Section 10.03 Reports by Trust--------------------------------------------60
iii
<PAGE>
Section 10.04 Reports by Indenture Trustee--------------------------------60
Section 10.05 Compliance Certificates and Opinions, etc.------------------60
ARTICLE XI. MISCELLANEOUS PROVISIONS------------------------------------------61
Section 11.01 Amendment---------------------------------------------------61
Section 11.02 Conformity With Trust Indenture Act-------------------------62
Section 11.03 Limitation on Rights of Noteholders-------------------------62
Section 11.04 Counterparts------------------------------------------------63
Section 11.05 GOVERNING LAW-----------------------------------------------63
Section 11.06 Notices-----------------------------------------------------63
Section 11.07 Severability of Provisions----------------------------------63
Section 11.08 Conflict with Trust Indenture Act---------------------------64
Section 11.09 Third Party Beneficiary-------------------------------------64
Section 11.10 Assignment--------------------------------------------------64
Section 11.11 Binding Effect----------------------------------------------64
Section 11.12 Survival of Agreement---------------------------------------64
Section 11.13 Captions----------------------------------------------------64
Section 11.14 Exhibits----------------------------------------------------64
Section 11.15 Calculations------------------------------------------------64
Section 11.16 No Proceedings----------------------------------------------65
iv
<PAGE>
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1997-1
Reconciliation and Tie between the Indenture
dated as of September 1, 1997 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
ss. 310(a)(1) ss. 7.08
(a)(2) 7.08
(a)(3) 7.13
(a)(4) Not Applicable
(b) 7.08; 7.10
(c) Not Applicable
311(a) 7.09
(b) 7.09
312(a) 10.02
(b) 10.02
(c) 10.02
313(a) 10.04
(b)(1) 10.02; 10.04; 4.01; 4.02; 4.03
(b)(2) 10.04
(c) 10.04
(d) 10.04
314(a) 10.03; 3.05; 6.06
(b) Not Applicable
(c)(1) 10.05
(c)(2) 10.05
(c)(3) Not Applicable
(d) Not Applicable
(e) 10.05
(f) Not Applicable
315(a) 7.01; 7.05
(b) 8.04
(c) 8.05
(d) 7.01
(e) 7.01
316(a) (last sentence) 2.07
(a)(1)(A) 7.17
(a)(1)(B) 8.06
317(a)(1) 8.03
(a)(2) 8.04
(b) 6.09
318(a) 11.09
(c) 11.09
v
<PAGE>
This INDENTURE, dated as of September 1, 1997, is made by and
between First Sierra Equipment Contract Trust 1997-1, a Delaware business trust
(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>
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date hereof;
(c) references herein to "Articles", "Sections", "Subsections",
"Paragraphs" and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions of
this Indenture;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without limitation
by reason of enumeration.
Section 1.04 Conflict with TIA. If any provision hereof limits,
qualifies or conflicts with a provision of the TIA that is required under the
TIA to be part of and govern this Indenture, the latter provision shall control
and all provisions required by the TIA are hereby incorporated by reference. If
any provision of this Indenture modifies or excludes any provision of the TIA
that may be so modified or excluded, the latter provisions shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
ARTICLE II.
PLEDGE OF INITIAL PLEDGED PROPERTY;
ORIGINAL ISSUANCE OF NOTES AND RESIDUAL CLASS
Section 2.01 Pledge of Pledged Property. The Trust, simultaneously
with the execution and delivery of this Indenture, does hereby pledge, deposit,
transfer, assign, and otherwise grant to the Indenture Trustee, without recourse
(except as otherwise expressly set forth herein), to be held in trust for the
benefit of the Noteholders, the Note Insurer and the Letter of Credit Bank, as
their interests may appear as provided in this Indenture, all the right, title,
and interest of the Trust in and to (a)(i) any Equipment that is owned by 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 Trust in any of the Equipment
that is not owned by the Trust, (b) the Contracts, including, without
limitation, all Scheduled Payments, Residual Receipts, 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
2
<PAGE>
Contracts, (f) all of the Trust's right, title and interest in and to, and
rights under the Depositor Transfer Agreement, the Receivables Transfer
Agreement and the Servicing Agreement, each as executed and delivered in
accordance therewith, (g) the Note Insurance Policy, (h) all amounts on deposit
in the Collection Account and the Lockbox Account held by the Indenture Trustee,
(i) 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, 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
Florida, 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, the Note Insurer and the Letter of Credit Bank, as
their interests may appear, of a valid first priority perfected security
interest in all of the Trust's right, title and interest 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, the Note Insurer and
the Letter of Credit Bank, as their interests may appear.
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, Class B-1 Notes, the
Class-B-2 Notes and the Class B-3 Notes in authorized denominations equal in the
aggregate to 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, 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 Transferor 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 Transferor;
(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 Transferor in the State of Delaware;
3
<PAGE>
(d) 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;
(e) 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;
(f) A copy of the Trust Certificate;
(g) Delivery of the executed Financing Statements with respect to
the Contracts, in accordance with the Filing Requirements, prepared for filing;
(h) A certificate listing the Servicing Officers as of the Closing
Date;
(i) Executed copies of the Transaction Documents in form and
substance acceptable to the Note Insurer and the Letter of Credit Bank;
(j) 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;
(k) 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;
(l) An executed Note Insurance Policy;
(m) A custody receipt, substantially in the form of Exhibit A
hereto, pursuant to which the Indenture Trustee certifies that it has received a
contract file with respect to each Contract on the List of Contracts;
(n) All Necessary Consents;
(o) The Letter of Credit;
(p) 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;
(q) A letter form 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;
4
<PAGE>
(r) A letter from DCR that it has assigned a rating of (i) "BBB" to
the Class B-1 Notes, (ii) "AA" to the Class B-2 Notes and (iii) "B" to the Class
B-3 Notes; and
(s) Opinions of counsel to First Sierra, the Transferor and the
Depositor, in form and substance acceptable to the Indenture Trustee, the Note
Insurer and the Letter of Credit Bank, covering such matters as the Indenture
Trustee, the Note Insurer or the Letter of Credit Bank may reasonably request
including, without limitation, opinions concerning nonconsolidation, true sale,
security interest, federal tax and general corporate matters;
and (iii) the Note Insurer and the Letter of Credit Bank shall have received in
writing on or before the Closing Date the following:
(a) Acknowledgement by the Back-up Servicer that it and the
Servicer have agreed to a format pursuant to which data will be received;
(b) An opinion of counsel to the Back-up Servicer dated as of
the Closing Date, as to the due authorization, execution and delivery of
the Servicing Agreement by the Back-up Servicer; and
(c) An officer's certificate from a responsible officer of the
Back-up Servicer, dated as of the Closing Date, to the effect that (i) the
representations and warranties contained in Section 2.03 of the Servicing
Agreement are true and correct in all material respects as of the Closing
Date and (ii) no Event of Back-up Servicing Termination exists.
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, the Note Insurer and the Letter of Credit Bank, as
their interests may appear, and declares that the Indenture Trustee holds and
will hold such right, title and interest for the benefit of all present and
future Noteholders, the Note Insurer and the Letter of Credit Bank, as their
interests may appear, for the use and purpose and subject to the terms and
provisions of this Indenture. The Trust hereby (a) appoints the Indenture
Trustee as the Trust's attorney-in-fact with all power independently to enforce
all of the Trust's rights against the Originator hereunder, under the
Receivables Transfer Agreement and under the Servicing Agreement and (b) directs
the Indenture Trustee to enforce such rights. The Indenture Trustee hereby
accepts such appointment and agrees to enforce such rights.
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
Transferor, the Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee or any other Person, other than the Note Insurer pursuant to the Note
Insurance Policy and the Letter of Credit Bank pursuant to the Letter of Credit.
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(b) Neither First Sierra, the Transferor, the Depositor, the
Servicer, the Back-up 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 Sections
4.03 and 4.04 of the Depositor Transfer Agreement. Without limiting the
generality of the foregoing, if any Obligor fails to pay any Scheduled Payment,
Final Scheduled Payment, exercised Purchase Option 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, exercised Purchase Option 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, 5.07and 5.08 of the Servicing Agreement and Sections
4.03 and 4.04 of the Depositor 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, the Letter of Credit Bank 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 Class B Notes shall constitute indebtedness and that for all
applicable tax purposes, accordingly, the Trust shall 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 the Noteholders to treat the Class A Notes and the Class B
Notes as indebtedness for all applicable tax purposes in all tax filings,
reports and returns and otherwise, and further covenants that neither it nor any
of its Affiliates will take or participate in the taking of, or permit to be
taken, any action that is inconsistent with the treatment of the Class A Notes
or of the Class B Notes as
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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 Note Insurer, the Noteholders and the Letter of Credit Bank, as their
interests appear herein, as an Eligible Bank Account, in the name of "First
Sierra Equipment Contract-Backed Notes 1997-1 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, the Note Insurer and the Letter of Credit Bank, as
their interests appear herein.
(b) At the times indicated in this Section 3.01(b) or in Section
3.01(c) below, the following amounts (net of Excluded Amounts) shall be
deposited in the Collection Account in immediately available funds:
(i) The Servicer shall deposit or cause to be deposited the
aggregate amounts of Actual Payments;
(ii) The Servicer shall deposit the aggregate Servicer Advances
payable pursuant to Section 4.03 of the Servicing Agreement;
(iii) The Servicer shall deposit any Repurchase Amounts payable by
it under the Servicing Agreement, or by the Originator pursuant to Section
4.01 hereof;
(iv) Investment Earnings, as described in Section 3.02(a) hereof;
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(v) The amount, if any, received by the Indenture Trustee as a
result of a drawing on the Note Insurance Policy pursuant to Section
3.03(a) hereof; and
(vi) the amount, if any, received by the Indenture Trustee as a
result of a drawing on the Letter of Credit pursuant to Section 3.03(b)
hereof.
(c) The Servicer shall so transfer the aggregate amount of Actual
Payments no later than two Business Days after the Servicer's receipt of such
amount. The Servicer shall so deposit the aggregate amount of Servicer Advances
no later than the related Determination Date. The Servicer shall instruct the
Indenture Trustee in writing to deposit the portion of any Advance Payment due
and owing for a Collection Period no later than the related Determination Date.
Except as otherwise expressly set forth, any other deposits and transfers of
funds to be made pursuant to this Section 3.01 shall be made no later than the
third Business Day immediately preceding the related Payment Date.
Notwithstanding the foregoing, the Servicer may deduct from amounts
otherwise payable to the Collection Account amounts previously deposited by the
Servicer into the Collection Account but (i) subsequently uncollectable as a
result of dishonor of the instrument of payment for or on behalf of the Obligor
or (ii) later determined to have resulted from mistaken deposits.
Section 3.02 Investment of Monies Held in the Accounts; Subaccounts.
(a) The Servicer shall direct the Indenture Trustee in writing to invest the
amounts in any Account in Eligible Investments that mature not later than the
Business Day immediately preceding the next Payment Date following the
investment of such amounts. Eligible Investments shall not be sold or disposed
of prior to their maturities. Investment Earnings on amounts held in any Account
shall be deposited in the Collection Account as earned. The amount of any
Insured Payment shall be held uninvested.
(b) The Indenture Trustee and the Servicer may, from time to time
and in connection with the administration of any Account, establish and maintain
with the Indenture Trustee one or more sub-accounts of any of the Accounts, as
the Indenture Trustee and/or the Servicer may consider useful.
Section 3.03 The Note Insurance Policy and the Letter of Credit.
(a) The Note Insurance Policy.
(i) 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.
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(ii) 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 a Insured Payment in an amount
equal to such Available Funds Shortfall.
(iii) Upon receipt of Insured Payments from the Note Insurer, the
Indenture Trustee shall immediately deposit such Insured Payments in the
Collection Account and shall distribute such Insured Payments, or the
proceeds thereof, in accordance with Section 3.04 hereof to the Class A
Noteholders exclusively. The parties hereto recognize that the making of
an Insured Payment does not relieve any of the parties hereto of any
obligation hereunder or under any of the Transaction Documents.
(iv) The Indenture Trustee shall (x) receive Insured Payments as
attorney-in-fact of each of the Class A Noteholders and (y) disburse such
Insured Payment to the Class A Noteholders as set forth in Section 3.04
hereof. The Note Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to Sections 3.04(b)(xiii) hereof with
respect to each Insured Payment made by the Note Insurer. The Indenture
Trustee hereby agrees on behalf of each Class A Noteholder and the Trust
for the benefit of the Note Insurer that it recognizes that to the extent
the Note Insurer makes Insured Payments, either directly or indirectly (as
by paying through the Indenture Trustee), to the Class A Noteholders, the
Note Insurer will be entitled to receive the related Reimbursement Amount
pursuant to Sections 3.04(b)(xiii) hereof.
(v) 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.
(vi) 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
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Insurer or its designee of such fact by telephone, promptly confirmed in
writing by overnight mail or facsimile transmission. Such notice shall be
in addition to the procedures set forth in the Note Insurance Policy for
making a claim under the Note Insurance Policy.
(vii) 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.
(viii) 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.
(b) The Letter of Credit.
(i) 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 excess of (A) the
Available Distribution Amount over (B) the sum of (I) the amounts
described in clauses (viii), (ix) and (x) of Section 3.04(b) on the
immediately following Payment Date and (II) any amount withheld from
disbursement to the Class B-2 Noteholders on such Payment Date pursuant to
Section 3.04(b)(xi) for the purpose of preventing an Available Funds
Shortfall (such excess, the "Class B-2 Interest 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.
(ii) If:
(x) on any Payment Date, the Class B-2 Note Interest for
the related Collection Period exceeds the Class B-2 Interest
Available Distribution Amount (such excess, a "Class B-2 Interest
Deficiency"), and
(y) on the Class B-2 Maturity Date, after taking into
account all principal reductions on the Class B-2 Notes on the Class
B-2 Maturity Date funded from Available Funds, the Class B-2 Note
Principal Balance would exceed zero (such excess, a "Class B-2
Ultimate Principal Deficiency"),
then the Indenture Trustee shall complete, in the case of a Class B-2
Interest Deficiency, a Drawing Certificate in the form of Exhibit A to the
Letter of Credit, or, in the case of a Class B-2 Ultimate Principal
Deficiency, a Drawing Certificate in the form of Exhibit B to the Letter
of Credit, and in either case submit such Drawing Certificate to the
Letter of Credit Bank no later than 12:00 noon New
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York City time on the second Business Day preceding such Payment Date as a
claim for a Letter of Credit Drawing in an amount equal to the lesser of
(A) such Class B-2 Interest Deficiency, and/or such Class B-2 Ultimate
Principal Deficiency, as the case may be, and (B) the Letter of Credit
Amount Available as of such date (such lesser amount, the "Letter of
Credit Drawing").
(iii) Upon receipt of Letter of Credit Drawings from the Letter of
Credit Bank, the Indenture Trustee shall immediately deposit such Letter
of Credit Drawings in the Collection Account and shall distribute such
Letter of Credit Drawings or the proceeds thereof, in accordance with
Section 3.04 hereof to the Class B-2 Noteholders exclusively. The parties
hereto recognize that the making of Letter of Credit Drawings does not
relieve any of the parties hereto of any obligation hereunder or under any
of the Transaction Documents.
(iv) The Indenture Trustee shall (x) receive Letter of Credit
Drawings as attorney-in-fact of each of the Class B-2 Noteholders and (y)
disburse such Letter of Credit Drawing to the Class B-2 Noteholders as set
forth in Section 3.04 hereof. The Letter of Credit Bank shall be entitled
to receive the related Letter of Credit Reimbursement Amount and the
Letter of Credit Additional Reimbursement Amount pursuant to Section
3.04(b) hereof with respect to the Letter of Credit Drawings made by the
Letter of Credit Bank. The Indenture Trustee hereby agrees on behalf of
each Class B-2 Noteholder and the Trust for the benefit of the Letter of
Credit Bank that it recognizes that, to the extent the Letter of Credit
Bank makes Letter of Credit Drawings, either directly or indirectly (as by
paying through the Indenture Trustee), to the Class B-2 Noteholders, the
Letter of Credit Bank will be entitled to receive the related Letter of
Credit Reimbursement Amount and the Letter of Credit Additional
Reimbursement Amount pursuant to Section 3.04(b) hereof.
(v) The Class B-2 Notes will be guaranteed by the Letter of Credit
pursuant to the terms set forth therein, notwithstanding any provisions to
the contrary contained in this Indenture. All amounts received under the
Letter of Credit shall be used solely for the payment to Class B-2
Noteholders of principal at maturity and interest on the Class B-2 Notes.
(vi) The parties hereto recognize that, to the extent that the
Letter of Credit Bank makes payments, directly or indirectly, on account
of principal of or interest on the Class B-2 Notes, the Letter of Credit
Bank shall be subrogated to the rights of the Holders of the Class B-2
Notes to receive distributions of principal and interest in accordance
with the terms hereof.
(vii) The parties hereto grant to the Letter of Credit Bank the
right of prior approval of amendments or supplements to the Transaction
Documents (solely to the extent that any such amendments or supplements
would have a material and adverse effect on the Letter of Credit Bank or
the Class B-2 Noteholders) and of the exercise of any option, vote, right,
power or the like available to the Class B-2 Noteholders hereunder.
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(viii) If a Responsible Officer of the Indenture Trustee has actual
knowledge, at any time, that there will not be a sufficient amount on
deposit in the Collection Account to make all required payments of
principal and interest on the Class B-2 Notes to the Class B-2 Noteholders
on the applicable Payment Date, the Indenture Trustee shall immediately
notify the Letter of Credit Bank or its designee by telephone, promptly
confirmed in writing by overnight mail or facsimile transmission, of the
amount of such deficiency.
(ix) If the short term rating of the Letter of Credit Bank is
reduced below P-1 by Moody's or below A-1+ by S&P, the Letter of Credit
Bank shall, in its discretion, within sixty (60) days of such reduction,
either (a) fund the Letter of Credit with cash to be held in a segregated
trust account by the Indenture Trustee for the benefit of the Class B-2
Noteholders or (b) replace the Letter of Credit with a substitute letter
of credit to be provided by an institution with a short term rating of
"P-1" by Moody's and "A-1+" by S&P, and upon the exercise of option (b) by
the Letter of Credit Bank, all obligations of the Letter of Credit Bank
under the Letter of Credit shall terminate. In the event the Letter of
Credit is funded with cash to be held by the Indenture Trustee, the
provisions of this Section 3.03(b) shall be deemed to apply and any Letter
of Credit Drawings that would otherwise be made directly by the Letter of
Credit Bank will instead be made by the Indenture Trustee at the written
direction of the Letter of Credit Bank from amounts on deposit in such
segregated trust account. Any such withdrawal of amounts from such account
to pay interest or principal on the Class B-2 Notes shall be deemed to be
a Letter of Credit Drawing, reimbursable in accordance with the terms of
this Indenture and the Letter of Credit and Reimbursement Agreement;
provided, that, notwithstanding anything to the contrary set forth in this
Indenture, any amounts paid as reimbursement of any such Letter of Credit
Drawings shall be deposited back into such segregated trust account, but
only to the extent that the amount on deposit therein is less than the
outstanding Class B-2 Note Principal Balance on such Payment Date. On each
Payment Date (after all distributions have been made in accordance with
Section 3.04(b) hereof), the Indenture Trustee, upon the written direction
of the Letter of Credit Bank, shall withdraw from such segregated trust
account the excess, if any, of (x) all amounts and other property on
deposit in such account over (y) the outstanding Class B-2 Note Principal
Balance on such Payment Date and shall pay such excess, if any, to the
Letter of Credit Bank. At such time as the Class B-2 Note Principal
Balance has been reduced to zero, all amounts and other property remaining
on deposit in such segregated trust account with the Indenture Trustee
shall be paid to the Letter of Credit Bank upon its written request. If at
any time after the exercise of option (a) above, the Indenture Trustee
receives (x) a written confirmation from the applicable Rating Agencies
that the Letter of Credit Bank's short term ratings have been upgraded to
"P-1" by Moody's and "A-1+" by S&P and (y) a new Letter of Credit from the
Letter of Credit Bank, on the same terms and conditions as the original
Letter of Credit, the Indenture Trustee shall release all property,
including interest and any other earnings on investments, being held in
such segregated trust account to the Letter of Credit Bank.
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(x) In the event that the Letter of Credit Bank exercises option (a)
set forth in the first sentence of clause (ix) above, the Letter of Credit
Bank shall direct the Indenture Trustee in writing to invest the amounts
in such segregated trust account in Eligible Investments that mature no
later than the Business Day preceding the next Payment Date following the
investment of such amounts. All income from investment of monies held in
such account (net of any losses thereon) shall be deposited in such
account as earned. 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 Letter of
Credit Bank pursuant to this Section 3.03(b)(x). The Indenture Trustee
shall have no obligation to initiate any such investments in the absence
of such written direction.
Section 3.04 Disbursements From Collection Account . (a) On each
Payment Date, the Indenture Trustee shall pay the entire amount of money then on
deposit in the Collection Account with respect to the related Collection Period,
as indicated on the Monthly Statement, as applicable, to the Persons to which
such money is then due, calculated on the basis of and in accordance with the
Monthly Statement for the related Collection Period; provided, however, that in
the event the Servicer fails to deliver a Monthly Statement by a Payment Date
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);
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(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 Back-up Servicer by wire transfer to the account
designated in writing by the Back-up Servicer of immediately available
funds, an amount equal to the Back-up Servicer Fee owing on such Payment
Date, plus any unpaid Back-up Servicer Fees from prior Collection Periods;
(v) 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;
(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
Indenture Trustee Fees owing on such Payment Date, plus any unpaid
Indenture Trustee Fees from prior Collection Periods;
(vii) 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 Section 7.07(a)(ii) hereof;
(viii) 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;
(ix) From the Available Funds then remaining in the Collection
Account, to the extent that such disbursement shall not result in an
Available Funds Shortfall, from Available Funds then remaining in the
Collection Account to the Class B-1 Noteholders an amount equal to the
Class B-1 Note Interest for the related Collection Period;
(x) From the Available Funds then remaining in the Collection
Account, to the Letter of Credit Bank by wire transfer to the account
designated in writing by the Letter of Credit Bank , the Letter of Credit
Bank Fee owing on
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such Payment Date, plus any unpaid Letter of Credit Fees from prior
Collection Periods;
(xi) From (x) the Available Funds then remaining in the Collection
Account, to the extent that such disbursement shall not result in an
Available Funds Shortfall, plus (y) the proceeds of any applicable Letter
of Credit Drawing, to the Class B-2 Noteholders an amount equal to the
Class B-2 Note Interest for the related Collection Period;
(xii) 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;
(xiii) 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;
(xiv) 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, from the Available Funds then
remaining in the Collection Account, the sum of (a) the Class B-1 Base
Principal Distribution Amount for such Payment Date, and (b) any Class B-1
Overdue Principal; provided, however, that if a Restricting Event exists
on such Payment Date and the 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-1 Noteholders under
this clause (xiv), shall instead be paid 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 (xii) above);
(xv) (a) 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, from the Available Funds then
remaining in the Collection Account, the sum of (i) the Class B-2 Base
Principal Distribution Amount for such Payment Date, and (ii) any Class
B-2 Overdue Principal; provided, however, that if a Restricting Event
exists on such Payment Date, the
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amount otherwise required to be paid to the Class B-2 Noteholders under
this clause (xv)(a) 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)(a) 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 (xii) 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 (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; provided, that (b) on the
Class B-2 Maturity Date there shall be paid to the Class B-2 Noteholders,
in addition to any amounts described in clause (xv)(a) as a payment of
principal (and after taking all such payments into account), from the
proceeds of any applicable Letter of Credit Drawing, an amount necessary
to reduce the Class B-2 Note Principal Balance to zero;
(xvi) From the Available Funds then remaining in the Collection
Account, to the Letter of Credit Bank by wire transfer to the account
designated in writing by the Letter of Credit Bank, the Letter of Credit
Reimbursement Amount, if any, owing on such Payment Date;
(xvii) From the Available Funds then remaining in the Collection
Account, to the Class B-3 Noteholders, the Class B-3 Note Interest for the
related Collection Period; until the Class B-3 Note Principal Balance has
been reduced to zero;
(xviii) 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, from the Available Funds then
remaining in the Collection Account, the sum of (a) the Class B-3 Base
Principal Distribution Amount for such Payment Date, and (b) 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 (xviii) 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 (xviii) 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 (xii) 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 (xviii) shall instead be paid to the Class
B-1 Noteholders pursuant to this clause (xviii) 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 are both zero, but the Class B-2 Note
Principal Balance on such Payment Date (after giving effect to all prior
payments of
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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 (xviii) shall instead be paid to the Class
B-2 Noteholders pursuant to this clause (xviii) during such time as a
Restricting Event is continuing as an additional reduction of the Class
B-2 Note Principal Balance up to the amount necessary to reduce such
balance to zero;
(xix) 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;
(xx) From the Available Funds then remaining in the Collection
Account, but only to the extent that neither of the conditions set forth
in the proviso to clause (xxii) below has occurred and is continuing on
such Payment Date (after taking into account all distributions to be made
on such Payment Date), to the Letter of Credit Bank by wire transfer to
the account designated in writing by the Letter of Credit Bank, the Letter
of Credit Additional Reimbursement Amount, if any, owing on such Payment
Date;
(xxi) 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
(xxii) From the Available Funds then remaining in the Collection
Account, to the Residual Holder, any remaining amounts; provided, however,
that
(I) if a Restricting Event does not exist on such Payment Date, but
if any payment of funds to the Residual Holder on such Payment Date
would result in the excess of (i) the Aggregate Discounted Contract
Principal Balance as of the end of the immediately preceding
Collection Period, over (ii) the sum of (w) the Class A Note
Principal Balance, (x) the Class B-1 Note Principal Balance, (y) the
Class B-2 Note Principal Balance and (z) the Class B-3 Note
Principal Balance (calculated with respect to clauses (w), (x), (y)
and (z) after giving effect to all payments of principal to be made
on such Payment Date) being less than 2% of the Initial
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Aggregate Discounted Contract Principal Balance such amount shall
not be paid to the Residual Holder but shall instead be paid
pursuant to this clause (xxii) to the Class A Noteholders (in the
sequential-pay fashion described in clause (xii) above), the Class
B-1 Noteholders, the Class B-2 Noteholders and the Class B-3
Noteholders as an additional payment of principal in an amount with
respect to each such Class equal to the product of (A) a fraction,
the numerator of which is the Class A Percentage, the Class B-1
Percentage, the Class B-2 Percentage or the Class B-3 Percentage, as
the case may be, and the denominator of which is the sum of the
Class A Percentage, the Class B-1 Percentage, the Class B-2
Percentage and the Class B-3 Percentage and (B) the amount that
would otherwise be paid to the Residual Holder pursuant to this
clause (xxii); and
(II) if a Restricting Event exists on such Payment Date, the amount
otherwise required to be paid to the Residual Holder under this
clause (xxii) shall instead be paid (w) 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 (xxii) 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
(xii) above); (x) 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 Residual Holder under this
clause (xxii) shall instead be paid to the Class B-1 Noteholders
pursuant to this clause (xxii) 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, (y) if the Class A Note Balance and the Class B-1 Note
Balance are both 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
Residual Holder under this clause (xxii) shall instead be paid to
the Class B-2 Noteholders pursuant to this clause (xxii) during such
time as a Restricting Event is continuing as an additional reduction
of the Class B-2 Note Principal Balance up to the amount necessary
to reduce such balance to zero; and (z) if each of the Class A Note
Principal Balance, the Class B-1 Note Principal Balance and the
Class B-2 Note Principal Balance are zero, but the Class B-3 Note
Principal Balance on such Payment
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Date (after giving effect to all prior payments of principal to the
Class B-3 Noteholders made on such Payment Date) exceeds zero, the
amount otherwise required to be paid to the Residual Holder under
this clause (xxii) shall instead be paid to the Class B-3
Noteholders pursuant to this clause (xxii) during such time as a
Restricting Event is continuing as an additional reduction of the
Class B-3 Note Principal Balance up to the amount necessary to
reduce such balance to zero.
(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 and the aggregate Class B
Percentage Interest in the case of the Class B Noteholders) of such payment.
Section 3.05 Statements to Noteholders. (a) If the Servicer has
delivered the Monthly Statement on the preceding Determination Date, then on
each Payment Date the Servicer will forward it to the Note Insurer and the
Letter of Credit Bank, and the Indenture Trustee will mail to the Rating
Agencies and each Class B Noteholder, 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
Initial Class A Note Principal Amount or of Initial Class B 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 or a Class B
Noteholder, the amount of such payment allocable to such Noteholder's
Percentage Interest of the Principal Distribution Amount and Class A,
Class B-1, Class B-2 or Class B-3 Overdue Principal, as applicable;
(ii) With respect to a statement to a Noteholder, the amount of such
payment allocable to such Noteholder's Percentage Interest of Class A-1,
Class A-2, Class A-3, Class A-4, Class B-1, Class B-2 or Class B-3 Note
Interest and Class A-1, Class A-2, Class A-3, Class A-4, Class B-1, Class
B-2 or Class B-3 Overdue Interest, as applicable;
(iii) The aggregate amount of fees and compensation received by the
Servicer pursuant to Section 3.04 hereof for the Collection Period;
(iv) The aggregate Class A Note Principal Balance (and,
individually, the Class A-1 Note Principal Balance, the Class A-2 Note
Principal Balance, the Class A-3 Note Principal Balance and the Class A-4
Note Principal
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Balance), the aggregate Class B-1 Note Principal Balance, the aggregate
Class B-2 Note Principal Balance, 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
(viii) The amount of any Letter of Credit Drawings made during the
related Collection Period and the aggregate amount of all unreimbursed
Letter of Credit Drawings.
(b) By January 31 of each calendar year, commencing January 31,
1998, 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, the Letter of Credit
Bank 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, the Letter of Credit Bank 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 Class B Noteholder, on
request, during the term of this Indenture, such periodic, special or other
reports or information not specifically provided for herein, as shall be
necessary, reasonable or appropriate with respect to such Class B Noteholder all
such reports or information to be provided by and in accordance with such
applicable instructions and directions as the Class B Noteholder
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may reasonably require and as the Servicer may reasonably be able to produce;
provided, however, that the Servicer may require such Class B Noteholder to
execute a confidentiality agreement in form and substance acceptable to the
Servicer.
(d) The Indenture Trustee shall promptly send to the Note Insurer,
the Letter of Credit Bank, each Noteholder and to the Rating Agencies in
writing:
(i) Notice of any breach by First Sierra, the Transferor, 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 Transfer Agreements.
(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 or default under
the Insurance Agreement, or any other default under any of the Transaction
Documents;
(vi) Notice of any Event of Back-up Servicing Termination; and
(vii) 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 Class B Noteholders to the
extent that the Indenture Trustee has itself received the related information
and the Class B 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.
Section 3.06 Compliance With Withholding Requirements.
Notwithstanding any other provisions of this Indenture, the Indenture Trustee,
as paying agent for and on behalf of, and at the direction of the Servicer,
shall comply with all federal withholding requirements respecting payments (or
advances thereof) to Noteholders as may be applicable to instruments
constituting indebtedness for federal income tax purposes. Any amounts so
withheld shall be treated as having been paid to the related Noteholder for all
purposes of this Indenture. In no event shall the consent of Noteholders be
required for any withholding.
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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 Letter of Credit Bank, 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. 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, the Noteholders, and the Letter of Credit Bank, 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, with the
consent of the Note Insurer and upon notice from the Servicer, may substitute
one or more Contracts (each a "Substitute Contract") and the related Equipment
for and replace Contracts and 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.
(b) Each Substitute Contract shall be a Contract, with respect to
which all of the representations and warranties set forth in Section 2.02 of the
Servicing Agreement were true as of the related Substitute Contract Cut-Off
Date.
(c) Prior to any substitution pursuant to this Section 4.02, the
Indenture Trustee shall have received an executed transfer agreement between the
Trust and First Sierra providing for the unconditional sale and transfer of the
Substitute Contracts and related Equipment by First Sierra to the Trust, the
List of Substitute Contracts reflecting the substitution, a release request, in
form and substance acceptable
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to the Indenture Trustee, with respect to the Contract being replaced and the
originally executed trust receipt relating thereto.
(d) No such substitution under this Section 4.02 shall be permitted
on any Transfer Date if:
(i) on a cumulative basis from the initial Cut-Off Date, the sum of
the Discounted Contract Principal Balances (as of the related Substitute
Cut-Off Date) of such Substitute Contracts would exceed ten percent (10%)
of the Aggregate Discounted Contract Principal Balance of all Contracts as
of the initial Cut-Off Date;
(ii) as of the related Substitute Cut-Off Date, the Substitute
Contracts then being transferred have a Discounted Contract Principal
Balance not less than the Discounted Contract Principal Balance of the
Contracts being replaced; and
(iii) as a result thereof, (x) the sum of the Scheduled Payments on
all Contracts due in any Collection Period thereafter would be less than
or increase the amount by which it is less than (y) the sum of the
Scheduled Payments which would otherwise be due in such Collection Period.
(e) Upon the replacement of a Contract and the related Equipment
with a Substitute Contract as described above, the security interest of the
Indenture Trustee in such replaced Contract, the related Equipment and all
proceeds thereon shall be terminated and such replaced Contract and the related
Equipment shall be transferred to the Trust.
Section 4.03 Release of Trust Property. (a) The Indenture Trustee
when required by the Trust and the provisions of this Indenture shall execute
instruments provided to it in order to release property from the lien of this
Indenture, in a manner and under circumstances that are not inconsistent with
the provisions of this Indenture and the Servicing Agreement. No party relying
upon an instrument executed by the Indenture Trustee as provided in this Article
IV shall be bound to ascertain the Indenture Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
monies.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding and all sums due the Indenture Trustee, the Note Insurer pursuant to
the Insurance Agreement and the Letter of Credit Bank pursuant hereto and the
Letter of Credit and Reimbursement Agreement have each been paid, release any
remaining portion of the Trust Property that secured the Note from the lien of
this Indenture and release to the Trust or any other Person entitled thereto any
funds then on deposit in the Collection Account and any subaccounts thereof as
may have been established pursuant to Section 3.02(b). The Indenture Trustee
shall release property from the lien of this Indenture pursuant to this Section
4.03(b) only upon receipt of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the
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TIA) Independent Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1)
meeting the applicable requirements of Section 10.05 hereof.
ARTICLE V.
THE NOTES
Section 5.01 The Notes. (a) The Class A Notes will be issued in
denominations of $1,000 and multiples thereof of Initial Class A-1 Note
Principal Balance, Initial Class A-2 Note Principal Balance, Initial Class A-3
Note Principal Balance and Initial Class A-4 Note Principal Balance and the
Class B Notes will be issued in denominations of $1,000,000 and $1,000
increments above $1,000,000 of Initial Class B-1 Note Principal Balance, Initial
Class B-2 Note Principal Balance and 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 through 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,
and 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 Class A Notes be registered so as to
participate in a global book-entry system with the Trust, as set forth herein.
The Class A 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 Class A Note shall be registered in the Register in the
name of Cede & Co., or any successor thereto, as nominee for the Trustee.
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The Trust and the Indenture Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Class A 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 Class A 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 Class A 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 Class A 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 Class A Notes. No
Person other than a Noteholder shall receive a certificate evidencing such Class
A 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 Class A 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 Class A 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 Class A 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 Class A Notes may be registered in whatever name or names Noteholders
transferring Class A 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 Class A Note is registered in the name of Cede & Co.,
as nominee of the Depository, all distributions of principal or interest on such
Class A Notes as the case may be and all notices with respect to such Class A
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 Class B 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 Transferor, 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 E
hereto, setting forth the facts surrounding such transfer. In the event that a
transfer is to be made in reliance on Rule 144A under the Securities Act, the
Class B Noteholder shall cause its prospective transferee to execute and deliver
a certificate substantially in the form of Exhibit F hereto; provided, however,
that with respect to any sale of a Class B Note by an investment company
registered under the Investment Company Act of 1940, as amended, made in
reliance on Rule 144A, the Class B Noteholder may (in lieu of delivering a
certificate in the form of Exhibit F) deliver to the Indenture Trustee a
certificate in the form of Exhibit G hereto with a copy of a Qualified
Institutional Buyer Certificate in the form of Addendum 1 thereto. The Servicer
promptly shall furnish to any Holder, or any prospective purchaser designated by
a Holder, the information required to be delivered to Holders and prospective
purchasers of Class B Notes in connection with the resale of the Class B Notes
to permit compliance with Rule 144A in connection with such resale. No Class B
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.
(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 Class B Note (i) unless, prior to such
transfer, the Indenture Trustee shall have received from the Class B 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 there
would be more than 90 holders of the Class B Notes. Ownership of the Trust
Certificate shall be nontransferable, but may be pledged to secure non-recourse
debt of the Transferor.
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Section 5.02 Initial Issuance of Notes. (a) The Indenture Trustee
shall, upon the written instruction of the Trust, in exchange for the Pledged
Property, authenticate and deliver Class A Notes and Class B Notes executed by
the Trust in authorized denominations equaling in the aggregate the Initial
Class A Note Principal Balance and the Initial Class B Note Principal Balance.
(b) Notwithstanding anything herein to the contrary, in the case of
the initial sale of a Note, the acquirer of such Note shall be deemed to have
represented and warranted that it is not acquiring its interest in the Note with
the assets of (A) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), whether
or not subject to Title I of ERISA, (B) a plan or other arrangement described in
Section 4975 of the Code or (C) any entity whose underlying assets include plan
assets by reason of an investment in such entity by a plan described in (A) or
(B) above (collectively, a "Benefit Plan Investor").
Section 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 Class B 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 Class B 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
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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) Notwithstanding the foregoing, in the case of any sale or other
transfer of record or beneficial ownership of a Note, the transferee of such
Note shall be deemed to have represented and warranted that it is not a Benefit
Plan Investor.
Section 5.04 Mutilated, Destroyed, Lost or Stolen Notes. If any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (a) there is delivered to the Trust, the Servicer and the Indenture
Trustee such security or indemnity satisfactory to each of them as may be
required by them to save each of them harmless (provided, that with respect to a
Class B 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 Note Insurer, the Letter of
Credit Bank and the Indenture Trustee may treat the Person in whose name any
Note is registered as the owner of such Note for the purpose of receiving
distributions pursuant to Section 3.04 hereof and for all other purposes
whatsoever, and the Note Insurer, the Letter of Credit Bank 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 or a Class B 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
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under the Notes, then the Indenture Trustee shall, within five Business Days
after the receipt of such application, send such notice to the current list of
Noteholders. Every Noteholder, by receiving and holding a Note, agrees with the
Trust, the Servicer and the Indenture Trustee that none of the Trust, the
Servicer nor the Indenture Trustee shall be held accountable by reason of the
disclosure of any such information, regardless of the source from which such
information was derived.
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, the Letter of Credit Bank or the
Servicer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and
(subject to Section 7.01 hereof) conclusive in favor of the Indenture Trustee,
the Trust, First Sierra and the Servicer, if made in the manner provided in this
Section 5.07.
(b) The fact and date of the execution by any Noteholder of any such
instrument or writing may be proven in any reasonable manner which the Indenture
Trustee deems sufficient.
(c) The ownership of Notes shall be proven by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Noteholder shall bind every holder of every Note issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done or omitted to be done by the Indenture
Trustee, the Trust or the Servicer in reliance thereon, whether or not notation
of such action is made upon such Note.
Section 5.08 No Proceedings. By its acceptance of a Note, each
Noteholder shall be deemed to have agreed that it will not directly or
indirectly institute, or cause to be instituted, against the Residual Holder or
the Trust any bankruptcy or insolvency proceeding so long as there shall not
have elapsed one year plus one day since the maturity date of the latest
maturing securities of the Trust.
ARTICLE VI.
THE TRUST
Section 6.01 Liability of the Trust. (a) The Trust shall be liable
for payments in respect of the Notes in accordance herewith only to the extent
of the obligations specifically undertaken by the Trust herein.
Section 6.02 Limitation on Liability of the Trust. (a) Neither the
Owner Trustee nor the directors, officers, employees or agents of the Trust or
the Owner
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Trustee shall be under any liability to the Indenture Trustee, the Noteholders,
First Sierra, the Servicer, the Residual Holder or any other Person hereunder or
pursuant to any document delivered hereunder, it being expressly understood that
all such liability is expressly waived and released as a condition of, and as
consideration for, the Trust's execution and delivery of this Indenture and the
issuance of the Notes. The Trust shall not be under any liability to the
Indenture Trustee, the Noteholders, First Sierra, the Servicer, the Residual
Holder or any other Person for any action taken or for refraining from the
taking of any action in its capacity as Trust pursuant to this Indenture whether
arising from express or implied duties under this Indenture; provided, 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 negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder. The Trust may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any other Person respecting any matters arising hereunder.
Section 6.03 Indemnity for Liability Claims. (a) The Residual Holder
on behalf of the Trust shall be deemed to have agreed to indemnify, defend and
hold harmless the Indenture Trustee (which shall include any of its directors,
employees, officers and agents), the Owner Trustee (which shall include any of
its directors, employees, officers and agents), the Noteholders, the Note
Insurer and the Letter of Credit Bank against and from any and all costs,
expenses, losses, damages, claims and liabilities arising out of or resulting
from the use, repossession or operation of the Equipment to the extent not
covered by the Servicer's indemnity provided by Section 5.01 of the Servicing
Agreement; provided, however, that such amounts shall be payable solely from
amounts payable to the Residual Holder pursuant to Section 3.04(b)(xxii) hereof.
Section 6.04 Liabilities. Notwithstanding any provision of this
Indenture, by entering into this Indenture, the Trust and the Residual Holder
agrees to be liable, directly to the injured party, for the entire amount of any
losses, claims, damages or liabilities (other than those losses incurred by a
Class A Noteholder or a Class B Noteholder in the capacity of an investor in the
Class A Notes or the Class B 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
Class B Noteholders, the Note Insurer and the Letter of Credit Bank have been
paid in full are insufficient to pay such losses, claims, damages or
liabilities).
Section 6.05 [Reserved].
Section 6.06 Annual Statement as to Compliance. The Servicer on
behalf of the Trust will deliver to the Indenture Trustee, the Letter of Credit
Bank 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, 1997), 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
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(i) a review of the activities of the Trust during such year and of
performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Trust has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in the compliance of any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status
thereof.
Section 6.07 Payment of Principal and Interest. The Trust will duly
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the Notes and this Indenture. Amounts properly withheld under the
Code by any Person from a payment to any Noteholder of interest and/or principal
shall be considered as having been paid by the Trust to such Noteholder for all
purposes of this Indenture.
Section 6.08 Maintenance of Office or Agency. The Trust will
maintain in New York, New York, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Trust in respect of the Notes and this Indenture may be
served. The Trust hereby initially appoints the Indenture Trustee to serve as
its agent for the foregoing purposes. The Trust will give prompt written notice
to the Indenture Trustee of the location, and of any change in the location, of
any such office or agency. If at any time the Trust shall fail to maintain any
such office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Trust hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.
Section 6.09 Money for Payments to be Held in Trust. On or before
each Payment Date, the Trust shall deposit or cause to be deposited in the
Collection Account, but only from the sources described herein, an aggregate sum
sufficient to pay the amounts then becoming due under the Notes, such sum to be
held in trust for the benefit of the Persons entitled thereto and (unless the
paying agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure so to act.
The Trust will cause each paying agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee, the Letter of Credit
Bank 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;
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(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 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 the Letter of Credit Bank 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 or the Letter of
Credit Bank 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 or the
Letter of Credit Bank, such amounts shall be paid promptly to the Note Insurer
or the Letter of Credit Bank, as applicable, upon receipt of a written request
by the Note Insurer or the Letter of Credit Bank 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
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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 Trust will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it 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 Trust will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its 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.
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 Noteholders, the Note Insurer and the Letter of Credit Bank, as
their interests appear herein, to be prior to all other liens in respect of the
Trust Property, and the Trust shall take all actions necessary to obtain and
maintain, in favor of the Indenture Trustee, for the benefit of the Noteholders,
the Note Insurer and the Letter of Credit Bank, as their interests appear
herein, a first lien on and a first priority, perfected security interest in the
Trust Property. The Trust will from time to time prepare (or shall cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) grant more effectively all or any portion of the Trust Property;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Indenture Trustee for the benefit of the
Noteholders, the Note Insurer and the Letter of Credit Bank, as their
interests appear herein, 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
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(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, the Note Insurer or the Letter of Credit Bank
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 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, the Letter of Credit Bank and the Rating Agencies 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:
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(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 (or,
following the Class A Termination Date, the Letter of Credit Bank);
(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 (or, following the Class A
Termination Date, the Letter of Credit Bank);
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, the Note
Insurer and the Letter of Credit Bank, 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;
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(iii) the Trust shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee, the Note Insurer
and the Letter of Credit Bank) to the effect that such transaction will
not have any material adverse tax consequence to the Trust, the Note
Insurer, any Noteholder or the Letter of Credit Bank;
(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, the
Note Insurer and the Letter of Credit Bank 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 (or, following the Class A Termination Date,
the Letter of Credit Bank) 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, the Note Insurer and the Letter of Credit Bank, the
due and punctual payment of the principal of and interest on all Notes and
the performance or observance of every agreement and covenant of this
Indenture and each of the Transaction Documents on the part of the Trust
to be performed or observed, all as provided herein, (C) expressly agree
by means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the rights
of Holders of the Notes, (D) 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;
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(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, the Note Insurer
and the Letter of Credit Bank) to the effect that such transaction will
not have any material adverse tax consequence to the Trust, the Note
Insurer, any Noteholder or the Letter of Credit Bank;
(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, the
Note Insurer and the Letter of Credit Bank 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 (or, following the Class A Termination
Date, the Letter of Credit Bank) 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, the Note Insurer and the Letter of Credit Bank
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.
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 the Letter of Credit Bank 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
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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, the Note Insurer or the Letter of Credit Bank, 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
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the Indenture Trustee shall 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 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, the Letter of Credit Bank 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; provided, however, that the foregoing shall not diminish or in
any way modify any obligation of the Back-up Servicer under the Servicing
Agreement. 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
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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 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, the Note Insurer
and the Letter of Credit Bank 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 immediately notify the Note Insurer
and the Letter of Credit Bank of: (a) any proposed change herein or supplement
hereto; (b) the occurrence of any Event of Default, Event of Servicing
Termination, Event of Back-up Servicing Termination or Restricting Event
actually known to a Responsible Officer of the Indenture Trustee; (c) any
proposed change of the Indenture Trustee hereunder; (d) any matter to be put to
the Noteholders for election hereunder; (e) any proposed exercise by the
Noteholders of any option, vote, right, power or the like hereunder; and (f) any
other matter, notice of which is required hereunder to be given to any of the
Noteholders or to the Indenture Trustee.
Section 7.02 Eligible Investments. The Servicer shall direct the
Indenture Trustee to invest in Eligible Investments, as further specified from
time to time by written notice to the Indenture Trustee executed by a Servicing
Officer, any cash amounts deposited in the Collection Account pursuant to the
terms of this Indenture or the Servicing Agreement, immediately upon deposit of
any such cash amounts; provided, however, that each such Eligible Investment (i)
shall mature no later than the Business Day immediately preceding the Payment
Date in respect of the Collection Period during which such deposit was made and
(ii) shall not be sold or disposed of prior to its maturity. The Indenture
Trustee shall not be liable or responsible for the selection of or losses on any
investments made by it pursuant to and in compliance with such instructions of
the Servicer pursuant to this Section 7.02. The Indenture Trustee shall have no
obligation to initiate any investments in the absence of such written direction.
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Section 7.03 Indenture Trustee's Assignment of Contracts. If in any
enforcement suit or legal proceeding it is held, or in connection with the
collection of a Defaulted Contract the Servicer or its assigns reasonably
anticipates, that the Servicer or its assigns may not or will not be able to
enforce a Contract on the ground that neither the Servicer nor its assigns are a
real party in interest or a holder entitled to enforce the Contract, then the
Indenture Trustee shall, at the Servicer's or its assigns' expense, take such
steps as the Indenture Trustee deems necessary to enforce the Contract,
including (i) bringing suit in the Indenture Trustee's name or the names of the
Noteholders, the Letter of Credit Bank 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;
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(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, the Letter of Credit Bank or by the Holders of Notes of
any Class evidencing Percentage Interests of not less than 25% of such
Class; provided, however, that if the payment within a reasonable time to
the Indenture Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of
the Indenture Trustee, not reasonably assured to the Indenture Trustee by
the security afforded to it by the terms of this Indenture, the Indenture
Trustee may require indemnity satisfactory to it against such cost,
expense or liability as a condition to so proceeding. The reasonable
expense of 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, the Note Insurance Policy and the
Letter of Credit 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
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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, under the Transfer Agreements or in any related document or the
accuracy of any such warranty or representation, any investment of monies in the
Collection Account (except to the extent that the Indenture Trustee, in its
individual capacity, is an obligor with respect to any such investment) or any
loss resulting therefrom, the acts or omissions of the Servicer, or any Obligor,
any action of the Servicer taken in the name of the Indenture Trustee, any
action by the Indenture Trustee taken at the instruction of the Servicer or the
preparation and filing of tax returns for the Trust. No recourse shall be had
for any claim based on any provision of this Indenture, the Notes or any
Contract or assignment thereof against Bankers Trust Company in its individual
capacity, and Bankers Trust Company shall not have any personal obligation,
liability or duty whatsoever to any Noteholder or any other Person with respect
to any such claim, and any such claim shall be asserted solely against the Trust
or any indemnitor who shall furnish indemnity as provided herein, except for
such liability as is determined to have resulted from its own gross negligence
or willful misconduct. The Indenture Trustee shall not be accountable for the
use or application by First Sierra or the Trust of any of the Notes or of the
proceeds of such Notes or for the use or application of any funds paid to the
Servicer in respect of the Contracts.
Section 7.06 Indenture Trustee May Own Notes. The Indenture Trustee
in its individual or any other capacity may become the owner or pledge of Notes
with the same rights as it would have if it were not Indenture Trustee, subject
to the definition of the term "Noteholder" in Annex A hereto.
Section 7.07 Indenture Trustee's Fees and Expenses. (a) The Servicer
on behalf of the Residual Holder agrees:
(i) to pay to the Indenture Trustee, pursuant to Section
3.04(b)(vi), as applicable, on each Payment Date reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
Indenture Trustee of an express trust);
(ii) except to the extent otherwise expressly provided herein, to
reimburse the Indenture Trustee, pursuant to Section 3.04(b)(vii), 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, that for purposes of this
clause (ii), such expenses, disbursements and advances shall be limited to
an aggregate amount of $75,000; and
(iii) to reimburse the Indenture Trustee, pursuant to Section
3.04(b)(xix), as applicable, for all reasonable expenses, disbursements
and
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advances that would have been paid pursuant to Section 7.07(a)(ii) but for
the $75,000 limitation.
(b) The Servicer's obligations under this Section 7.07 shall survive
the termination of this Indenture or the earlier resignation or removal of the
Indenture Trustee. The Indenture Trustee shall not be entitled to any other or
additional compensation or reimbursement, except as expressly provided herein or
as otherwise agreed from time to time.
(c) Subject to Section 7.10 hereof, the failure by the Servicer to
pay to the Indenture Trustee any compensation or other expenses shall not
relieve the Indenture Trustee of its obligations hereunder.
(d) In the event the Indenture Trustee performs services or incurs
expenses in the context of a proceeding described in Sections 6.01(a)(iv),
6.01(a)(v) or 6.01(a)(vii) of the Servicing Agreement, the fees for such
services and such expenses shall be considered expenses of administration for
the purposes of any bankruptcy laws or laws relating to creditors rights
generally.
Section 7.08 Eligibility Requirements for Indenture Trustee. The
Indenture Trustee shall at all times satisfy the requirements of TIA ss. 310(a).
The Indenture Trustee hereunder shall at all times be a corporation acceptable
to the Note Insurer having its principal office in a State, organized and doing
business under the laws of any State or the United States of America, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or State authority; provided, however, that no entity shall qualify as
Indenture Trustee hereunder to the extent that such qualification would, in
itself, affect any then current rating of the Class A Note or the Class B Notes
by the Rating Agencies. If such corporation publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid supervising
or examining authority, then for the purpose of this Section 7.08, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. Any successor Indenture Trustee's deposit ratings shall be at least
"investment grade" by the Rating Agencies. In case at any time the Indenture
Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.08, the Indenture Trustee shall resign immediately in the manner and
with the effect specified in Section 7.09 hereof. The Indenture Trustee shall
comply with TIA ss. 310(b), including the optional provision permitted by the
second sentence of TIA ss. 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities of the Trust are outstanding if the requirements
for such exclusion set forth in TIA ss. 310(b)(1) are met.
Section 7.09 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss.311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
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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, the Letter of Credit Bank and each Noteholder which resignation
will not become effective until such time as a successor Indenture Trustee has
been appointed in accordance with the provisions of this Section 7.10. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor Indenture Trustee acceptable to the Note Insurer by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Indenture Trustee and one copy to the successor Indenture Trustee. If
no successor Indenture Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Indenture Trustee may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
(a) If at any time the Indenture Trustee shall cease to be eligible
in accordance with the provisions of Section 7.08 hereof and shall fail to
resign after written request therefor by the Servicer, the Letter of Credit
Bank, 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) at
the direction of either the Holders of Notes of any Class evidencing Percentage
Interests of more than 25% of the related Class or the Letter of Credit Bank (in
either case 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 Note Insurer, Servicer or Noteholders remove the
Indenture Trustee, the Servicer or such Noteholders shall promptly appoint a
successor Indenture Trustee (acceptable to the Note Insurer) by written
instrument, in
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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 may petition a court of competent jurisdiction to appoint a successor
Indenture Trustee.
Section 7.11 Successor Indenture Trustee. (a) Any successor
Indenture Trustee appointed as provided in Section 7.10 hereof shall execute,
acknowledge and deliver to the Servicer, the Trust and predecessor Indenture
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Indenture Trustee shall become
effective and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Indenture Trustee. The predecessor Indenture Trustee shall deliver to
the successor Indenture Trustee all documents and statements held by it
hereunder. The Servicer, the Trust and the predecessor Indenture Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Indenture Trustee all 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, the Letter
of Credit Bank 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
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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 the Note Insurer, or
the Note Insurer shall have the power from time to time, and shall execute and
deliver all instruments to appoint one or more Persons approved by the 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, the Note
Insurer and the Letter of Credit Bank, as their interests appear herein, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 7.13, such powers, duties, obligations, rights and trusts as the
Servicer, the Trust and the Indenture Trustee may consider necessary or
desirable; provided, however, that if there is a conflict between the Trust, the
Indenture Trustee and the Note Insurer regarding the appointment of a
co-Indenture Trustee or separate Indenture Trustee, the Note Insurer shall
prevail. If the Servicer shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, or in the case an Event of
Servicing Termination shall have occurred and be continuing, the Indenture
Trustee and Trust, acting jointly, shall have the power to make such
appointment; provided, however, that if the Trust shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, the
Indenture Trustee alone shall have the power to make such appointment. No
co-Indenture Trustee or separate Indenture Trustee hereunder shall be required
to meet the terms of eligibility as a successor Indenture Trustee under Section
7.08 hereof, and no notice to Noteholders of the 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
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Trustee or co-Indenture Trustee but solely at the direction of the
Indenture Trustee;
(ii) No separate Indenture Trustee or co-Indenture Trustee hereunder
shall be personally liable by reason of any act or omission of any other
separate Indenture Trustee or co-Indenture Trustee hereunder; and
(iii) The Indenture Trustee may at any time accept the resignation
of or remove any separate Indenture Trustee or co-Indenture Trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate
Indenture Trustees and co-Indenture Trustees, as effectively as if given to each
of them. Every instrument appointing any separate Indenture Trustee or
co-Indenture Trustee shall refer to this Indenture and the conditions of this
Article VII. Each separate Indenture Trustee and co-Indenture Trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Indenture
Trustee or separately, as may be provided therein, subject to all the provisions
of this Indenture, specifically including every provision of this Indenture
relating to the conduct of, affecting the liability of, or affording protection
to, the Indenture Trustee. Every such instrument shall be filed with the
Indenture Trustee and a copy thereof given to the Servicer and the Trust.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at
any time constitute the Indenture Trustee, its agent or attorney-in-fact, with
full power and authority, to the extent not prohibited by law, to do any lawful
act under or in respect of this Indenture on its behalf and in its name. If any
separate Indenture Trustee or co-Indenture Trustee shall die, become incapable
of acting, resign or be removed, then all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
separate Indenture Trustee or successor co-Indenture Trustee.
(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
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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, the
Note Insurer and the Letter of Credit Bank 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, the Note Insurer or the Letter
of Credit Bank.
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, the Note Insurer or the Letter of Credit Bank, 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, the Letter of Credit Bank and the Note Insurer that:
(a) Organization and Good Standing. The Indenture Trustee is a
banking corporation duly organized, validly existing and in good standing under
the laws of the state of New York.
(b) Authorization. The Indenture Trustee has the power, authority
and legal right to execute, deliver and perform this Indenture, and the
execution, delivery and performance 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
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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 when due; and
(b) failure to distribute or cause to be distributed to the
Indenture Trustee, for the benefit of the Noteholders (x) on any Payment Date,
an amount equal to the principal due on the Outstanding Notes as of such Payment
Date to the extent that sufficient Available Funds are on deposit in the
Collection Account or (y) on the Class A-1 Maturity Date, the Class A-2 Maturity
Date, the Class A-3 Maturity Date, the Class A-4 Maturity Date, the Class B-1
Maturity 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.
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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, the Letter of Credit Bank 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 and Class B
Notes;
(ii) the principal of any of the Class A or Class B 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 and Class B
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, the Note Insurer or the Letter of Credit Bank
hereunder or under the Insurance Agreement, the Note Insurance Policy, the
Letter of Credit or the Letter of Credit and Reimbursement Agreement, as
applicable, and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, the Note Insurer, the Letter of Credit
Bank and their respective agents and counsel.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Subsequent to any such declaration of acceleration and so long as such
declaration and its consequences has not been rescinded and annulled, prior to
the exercise by the Indenture Trustee of the remedies set forth in Section
8.03(b) or (c) hereof, the Indenture Trustee shall give the Noteholders, the
Note Insurer and the Letter of Credit Bank ten days notice of its intention to
take such actions.
Section 8.03 Remedies. (a) If an Event of Default shall have
occurred and be continuing, the Indenture Trustee, at the written direction of
the Controlling Parties, may do one or more of the following:
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(b) institute, in its own name and as Indenture Trustee, Proceedings
for the collection of the entire amount of principal and interest remaining
unpaid on the Notes, or under this Indenture in respect of the Notes, whether by
declaration or otherwise, enforce any judgment obtained, and collect from the
Pledged Property securing the Notes the monies adjudged due;
(c) sell the Pledged Property or any portion thereof or rights or
interest therein, at one or more sales called and conducted in any manner
permitted by law;
(d) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Pledged Property
securing the Notes; or
(e) exercise any remedies of a secured party under the UCC or other
applicable law and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Note Insurer, the Letter of
Credit Bank 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, the
Letter of Credit Bank (including, in each case, any claim for the reasonable
compensation, expenses, disbursements and advances
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of the Indenture Trustee, the Note Insurer, the Letter of Credit Bank and their
respective agents and counsel) and the Noteholders allowed in such judicial
Proceeding;
(b) to petition for lifting of the automatic stay and thereupon to
foreclose upon the Pledged Property as elsewhere provided herein; and
(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, the Letter of Credit Bank 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, the
Letter of Credit Bank or any Noteholder any plan of reorganization, arrangement,
adjustment or composition affecting the Note Insurer, the Letter of Credit Bank
or 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, the Letter of
Credit Bank or any Noteholder in any such Proceeding.
Section 8.07 Allocation of Money Collected. If the Notes have been
declared due and payable following an Event of Default and such declaration and
its consequences have not been rescinded and annulled, any money collected by
the Indenture Trustee with respect to the Notes pursuant to this Article (and
any funds then held or thereafter received by the Indenture Trustee) shall be
applied in the following order, at the date or dates fixed by the Indenture
Trustee:
FIRST: To the payment of all amounts due the Indenture Trustee
under Section 7.07 hereof and all Back-up Servicer Fees due to the Back-up
Servicer under the Servicing Agreement;
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 Class B-1 Note Interest to the Class
B-1 Noteholders;
FIFTH: To the payment of all unpaid Letter of Credit Bank Fees
due and payable to the Letter of Credit Bank;
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SIXTH: To the payment of Class B-2 Note Interest to the Class
B-2 Noteholders:
SEVENTH: To the payment of the outstanding Class A Note
Principal Balance to the Class A Noteholders (in the sequential-pay fashion
described in Section 3.04(b)(xii) hereof);
EIGHTH: To the payment of all unpaid 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 Letter of Credit Reimbursement
Amount, if any, owing to the Letter of Credit Bank;
TWELFTH: To the payment of Class B-3 Note Interest to the
Class B-3 Noteholders;
THIRTEENTH: To the payment of the outstanding Class B-3 Note
Principal Balance to the Class B-3 Noteholders;
FOURTEENTH: To the payment of the Letter of Credit Additional
Reimbursement Amount, if any, owing to the Letter of Credit Bank;
FIFTEENTH: 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
SIXTEENTH: To the payment of any surplus to or at the written
direction of the Residual Holder.
Section 8.08 Waiver of Events of Default. (a) The Note Insurer (or,
following the Class A Termination Date, the Letter of Credit Bank) 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 (or, following the Class A
Termination Date, the Letter of Credit Bank)) 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
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each Note outstanding affected (which only may be waived by the Holders of
all Notes outstanding affected).
(b) A copy of each waiver pursuant to Section 8.08(a) shall be
furnished by First Sierra to the Indenture Trustee. Upon any such waiver, such
Event of Default shall cease to exist and shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereon.
Section 8.09 Limitation On Suits. No Holder shall have any right to
institute any Proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Controlling Parties shall have made written request to the
Indenture Trustee to institute Proceedings in respect of such Event of Default
in its own name as Indenture Trustee hereunder;
(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 (or, following the Class A Termination Date,
the Letter of Credit Bank) 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, the Letter of
Credit Bank 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.
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Section 8.11 Restoration of Rights and Remedies. If the Indenture
Trustee, the Note Insurer, the Letter of Credit Bank 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, the Letter of Credit Bank or to such Noteholder, then and in every
such case, the Indenture Trustee, the Note Insurer, the Letter of Credit Bank
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,
the Letter of Credit Bank or the Noteholders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 8.13 Delay or Omission Not Waiver. No delay or omission of
the Indenture Trustee, the Note Insurer, the Letter of Credit Bank 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, the Letter of
Credit Bank 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, the Letter of Credit Bank or the Noteholders, subject in each case
however to the right of the Note Insurer (or, following the Class A Termination
Date, the Letter of Credit Bank) 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
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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 applicable law, the Indenture Trustee shall not sell the Pledged
Property without the prior written consent of the Note Insurer (or, following
the Class A Termination Date, the Letter of Credit Bank).
(b) The Note Insurer, the Letter of Credit Bank and any Noteholder
may bid for and acquire any portion of the Pledged Property securing the Notes
in connection with any sale thereof.
(c) Each of the parties hereby covenants and agrees that a sale of
the entirety of the Contracts and the Equipment by a public sale held not less
than ten days after notice thereof is commercially reasonable.
(d) The Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance, provided to it by the Servicer, transferring its
interest in any portion of the Pledged Property in connection with a sale
thereof. In addition, the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Trust to transfer and convey its interest in
any portion of the Pledged Property in connection with a sale thereof, and to
take all action necessary to effect such sale. No purchaser or transferee at
such a sale shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any monies.
Section 8.16 Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Trust, the
Depositor or the Transferor 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,
the Depositor or the Transferor.
ARTICLE IX.
TERMINATION
Section 9.01 Termination of Obligations and Responsibilities. The
respective obligations and responsibilities of First Sierra, the Servicer, the
Indenture Trustee and the Trust created hereby shall terminate (i) at the option
of the Residual Holder, at any time which is 123 days after the payment to
Noteholders of all amounts required to be paid to them pursuant to this
Indenture, reducing the Class A Note Principal Balance, the Class B-1 Note
Principal Balance, the Class B-2 Note Principal Balance and the Class B-3 Note
Principal Balance to zero or (ii) after the 120th day
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following the Class A-4 Maturity Date; provided that all amounts then owing to
the Note Insurer, the Letter of Credit Bank and the Indenture Trustee pursuant
to the Transaction Documents have been paid to such parties; and provided,
however, that in no event shall the trust created hereby continue beyond the
expiration of 21 years from the death of the last survivor of the descendants
living on the date of this Indenture of Joseph P. Kennedy, late Ambassador to
the Court of St. James. Notwithstanding the foregoing, the representations and
warranties and indemnification obligations of First Sierra and the Servicer
hereunder and under the Servicing Agreement shall survive the termination of the
Trust and of this Indenture. Upon termination of the Trust, the Indenture
Trustee shall release any remaining Trust Property to the Residual Holder but
not if the Class A Note Principal Balance and the Class B Note Principal Balance
have not been reduced to zero or any amounts are owing to the Note Insurer , the
Letter of Credit Bank or the Indenture Trustee.
Section 9.02 Optional Redemption of Notes; Final Disposition of
Funds. (a) On any Payment Date following any Calculation Date as of which the
sum of (1) the Class A Note Principal Balance and (2) the Class B Note Principal
Balance is less than ten percent (10.00%) of the sum of (x) the Initial Class A
Note Principal Balance and (y) the Initial Class B Note Principal Balance, the
Residual Holder shall have the option to cause the retirement of the Notes by
depositing with the Indenture Trustee the sum of (i) the outstanding Class A
Note Principal Balance and the outstanding Class B Note Principal Balance as of
such Payment Date (after giving effect to the payment of any principal on such
Payment Date), (ii) accrued interest on the related Note Principal Balances at
the related Note Rate and (iii) all amounts owed to the Indenture Trustee, the
Note Insurer and the Letter of Credit Bank. Upon receipt of such amounts and all
amounts then owed to the Indenture Trustee the Indenture Trustee shall (x) make
the final payment in full to the Noteholders, (y) pay all amounts owed to the
Note Insurer and the Letter of Credit Bank and (z) release any remaining Trust
Property to the Residual Holder. In the event that the Residual Holder elects to
redeem the Notes in accordance with this Section 9.02, the Residual Holder shall
be required to notify the Indenture Trustee in writing by no later than two (2)
Business Days prior to a notice required to be sent by the Indenture Trustee
pursuant to Section 9.02(b).
(b) Notice of any termination pursuant to this Section 9.02 shall be
given promptly by the Indenture Trustee, by letter to Noteholders, the Note
Insurer and the Letter of Credit Bank 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 Class B 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 to Noteholders
an amount equal to (x) the amount otherwise distributable to the Noteholders on
such Payment Date but for such purchase pursuant to this Section 9.02 and (y)
each Class A and Class B Noteholder's pro rata share (based on the aggregate
related Percentage Interest) of the Class A-1 Note Principal Balance, Class A-2
Note Principal Balance, Class A-3 Note Principal Balance, Class A-4 Note
Principal Balance, Class B-1 Note Principal Balance, the Class B-2 Note
Principal Balance and the
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Class B-3 Note Principal Balance deposited by the Residual Holder into the
Collection Account pursuant to this Section 9.02. After such Payment Date,
interest on the Class A and Class B Notes shall cease to accrue.
(c) 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. (d) In the event that any amount
due to any Noteholder remains unclaimed, the Servicer shall, at its expense,
cause to be published once, in the eastern edition of The Wall Street Journal,
notice that such money remains unclaimed. If, within two years after such
publication, such amount remains unclaimed, the Servicer shall be entitled to
all unclaimed funds and other assets which remain subject hereto, and the
Indenture Trustee upon written direction from the Servicer shall transfer such
funds and shall be discharged of any responsibility for such funds and, the
Noteholders shall look to the Servicer for payment.
ARTICLE X.
NOTEHOLDERS' LISTS AND REPORTS
Section 10.01 Trust To Furnish To Indenture Trustee Names and
Addresses of Noteholders. The Trust will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders as of such Record Date, (b) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
10 days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished. The Indenture Trustee or, if the Indenture Trustee is
not the Note Registrar, the Trust shall furnish to the Note Insurer, the Letter
of Credit Bank or the Trust in writing upon their written request and at such
other times as the Note Insurer, the Letter of Credit Bank or the Trust may
request a copy of the list of Noteholders.
Section 10.02 Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee and the names and
addresses of Noteholders received by the Indenture Trustee in its capacity as
Note Registrar.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA ss. 312(c).
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Section 10.03 Reports by Trust. (a) The Trust shall:
(i) file with the Indenture Trustee, within 15 days after the Trust
is required to file the same with the Commission, copies of the annual
reports and copies of the information documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Trust may be
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act;
(i) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(ii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA ss. 313(c))
such summaries of any information, documents and reports required to be
filed by the Trust pursuant to clauses (i) and (ii) of this Section
10.03(a) as may be required by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Trust otherwise determines, the fiscal year of the
Trust shall end as of December 31 of each year for purposes of this section.
Section 10.04 Reports by Indenture Trustee. If required by TIA ss.
313(a), within 60 days after each August 31, beginning with August 31, 1998, the
Indenture Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a
brief report dated as of such date that complies with TIA ss. 313(a). The
Indenture Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to Noteholders
shall be filed by the Indenture Trustee with the Commission and each stock
exchange, if any, on which the Notes are listed. The Trust shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
Section 10.05 Compliance Certificates and Opinions, etc. Upon any
application or request by the Trust to the Indenture Trustee to take any action
under any provision of this Indenture, the Trust shall furnish to the Indenture
Trustee, the Letter of Credit Bank 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.
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Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
Section 11.01 Amendment. (a) This Indenture may be amended from time
to time by the Trust, the Servicer, the Originator and the Indenture Trustee,
without the consent of 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 or the Letter of
Credit Bank.
(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; provided, further, that no such amendment
shall materially and adversely affect the interests of the Letter of Credit Bank
or the Class B-2 Noteholders, without the prior written consent of the Letter of
Credit Bank; and provided, further, that no amendment to Section 3.03(b) hereof
shall be made without the prior written consent of the Letter of Credit Bank.
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(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, the Letter of Credit Bank 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, the Note Insurer and the Letter of Credit
Bank shall be entitled to receive an officer's certificate and an Opinion of
Counsel to the effect that all conditions precedent to the amendment of this
Indenture have been satisfied. The Indenture Trustee may, but shall not be
obligated to, execute and deliver any such amendment which affects that
Indenture Trustee's rights, powers, immunities or indemnifications hereunder.
Section 11.02 Conformity With Trust Indenture Act. Every amendment
of this Indenture and every supplemental indenture executed pursuant to this
Article XI shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the TIA.
Section 11.03 Limitation on Rights of Noteholders. (a) The death or
incapacity of any Noteholder shall not operate to terminate this Indenture or
the Trust, nor entitle such Noteholder's legal representatives or heirs to claim
an accounting or to take any action or commence any proceeding in any court for
a partition or winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) It is understood and intended, and expressly covenanted by each
Noteholder with every other Noteholder and the Indenture Trustee, that no one or
more Holders of Notes shall have any right in any manner whatever by virtue or
by availing itself or themselves of any provisions of this Indenture to affect,
disturb or prejudice the rights of the Holders of any other 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.
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Section 11.04 Counterparts. For the purpose of facilitating the
execution of this Indenture and for other purposes, this Indenture may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 11.05 GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS OF
ANY STATE.
Section 11.06 Notices. All demands, notices, instructions,
directions and communications (other than periodic communications of a routine
nature made in connection with the dissemination of information regarding the
Pledged Property, the Servicer and the Trust required to be delivered hereunder,
which shall be delivered or mailed by first class mail or facsimile
transmission) hereunder shall be in writing, personally delivered or mailed by
overnight courier, and shall be deemed to have been duly given upon receipt (a)
in the case of the Servicer, at Texas Commerce Tower, 70th Floor, 600 Travis
Street, Houston, Texas 77002, Attention: Sandy Ho, telephone (713) 221-8822,
telecopy (713) 221-1818, (b) in the case of the Trust, Delaware Trust Capital
Management Inc., at 900 Market Street, 2nd Floor, Wilmington, Delaware 19801,
Attention: First Sierra Equipment Contract Trust 1997-1, telephone (302)
421-7307, telecopy (302) 421-7742, (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 Moody's, at 99 Church Street, New York, NY
10007-2701, telephone (212) 553-1402, telecopy (212) 533-3856, (f) in the case
of the Note Insurer, at 113 King Street, Armonk, NY 10504, Attention: Insured
Portfolio Management - SF, telephone (914) 273-4545, telecopy (914) 765-3810,
(g) in the case of DCR, 55 East Monroe Street, Chicago, Illinois 60603,
Attention: Asset Backed Monitoring, telecopy (312) 263-2852 and (h) in the case
of the Letter of Credit Bank, at 75 Wall Street, New York, New York 10005,
Attention: Edward M. Weber, telephone (212) 429-2552, telecopy (212) 429-2780.
Any notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Note Register. 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
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Indenture and shall in no way affect the validity or enforceability of the other
provisions of this Indenture or of the Notes or the rights of the Holders
thereof.
Section 11.08 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.09 Third Party Beneficiary. The parties hereto
acknowledge and agree that each of the Note Insurer and the Letter of Credit
Bank is an express third party beneficiary of this Indenture.
Section 11.10 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02 of the Servicing Agreement,
this Indenture may not be assigned by the Servicer except with prior written
consent of the Trust, the Note Insurer, (or, following the Class A Termination
Date, the Letter of Credit Bank) 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, the Letter of Credit Bank 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
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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 Residual Holder or
the Trust any bankruptcy or insolvency proceeding so long as there shall not
have elapsed one year plus one day since the maturity date of the latest
maturing securities of the Trust.
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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 1997-1, as Issuer
By: DELAWARE TRUST CAPITAL
MANAGEMENT, INC., not in its individual
capacity but solely as Owner Trustee
By ________________________________________
Name:
Title:
FIRST SIERRA FINANCIAL, INC., as Servicer
and as Originator
By ________________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity but solely
as Indenture Trustee
By ________________________________________
Name: Patricia M.F. Russo
Title: Vice President
66
Conformed Copy
RECEIVABLES TRANSFER AGREEMENT
--------------
between
FIRST SIERRA FINANCIAL, INC.,
FIRST SIERRA RECEIVABLES III, INC.,
PRUDENTIAL SECURITIES CREDIT CORPORATION,
FIRST UNION NATIONAL BANK,
VARIABLE FUNDING CAPITAL CORPORATION,
BANKERS TRUST COMPANY
and
FIRST SIERRA RECEIVABLES IV, INC.
--------------
Dated as of
September 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................................3
SECTION 1.01 Definitions...............................................3
SECTION 1.02 Other Definitional Provisions.............................3
ARTICLE II TRANSFER OF CONVEYED ASSETS.........................................4
SECTION 2.01 Direction; Acquisition; Capital Contribution..............4
SECTION 2.02 Custody of Contract Files.................................5
SECTION 2.03 Intention of the Parties; Grant of Security Interest......5
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................6
SECTION 3.01 Representations and Warranties............................6
SECTION 3.02 Representations and Warranties of the Transferor.........16
SECTION 3.03 Substitution of Contracts and Equipment
by First Sierra.........................................18
ARTICLE IV COVENANTS..........................................................19
SECTION 4.01 Seller Covenants.........................................19
SECTION 4.02 Transferor Covenants.....................................22
SECTION 4.03 Transfer of Conveyed Assets..............................24
ARTICLE V CONDITIONS PRECEDENT................................................24
SECTION 5.01 Conditions to Transferor Obligations.....................24
SECTION 5.02 Conditions to Sellers' and Investors' Obligations........25
ARTICLE VI TERMINATION 25
SECTION 6.01 Termination..............................................25
SECTION 6.02 Effect of Termination....................................25
ARTICLE VII MISCELLANEOUS PROVISIONS..........................................26
SECTION 7.01 Amendment................................................26
SECTION 7.02 GOVERNING LAW............................................26
SECTION 7.03 Notices..................................................26
SECTION 7.04 Severability of Provisions...............................26
SECTION 7.05 Assignment...............................................27
SECTION 7.06 Further Assurances.......................................27
SECTION 7.07 No Waiver; Cumulative Remedies...........................27
SECTION 7.08 Counterparts.............................................27
SECTION 7.09 Binding Effect: Third-Party Beneficiaries................27
SECTION 7.10 Merger and Integration...................................27
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SECTION 7.11 Headings.................................................28
SECTION 7.12 Schedules and Exhibits...................................28
SECTION 7.13 No Bankruptcy Petition Against
the Transferor or the Trust.............................28
Schedules & Annexes
Schedule 1 LIST OF CONTRACTS
Annex A DEFINED TERMS
ii
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RECEIVABLES TRANSFER AGREEMENT
THIS RECEIVABLES TRANSFER AGREEMENT (this "Agreement"), dated as of
September 1, 1997, is entered into between FIRST SIERRA FINANCIAL, INC. ("First
Sierra"), a Delaware corporation located at Texas Commerce Tower, 70th Floor,
600 Travis Street, Houston, Texas 77002, FIRST SIERRA RECEIVABLES III, INC.,
("Receivables III"), a Delaware corporation located at Texas Commerce Tower,
70th Floor, 600 Travis Street, Houston, Texas 77002, PRUDENTIAL SECURITIES
CREDIT CORPORATION ("Prudential") a Delaware corporation located at 1220 N.
Market Street, Wilmington, Delaware 19801, FIRST UNION NATIONAL BANK (formerly
First Union National Bank of North Carolina) ("First Union") a Delaware
corporation located at One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0610, VARIABLE FUNDING CAPITAL CORPORATION
("VFCC") a Delaware corporation located at One First Union Center, 301 South
College Street, Charlotte, North Carolina 28288-0610, Bankers Trust Company (the
"Indenture Trustee") a New York banking corporation located at Four Albany
Street, New York, New York 10006, not in its individual capacity but as Trustee
of the First Sierra Equipment Lease Trust 1997-A, the First Sierra Equipment
Lease Trust 1997-B and the First Sierra Equipment Lease Trust 1997-C (each as
defined herein) and FIRST SIERRA RECEIVABLES IV, INC. (the "Transferor"), a
Delaware corporation, located at Texas Commerce Tower, 600 Travis Street,
Houston, Texas 77002. First Sierra, Receivables III and each Warehouse Trust (as
defined below), are collectively referred to herein as the "Sellers".
Prudential, First Union and VFCC are collectively referred to herein as the
"Investors".
WITNESSETH:
WHEREAS, First Sierra in the ordinary course of its business acquires
and originates equipment contracts in the United States; and
WHEREAS, Receivables III, First Sierra and Bankers Trust Company have
entered into a Master Investment, Pooling and Servicing Agreement, dated as of
March 1, 1997 (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
<PAGE>
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 National Bank of North Carolina, the
parties thereto formed a trust (the "First Sierra Equipment Lease Trust
1997-A"), issued a Senior Certificate to First Union National Bank of North
Carolina representing the senior beneficial ownership interest in the Leases and
Equipment conveyed by Receivables III to the First Sierra Equipment Lease Trust
1997-A and issued a Residual Certificate to Receivables III representing the
residual beneficial ownership interest in the Contracts and Equipment conveyed
to the First Sierra Equipment Lease Trust 1997-A; and
WHEREAS, First Union and Receivables III, as the beneficial owners of
the Leases and Equipment in the First Sierra Equipment Lease Trust 1997-A,
desire that Bankers Trust Company, as the Trustee of such trust, convey such
Contracts and Equipment to the Transferor; 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 National Bank of North Carolina, the
parties thereto formed a trust (the "First Sierra Equipment Lease Trust
1997-B"), issued a Senior Certificate to VFCC representing the senior beneficial
ownership interest in the Leases and Equipment conveyed by Receivables III to
the First Sierra Equipment Lease Trust 1997-B and issued a Residual Certificate
to Receivables III representing the residual beneficial ownership interest in
the Contracts and Equipment conveyed to the First Sierra Equipment Lease Trust
1997-B; and
WHEREAS, VFCC and Receivables III, as the beneficial owners of the
Leases and Equipment in the First Sierra Equipment Lease Trust 1997-B, desire
that Bankers Trust Company, as trustee of such trust, convey such Contracts and
Equipment to the Transferor; and
WHEREAS, pursuant to a Series 1997-C Supplement, dated as of March 31,
1997 (the "Series 1997-C Supplement") among Receivables III, First Sierra,
Bankers Trust Company and Prudential, the parties thereto formed a trust (the
"First Sierra Equipment Lease Trust 1997-C" and, together with the First Sierra
Equipment Lease Trust 1997-A and the First Sierra Equipment Lease Trust 1997-B,
the "Warehouse Trusts"), issued a Senior Certificate to Prudential representing
the senior beneficial ownership interest in the Leases and Equipment conveyed by
Receivables III to the First Sierra Equipment Lease Trust 1997-C and issued a
Residual Certificate to Receivables III representing the residual beneficial
ownership interest in the Contracts and Equipment conveyed to the First Sierra
Equipment Lease Trust 1997-C; and
WHEREAS, Prudential and Receivables III, as the beneficial owners of
the Leases and Equipment in the First Sierra Equipment Lease Trust 1997-C,
desire that Bankers Trust Company, as trustee of such trust, convey such
Contracts and Equipment to the Transferor; and
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WHEREAS, in addition to Contracts and Equipment in the Warehouse
Trusts, First Sierra desires to convey, transfer, contribute and assign all of
its right title and interest in and to certain other Contracts and Equipment to
the Transferor; 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 Transferor upon the terms and conditions hereinafter set forth; and
WHEREAS, each of the Sellers and the Transferor 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,
the Letter of Credit Bank, any Owner Trustee and any Indenture Trustee (as
defined below).
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Whenever used in this Agreement, capitalized
terms used and not defined herein shall have the meanings set forth in Annex A
hereto.
SECTION 1.02 Other Definitional Provisions.
(a) Terms used in Related Documents. Each term defined in this
Agreement will have the meaning assigned to such term in this Agreement when
used in any certificate or other document made or delivered pursuant to this
Agreement, unless such term is otherwise defined therein.
(b) Accounting Terms. As used in this Agreement, accounting terms which
are not defined pursuant to Section 1.01 have the respective meanings given to
them under generally accepted accounting principles, as in effect on the date of
this Agreement. To the extent that the definitions of accounting terms in this
Agreement are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement will
control.
(c) "Hereof," etc. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement; and Section,
Schedule and Exhibit references contained in this Agreement are references to
Sections, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
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(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; Capital Contribution.
(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 all of the assets of each
Warehouse Trust to the Transferor. Upon receipt of the consideration specified
below, each of the Investors hereby release all of its right, title and interest
in, to and under the Conveyed Assets. Such receipt being hereby acknowledged by
execution of this Agreement by each Investor.
(b) In consideration for (x) the issuance to First Sierra of all shares
of the Transferor's issued and outstanding capital stock, (y) the receipt of
$7,896,613.45 by First Sierra, $3,745,521.50 by First Sierra Equipment Lease
Trust 1997-A, $73,812,899.92 by First Sierra Equipment Lease Trust 1997-B and
$73,760,045.92 by First Sierra Equipment Lease Trust 1997-C and (z) other good
and valuable consideration, each of the Sellers hereby conveys to the Transferor
all of its right, title and interest in, to and under the Conveyed Assets,
whether now existing or hereinafter arising, without recourse (except as may be
set forth in the Servicing Agreement). In connection with such conveyance, each
of the Sellers, as applicable, hereby makes a capital contribution to the
Transferor in the amount by which the fair market value of the related Conveyed
Assets exceeds the cash consideration received by such Seller in connection
therewith.
(c) In connection with such contribution and conveyance, each Seller
agrees to record and file, at the expense of First Sierra, financing statements
(and thereafter will file continuation statements with respect to such financing
statements) with respect to the related Conveyed Assets contributed and to be
transferred to the Transferor pursuant to this Agreement, meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect and to maintain the
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perfection of, the transfer, conveyance and contribution of the related Conveyed
Assets (subject to the Filing Requirements with respect to the Equipment) from
each of the Sellers to the Transferor, the transfer, conveyance and assignment
of the Conveyed Assets (subject to the Filing Requirements with respect to the
Equipment) from the Transferor to the Trust and the transfer, assignment and
pledge of the Pledged Property from the Transferor to the Indenture Trustee on
behalf of the Noteholders, the Note Insurer and the Letter of Credit Bank, as
their interests may appear, pursuant to the Indenture, and to deliver a
file-stamped copy of such financing statements or other evidence of such filings
to the Transferor (and copies to the Indenture Trustee, the Letter of Credit
Bank 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 Transferor but instead will be held by
the Indenture Trustee.
(d) In connection with such assignment and conveyance, First Sierra
shall, at its own expense, on or prior to the Closing Date, and with respect to
Substitute Contracts, as soon as possible, but in no event later than two (2)
Business Days after the related Conveyance Date (i) cause the Contract
Management System to be marked with a specified code (the "Contract Management
Code") to show that the Conveyed Assets have been assigned and transferred to
the Transferor in accordance with this Agreement, subsequently assigned and
transferred to the Trust in accordance with the Depositor Transfer Agreement and
pledged to the Indenture Trustee on behalf of the Noteholders, the Note Insurer
and the Letter of Credit Bank, as their interests may appear, pursuant to the
Indenture and (ii) prepare and hold in its capacity as Servicer on behalf of the
Transferor and the Indenture Trustee the List of Contracts on or prior to the
Closing Date. Pursuant to Section 3.03, First Sierra from time to time may make
capital contributions of Substitute Contracts to the Transferor at any time by
delivering a supplemented List of Contracts to the Transferor on each Conveyance
Date containing for each Substitute Contract transferred on such Conveyance Date
the information set forth in the definition of List of Contracts. Upon delivery
of any such supplement to the List of Contracts, the List of Contracts shall be
deemed amended to incorporate therein the information contained in such
supplement.
(e) Except for the obligations of First Sierra pursuant to the
Servicing Agreement and the Indenture with respect to any breach of a
representation, warranty or covenant made herein, the sale and contribution of
the Contracts will be without recourse to the Sellers.
SECTION 1.02 Custody of Contract Files . In connection with the
contribution, assignment, transfer and conveyance of the Contracts to the
Transferor pursuant to this Agreement, First Sierra, as Servicer under the
Servicing Agreement and as agent of the Indenture Trustee will retain the
Contract Files and any related evidence of insurance and payments; provided,
however, that First Sierra will physically convey the original executed
counterparts of each Contract and the related Certificate of Title, if
applicable, to the Indenture Trustee in accordance with the terms of the
Indenture.
SECTION 2.03 Intention of the Parties; Grant of Security Interest. It
is the intention of the parties hereto that each transfer of Conveyed Assets to
be made pursuant to the terms hereof shall constitute a sale or capital
contribution of such Contract
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by each Seller to the Transferor and not a loan. In the event, however, that a
court of competent jurisdiction were to hold that any such transfer constitutes
a loan and not a sale or capital contribution, it is the intention of the
parties hereto that this Agreement is deemed to be a security agreement and that
each Seller shall be deemed to have granted to the Transferor 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties. (a) First Sierra hereby
makes the following representations and warranties for the benefit of the
Indenture Trustee, the Noteholders, the Note Insurer, the Letter of Credit Bank
and the Transferor. Such representations and warranties are made as of the
Closing Date or any Transfer Date (with respect to Substitute Contracts
transferred to Transferor on such date) and shall survive each contribution,
assignment, transfer and conveyance by First Sierra of the respective Conveyed
Assets to the Transferor 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 or any other Transaction Document to which it is a party;
(iii) Power and Authority. First Sierra has the corporate
power and authority to execute and deliver this Agreement, the Source
Agreements to which it is a party and the Contracts and any other
Transaction Document to which it is a party, and to carry out their
respective terms; First Sierra has duly authorized the contribution
and assignment to the Transferor of the Conveyed Assets by all
necessary corporate action; and the execution, delivery, and
performance of this Agreement, the Source Agreements, the Contracts
and any other Transaction Document to which it is a party, has been
duly authorized by First Sierra by all necessary corporate action;
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(iv) Due Execution and Delivery. This Agreement has been
duly executed and delivered on behalf of First Sierra;
(v) Valid Assignment; Binding Obligations. This Agreement
constitutes a valid contribution, assignment, transfer and conveyance
to the Transferor of all right, title, and interest of First Sierra
in, to and under the Conveyed Assets and the Conveyed Assets will be
held by the Transferor free and clear of any Lien of any Person
claiming, through or under First Sierra, except for Liens permitted
under, or to be created by the Indenture; and this Agreement, and the
other Transaction Documents to which it is a party, when duly executed
and delivered, will constitute legal, valid, and binding obligations
of First Sierra enforceable against First Sierra in accordance with
their respective terms subject as to enforceability to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law);
(vi) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of First
Sierra, or any material term of any indenture, agreement, mortgage,
deed of trust, or other instrument to which First Sierra is a party or
by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust, or other instrument,
other than this Agreement, or violate any law or any order,
injunction, writ, rule, or regulation applicable to First Sierra of
any court or of any federal or state regulatory body, administrative
agency, or other Governmental Authority having jurisdiction over First
Sierra or any of its properties which would have a material adverse
effect on the Conveyed Assets;
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of First Sierra,
threatened, before any court, regulatory body, administrative agency,
or other tribunal or Governmental Authority (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement, or (C)
seeking any determination or ruling that might (in the reasonable
judgment of First Sierra) materially and adversely affect the
performance by First Sierra of its obligations under, or the validity
or enforceability of, this Agreement;
(viii) Tax Returns. First Sierra has filed on a timely basis
all tax returns (federal, state and local) required to be filed and
has paid or made adequate provisions for the payment of all taxes,
assessments and other governmental charges due from First Sierra;
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<PAGE>
(ix) Pensions. Each pension plan or profit sharing plan to
which First Sierra is a party has been fully funded in accordance with
the obligations of First Sierra set forth in such plan;
(x) Valid Business Reasons. First Sierra has valid business
reasons for selling its interests in the Conveyed Assets rather than
obtaining a loan with the Conveyed Assets as collateral;
(xi) Insolvency. First Sierra is not insolvent and will not
be rendered insolvent by the transactions contemplated by this
Agreement and has an adequate amount of capital to conduct its
business in the ordinary course and to carry out its obligations
hereunder and under each Transaction Document to which it is a party;
(xii) Principal Place of Business. The principal place of
business and chief executive office of First Sierra are located at the
address of First Sierra set forth herein and, there are now no, and
during the past four months there have not been, any other locations
where First Sierra is located (as that term is used in the UCC in the
state of such location) except that, with respect to such changes
occurring after the date of this Agreement, as shall have been
specifically disclosed to the Servicer and the Indenture Trustee in
writing;
(xiii) Accounting and Tax Treatment. First Sierra will treat
the assignment of the Conveyed Assets to the Transferor pursuant to
Article II as a sale and contribution of the Conveyed Assets to the
capital of the Transferor for federal income tax purposes, and as a
sale for financial reporting and accounting purposes;
(xiv) Legal Name. The legal name of First Sierra is as set
forth in the signature line of this Agreement and First Sierra has not
changed its name since its incorporation and since its incorporation,
First Sierra did not use, nor does First Sierra now use, any trade
names, fictitious names, assumed names or "doing business as" names;
(xv) Material Adverse Change. As of June 30, 1997, no event
has occurred and is continuing which materially and adversely affects
First Sierra's operations including, without limitation, the ability
of First Sierra to perform the transactions contemplated hereunder;
(xvi) 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;
(xvii) Fair Consideration. The consideration received by
First Sierra as set forth herein is fair consideration having value
reasonably
8
<PAGE>
equivalent to or in excess of the value of the Conveyed Assets
conveyed by it and the performance of First Sierra's obligations
hereunder; and
(xviii) Consolidated Return Taxable Income from the
Equipment and the Related Contracts. The Transferor 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 Transferor under the Transaction Documents or
other document relating to the financing contemplated hereby. The
Transferor shall treat the Contracts as owned by it and any True Lease
Equipment as owned by it for federal, state and local income tax
purposes, and the affiliated group of which the Transferor is a member
within the meaning of section 1504 of the Code shall treat the
Contracts owned by the Transferor and any True Lease Equipment as
owned by the Transferor for federal income tax purposes 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, the Letter of Credit Bank and the Transferor. Such representations and
warranties are made as of the Closing Date and shall survive each contribution,
assignment, transfer and conveyance by the Sellers of the respective Conveyed
Assets to the Transferor 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 or any other Transaction Document to which it
is a party;
(iii) Power and Authority. Receivables III has the corporate
power and authority to execute and deliver this Agreement and any
other Transaction Document to which it is a party, and to carry out
their respective terms; Receivables III has duly authorized the
contribution and assignment to the Transferor of all of its right,
title and interest, if any, in the Conveyed Assets by all necessary
corporate action; and the execution, delivery, and
9
<PAGE>
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;
(iv) Due Execution and Delivery. This Agreement has been
duly executed and delivered on behalf of Receivables III;
(v) Valid Assignment; Binding Obligations. This Agreement
constitutes a valid assignment, transfer and conveyance to the
Transferor of all right, title, and interest of Receivables III in, to
and under the Conveyed Assets and the Conveyed Assets will be held by
the Transferor free and clear of any Lien of any Person claiming,
through or under Receivables III; and this Agreement when duly
executed and delivered, will constitute the legal, valid, and binding
obligation of Receivables III enforceable against Receivables III in
accordance with its terms subject as to enforceability to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law);
(vi) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of
Receivables III, or any material term of any indenture, agreement,
mortgage, deed of trust, or other instrument to which Receivables III
is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, mortgage, deed of trust, or
other instrument, other than this Agreement, or violate any law or any
order, injunction, writ, rule, or regulation applicable to Receivables
III of any court or of any federal or state regulatory body,
administrative agency, or other Governmental Authority having
jurisdiction over Receivables III or any of its properties which would
have a material adverse effect on the Conveyed Assets;
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of Receivables III,
threatened, before any court, regulatory body, administrative agency,
or other tribunal or Governmental Authority (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement, or (C)
seeking any determination or ruling that might (in the reasonable
judgment of Receivables III) materially and adversely affect the
performance by Receivables III of its obligations under, or the
validity or enforceability of, this Agreement;
(viii) 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
10
<PAGE>
this Agreement and the Transaction Documents to which it is a party,
except for such having been obtained, effected or made;
(ix) 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
obligations hereunder; and
(x) Principal Place of Business. The principal place of
business and chief executive office of Receivables III are located at
1061 East Indiantown Road, Suite 201, Jupiter, Florida 73477 and,
there are now no, and during the past four months there have not been,
any other locations where First Sierra is located (as that term is
used in the UCC in the state of such location) except that, with
respect to such changes occurring after the date of this Agreement, as
shall have been specifically disclosed to the Servicer and the
Indenture Trustee in writing. The principal place of business and
chief executive office of each of the Warehouse Trusts are located in
care of Bankers Trust Company, Four Albany Street, New York 10006 and,
there are now no, and during the past four months there have not been,
any other locations where each Warehouse Trust is located (as that
term is used in the UCC in the state of such location).
(c) Prudential hereby makes the following representations and
warranties for the benefit of the Indenture Trustee, the Noteholders, the Note
Insurer, the Letter of Credit Bank and the Transferor. Such representations and
warranties are made as of the Closing Date and shall survive each contribution,
assignment, transfer and conveyance by the Sellers of the respective Conveyed
Assets to the Transferor and its successors and assigns
(i) Organization and Good Standing. Prudential is a
corporation duly organized, validly existing and in good standing,
under the laws of the State of Delaware, with corporate power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power,
authority, and legal right to acquire and own the Conveyed Assets;
(ii) Due Qualification. Prudential is qualified as a foreign
corporation in any state where it is required to be so qualified to
conduct its business and has obtained all necessary licenses, consents
and approvals as required under federal and state law, in each case,
where the failure to be so qualified, licensed, consented to or
approved could reasonably be expected materially and adversely to
affect the ability of Prudential to comply with the terms of this
Agreement or any other transaction document to which it is a party;
(iii) Power and Authority. Prudential has the corporate
power and authority to execute and deliver this Agreement and any
other Transaction
11
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Document to which it is a party, and to carry out their respective
terms; and the execution, delivery, and performance of this Agreement
and any other Transaction Document to which it is a party, has been
duly authorized by Prudential by all necessary corporate action;
(iv) Due Execution and Delivery. This Agreement has been
duly executed and delivered on behalf of Prudential;
(v) Valid Assignment; Binding Obligations. This Agreement
constitutes a valid contribution, assignment, transfer and conveyance
to the Transferor of all right, title, and interest of Prudential in,
to and under the Conveyed Assets and the Conveyed Assets will be held
by the Transferor free and clear of any Lien of any Person claiming,
through or under Prudential; and this Agreement, when duly executed
and delivered, will constitute the legal, valid, and binding
obligation of Prudential enforceable against Prudential in accordance
with its terms subject as to enforceability to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law);
(vi) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of
Prudential, or any material term of any indenture, agreement,
mortgage, deed of trust, or other instrument to which Prudential is a
party or by which it is bound, or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust, or other
instrument, other than this Agreement, or violate any law or any
order, injunction, writ, rule, or regulation applicable to Prudential
of any court or of any federal or state regulatory body,
administrative agency, or other Governmental Authority having
jurisdiction over Prudential or any of its properties which would have
a material adverse effect on the Conveyed Assets;
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of Prudential,
threatened, before any court, regulatory body, administrative agency,
or other tribunal or Governmental Authority (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement, or (C)
seeking any determination or ruling that might (in the reasonable
judgment of Prudential) materially and adversely affect the
performance by Prudential of its obligations under, or the validity or
enforceability of, this Agreement;
(viii) No Consent Required. Prudential is not required to
obtain the consent of any other Person, or any consent, license,
approval or authorization or registration or declaration with, any
governmental authority,
12
<PAGE>
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;
and
(ix) Fair Consideration. The consideration received by
Prudential as set forth herein is fair consideration having value
reasonably equivalent to or in excess of the value of the Conveyed
Assets conveyed by it and the performance of Prudential's obligations
hereunder.
(d) First Union hereby makes the following representations and
warranties for the benefit of the Indenture Trustee, the Noteholders, the Note
Insurer, the Letter of Credit Bank and the Transferor. Such representations and
warranties are made as of the Closing Date and shall survive each contribution,
assignment, transfer and conveyance by the Sellers of the respective Conveyed
Assets to the Transferor and its successors and assigns:
(i) Organization and Good Standing. First Union is a
national bank duly organized, validly existing and in good standing,
under the laws of the United States, with corporate power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power,
authority, and legal right to acquire and own the Conveyed Assets;
(ii) Due Qualification. First Union is qualified as a
foreign corporation in any state where it is required to be so
qualified to conduct its business and has obtained all necessary
licenses, consents and approvals as required under federal and state
law, in each case, where the failure to be so qualified, licensed,
consented to or approved could reasonably be expected materially and
adversely to affect the ability of First Union to comply with the
terms of this Agreement or any other Transaction Document to which it
is a party;
(iii) Power and Authority. First Union has the corporate
power and authority to execute and deliver this Agreement and any
other Transaction Document to which it is a party, and to carry out
their respective terms; and the execution, delivery, and performance
of this Agreement and any other Transaction Document to which it is a
party, has been duly authorized by First Union by all necessary
corporate action;
(iv) Due Execution and Delivery. This Agreement has been
duly executed and delivered on behalf of First Union;
(v) Valid Assignment; Binding Obligations. This Agreement
constitutes a valid contribution, assignment, transfer and conveyance
to the Transferor 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 Transferor free and clear of any Lien of any Person claiming,
through or under First Union;
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<PAGE>
and this Agreement, when duly executed and delivered, will constitute
legal, valid, and binding obligation of First Union enforceable
against First Union in accordance with their respective terms subject
as to enforceability to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(vi) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of First
Union, or any material term of any indenture, agreement, mortgage,
deed of trust, or other instrument to which First Union is a party or
by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust, or other instrument,
other than this Agreement, or violate any law or any order,
injunction, writ, rule, or regulation applicable to First Union of any
court or of any federal or state regulatory body, administrative
agency, or other Governmental Authority having jurisdiction over First
Union or any of its properties which would have a material adverse
effect on the Conveyed Assets;
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of First Union,
threatened, before any court, regulatory body, administrative agency,
or other tribunal or Governmental Authority (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement, or (C)
seeking any determination or ruling that might (in the reasonable
judgment of First Union) materially and adversely affect the
performance by First Union of its obligations under, or the validity
or enforceability of, this Agreement;
(viii) 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; and
(ix) 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.
(e) VFCC hereby makes the following representations and warranties for
the benefit of the Indenture Trustee, the Noteholders, the Note Insurer, the
Letter of Credit Bank and the Transferor. Such representations and warranties
are made as of the Closing Date and shall survive each contribution, assignment,
transfer and conveyance by
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<PAGE>
the Sellers of the respective Conveyed Assets to the Transferor and its
successors and assigns:
(i) Organization and Good Standing. VFCC is a corporation
duly organized, validly existing and in good standing, under the laws
of the State of Delaware, with corporate power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at
all relevant times, and now has, power, authority, and legal right to
acquire and own the Conveyed Assets;
(ii) Due Qualification. VFCC is qualified as a foreign
corporation in any state where it is required to be so qualified to
conduct its business and has obtained all necessary licenses, consents
and approvals as required under federal and state law, in each case,
where the failure to be so qualified, licensed, consented to or
approved could reasonably be expected materially and adversely to
affect the ability of VFCC to comply with the terms of this Agreement
or any other Transaction Document to which it is a party;
(iii) Power and Authority. VFCC has the corporate power and
authority to execute and deliver this Agreement and any other
Transaction Document to which it is a party, and to carry out their
respective terms; and the execution, delivery, and performance of this
Agreement and any other Transaction Document to which it is a party,
has been duly authorized by VFCC by all necessary corporate action;
(iv) Due Execution and Delivery. This Agreement has been
duly executed and delivered on behalf of VFCC;
(v) Valid Assignment; Binding Obligations. This Agreement
constitutes a valid contribution, assignment, transfer and conveyance
to the Transferor of all right, title, and interest of VFCC in, to and
under the Conveyed Assets and the Conveyed Assets will be held by the
Transferor free and clear of any Lien of any Person claiming, through
or under VFCC; and this Agreement, when duly executed and delivered,
will constitute the legal, valid, and binding obligation of VFCC
enforceable against VFCC in accordance with their respective terms
subject as to enforceability to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(vi) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of VFCC, or
any material term of any indenture, agreement, mortgage, deed of
trust, or other instrument to which VFCC is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture,
15
<PAGE>
agreement, mortgage, deed of trust, or other instrument, other than
this Agreement, or violate any law or any order, injunction, writ,
rule, or regulation applicable to VFCC of any court or of any federal
or state regulatory body, administrative agency, or other Governmental
Authority having jurisdiction over VFCC or any of its properties which
would have a material adverse effect on the Conveyed Assets;
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of VFCC, threatened,
before any court, regulatory body, administrative agency, or other
tribunal or Governmental Authority (A) asserting the invalidity of
this Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, or (C) seeking any
determination or ruling that might (in the reasonable judgment of
VFCC) materially and adversely affect the performance by VFCC of its
obligations under, or the validity or enforceability of, this
Agreement;
(viii) 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; and
(ix) 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.
SECTION 3.02 Representations and Warranties of the Transferor. The
Transferor hereby makes the following representations and warranties for the
benefit of the Sellers, the Investors, Receivables III, the Note Insurer, the
Indenture Trustee, the Letter of Credit Bank and the Noteholders. Such
representations and warranties speak as of the Closing Date and each Transfer
Date.
(i) Organization and Good Standing. The Transferor is a corporation
duly organized and validly existing in good standing under the laws of the State
of Delaware, with full power and authority to own its properties and to conduct
its business as presently conducted and has the power, authority and legal right
to acquire and own the Conveyed Assets;
(ii) Due Qualification. The Transferor is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualification, except to
the extent that the failure to be so qualified, licensed or approved would not,
in the aggregate, materially and adversely affect the ability of the Transferor
to comply with the terms of this Agreement and the other Transaction Documents
to which it is a party;
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(iii) Power and Authority. The Transferor has the power and authority
to execute and deliver this Agreement and the other Transaction Documents to
which it is a party and to carry out their respective terms; and the execution,
delivery, and performance of this Agreement and other Transaction Documents to
which it is a party have been duly authorized by the Transferor by all necessary
action;
(iv) Due Execution and Delivery. This Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered on behalf of the Transferor;
(v) Binding Obligations. This Agreement and the other Transaction
Documents to which it is a party constitute legal, valid, and binding
obligations of the Transferor and are enforceable 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 other Transaction
Documents to which it is a party will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice of
lapse of time) a default under, the Certificate of Incorporation or By Laws of
the Transferor, or any material term to any indenture to which the Transferor is
a party or violate any law or any order, injunction, writ, rule or regulation
applicable to the Transferor of any court or of any federal or state regulatory
body, administrative agency or other Governmental Authority having jurisdiction
over the Transferor or any of its properties which would have a material adverse
effect on the Conveyed Assets;
(vii) Common Stock. First Sierra is the registered owner of all of the
issued and outstanding common stock of the Transferor, all of which common stock
is validly issued, fully paid and nonassessable and, to the best of its
knowledge, owned of record, free and clear of all mortgages, assignments,
pledges, security interests, warrants, options and rights to purchase;
(viii) No Proceedings. There are no proceedings or investigations of
which the Transferor has received service of process to which the Transferor is
a party pending or, to the knowledge of the Transferor, threatened, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of or any of the Transaction
Documents, (B) seeking to prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents or (C) seeking any
determination or ruling that would materially and adversely affect the
performance by the Transferor of its obligations under, or the validity or
enforceability of, any of the Transaction Documents;
(ix) Approvals and Compliance. All approvals, authorizations, consents,
orders or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection with
the execution and delivery of the Transaction Documents, have been or will be
taken or
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obtained on or prior to the Closing Date and the Transferor is in compliance
with all applicable laws, rules, regulations and orders with respect to the
Transferor, its business and properties and all purchased Contracts;
(x) Solvency. The Transferor is solvent and will not be rendered
insolvent by the transactions contemplated by this Agreement and the other
Transaction Documents and the Transferor has an adequate amount of capital to
conduct its business in the ordinary course and to carry out its obligations
under this Agreement and the other Transaction Documents;
(xi) Subsidiaries. The Transferor has no subsidiaries;
(xii) Tax Returns. The Transferor has filed on a timely basis all tax
returns (federal, state and local) required to be filed and has paid or made
adequate provisions for the payment of all taxes, assessments and other
governmental charges due from the Transferor;
(xiii) Principal Place of Business. The principal place of business and
chief executive office of the Transferor are located at the address of the
Transferor set forth herein and, there are now no, and during the past four
months there have not been, any other locations where the Transferor is located
(as that term is used in the UCC in the state of such location) except that,
with respect to such changes occurring after the date of this Agreement, as
shall have been specifically disclosed to the Servicer, the Note Insurer, the
Letter of Credit Bank and the Indenture Trustee in writing;
(xiv) Accounting and Tax Treatment. The Transferor will treat the
assignment of the Conveyed Assets to the Trust pursuant to the Depositor
Transfer Agreement as a sale of the Conveyed Assets for federal income tax
purposes, and as a sale for financial reporting and accounting purposes; and
(xv) Legal Name. The legal name of the Transferor is as set forth in the
signature line of this Agreement and the Transferor has not changed its name
since its incorporation and since its incorporation, the Transferor did not use,
nor does the Transferor now use, any trade names, fictitious names, assumed
names or "doing business as" names.
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, each proposed Substitute Contract must (i) be
an Eligible Contract, (ii) satisfy all of the representations and warranties set
forth in Section 2.02 of the Servicing Agreement, (iii) have a Discounted
Contract Principal Balance of not less than the Discounted Contract Principal
Balance of the Contract being replaced and (iv) is eligible to be substituted by
First Sierra under the Indenture. For purposes of determining compliance with
clause (iii) of the preceding sentence, if more than one Substitute Contract is
being provided on any date, the Discounted Contract Principal Balance of the
Substitute Contracts and the Contracts being replaced shall be determined on an
aggregate basis.
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(b) Any substitution of a Contract pursuant to this Agreement will be
effected by (i) delivery to the Indenture Trustee of the Contract File for each
such Substitute Contracts, (ii) filing of any UCC financing statements necessary
to perfect the interest of the Indenture Trustee in the Substitute Contracts,
(iii) delivery to the Indenture Trustee of a supplement to the List of Contracts
reflecting such substitution and (iv) delivery to the Indenture Trustee of a
release request and the originally executed trust receipt relating thereto.
(c) The parties hereto agree that in addition to the obligation of
First Sierra to repurchase or to substitute any Contract and the related
Equipment as to which a breach of the representations set forth in the Servicing
Agreement has occurred and is continuing, First Sierra will enforce its remedies
against any Source under any Source Agreement. In consideration of the purchase
of the Equipment and the Contract, First Sierra shall remit the Repurchase
Amount to the Servicer for allocation of such Repurchase Amount pursuant to the
terms of the Indenture. Except as may be set forth in the Transaction Documents,
it is understood and agreed that the obligations of First Sierra with respect to
a breach as provided in this Section 3.03 and Section 4.01 of the Indenture
constitute the sole remedy against First Sierra for such breach available to the
Transferor, the Note Insurer, the Letter of Credit Bank, the Indenture Trustee
and Noteholders. The representations and warranties set forth in Sections 3.01
and 3.02 shall survive the assignment of the Conveyed Assets to the Transferor,
the assignment of the Conveyed Assets to the Trust and the pledge of the Pledged
Property to the Indenture Trustee.
ARTICLE IV
COVENANTS
SECTION 4.01 Seller Covenants. First Sierra and the Sellers, as
applicable, hereby covenant and agree with the Transferor, the Note Insurer, the
Letter of Credit Bank, 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 Transferor, the Trust and the Indenture Trustee in the
Conveyed Assets. First Sierra shall deliver (or cause to be delivered) to the
Transferor file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Preservation of Name, etc. First Sierra will not change its name,
identity or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by First Sierra in
accordance with paragraph (a) above or under any Transaction Document seriously
misleading within the meaning of ss. 9-402(7) of the UCC, unless it shall have
given the Transferor, the Note Insurer, the Letter of Credit Bank and the
Indenture Trustee at least 60 days' prior written notice thereof.
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(c) Preservation of Office. First Sierra will give the Transferor, the
Note Insurer, the Letter of Credit Bank and the Indenture Trustee at least 60
days' prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement.
(d) Obligations with Respect to Conveyed Assets. 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 Transferor, the Trust, the Note Insurer, the Letter of
Credit Bank or the Indenture Trustee in any of the Conveyed Assets.
(e) Compliance with Law. First Sierra will comply, in all material
respects, with all acts, rules, requisitions, orders, decrees and directions of
any Governmental Authority applicable to its business and to the Conveyed Assets
or any part thereof; provided, however, that First Sierra may contest any act,
regulation, order, decree or direction in any reasonable manner which shall not
materially and adversely affect the rights of the Transferor, the Indenture
Trustee, the Note Insurer, the Letter of Credit Bank or the Owner Trustee in the
Conveyed Assets.
(f) Conveyance of Conveyed Assets; Security Interests. Except for the
transfers and conveyances hereunder, or under any Transaction Document, the
Sellers will not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien, on any Conveyed Asset, or any
interest therein and First Sierra shall defend the right, title, and interest of
the Transferor, the Trust, the Indenture Trustee, the Note Insurer, the Letter
of Credit Bank and their respective successors and assigns in, to, and under the
Conveyed Assets, against all claims of third parties claiming, through or under
the Sellers; provided, however, that nothing in this Section 4.01(f) shall
prevent or be deemed to prohibit First Sierra from suffering to exist upon any
of the Conveyed Assets any Liens for municipal or other local taxes if such
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.
(g) Notification of Breach. The Sellers will advise the Transferor, the
Indenture Trustee, the Letter of Credit Bank 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.
(h) Further Assurances. First Sierra will make, execute or endorse,
acknowledge and file or deliver to the Transferor, the Trust and the Indenture
Trustee from time to time such schedules, confirmatory assignments, conveyances,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such further steps relating to the Conveyed
Assets and other rights covered by this Agreement, as the Transferor, the Trust,
the Indenture Trustee, the Letter of Credit Bank and the Note Insurer may
request and reasonably require, provided that no
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UCC filing will be required with respect to the Equipment, except as required by
the Filing Requirements.
(i) Indemnification. First Sierra agrees to indemnify, defend and hold
the Transferor, the Indenture Trustee, the Letter of Credit Bank and the Note
Insurer harmless from and against any and all loss, liability, damage, judgment,
claim, deficiency, or expense (including interest, penalties, reasonable
attorneys' fees and amounts paid in settlement) to which any of them may become
subject insofar as such loss, liability, damage, judgment, claim, deficiency, or
expense arises out of or is based upon a breach by First Sierra of its covenants
contained in Section 4.01, or any information certified set forth in this
Agreement or in any schedule delivered by First Sierra hereunder, being untrue
in any material respect at any time. The obligations of First Sierra under this
Section 4.01(i) shall be considered to have been relied upon by the Transferor,
the Indenture Trustee, the Letter of Credit Bank and the Note Insurer and shall
survive the execution, delivery, and performance of this Agreement regardless of
any investigation made by the Transferor, the Indenture Trustee, the Letter of
Credit Bank and 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 TRANSFEROR, THE INDENTURE TRUSTEE, THE LETTER OF CREDIT BANK, THE
NOTE INSURER OR ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES OR AGENTS.
(j) Notice of Liens. First Sierra shall notify the Transferor, the
Indenture Trustee, the Letter of Credit Bank and the Note Insurer promptly after
becoming aware of any Lien on any Conveyed Asset.
(k) 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 Transferor shall have no responsibility with respect
thereto. First Sierra shall promptly pay and discharge, or cause the payment and
discharge of, all federal income taxes (and all other material taxes) when due
and payable by each such Seller, except (i) such as may be paid thereafter
without penalty or (ii) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. First Sierra shall promptly notify the
Transferor, the Indenture Trustee, the Noteholders, the Letter of Credit Bank
and the Note Insurer of any material challenge, contest or proceeding pending by
or against First Sierra before any taxing authority. First Sierra and the
Transferor 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
Transferor harmless against any claims of liability for such taxes and (ii) the
Transferor 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 Transferor 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 (or, following the Class A
Termination Date, the Letter of Credit Bank), except that First Sierra shall not
require the Transferor to make any payments to First Sierra, pursuant to the Tax
Sharing Agreement, which exceed the
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aggregate federal income tax liability of the Transferor, on a separate return
basis for all taxable years covered by Tax Sharing Agreement, that would arise
if all allowable losses arising at an time during such period were applied to
reduce the Transferor`s aggregate separate taxable income for all such years.
(l) Taxes and Other Liabilities. First Sierra shall promptly pay and
discharge all material taxes, assessments, fees, claims and other governmental
charges when due and payable by First Sierra, the First Sierra Group, or any
member of the First Sierra Group, including the Transferor, 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 Transferor, the Note Insurer, the Letter of Credit Bank 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.
(m) Non-Consolidation. First Sierra shall take all action necessary to
ensure that the Transferor would not be substantially consolidated with First
Sierra, such that the separate corporate existence of First Sierra and the
Transferor would be ignored in the event of a bankruptcy of First Sierra.
SECTION 4.02 Transferor Covenants. The Transferor hereby covenants and
agrees with the Sellers, the Note Insurer, the Letter of Credit Bank and the
Indenture Trustee as follows:
(a) Transferor Certificate. Prior to each date as of which Contracts
and the interest of the Transferor in the Equipment subject to such Contracts
are to be re-purchased by First Sierra pursuant to the Indenture, the Transferor
shall submit to First Sierra a certificate signed by the president, executive
vice president, any vice president or the treasurer of the Transferor (a
"Transferor Certificate"), executed by the Transferor and completed as to its
date and the date of this Agreement. Each Transferor Certificate shall operate
as an assignment, without recourse, representation, or warranty, to First Sierra
of all the Transferor's right, title, and interest in and to such purchased
Contract, the Transferor'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 the Transferor 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, the Transferor
shall, at the Servicer's expense, take such steps as the Servicer deems
necessary to enforce the Contract, including bringing suit in the Transferor's
name.
(b) Obligor's Quiet Enjoyment. The Transferor 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. The
Transferor covenants and agrees that, so long as an Obligor shall not be in
default of any of the provisions of the applicable Contract, neither the
Transferor nor any assignee of the
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Transferor 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 Transferor. The Transferor 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 the
Transferor and such Person would be disregarded) and in that regard, the
Transferor shall:
(i) not engage in any action that would cause the separate legal
identity of the Transferor not to be respected, including, without limitation,
(a) holding itself out as being liable for the debts of any other party or (b)
acting other than through its duly authorized agents;
(ii) not incur, assume or guarantee any indebtedness except for such
indebtedness as may be incurred by the Transferor in connection with the
issuance of the Notes or as otherwise permitted by the Note Insurer;
(iii) not commingle its funds with those of any other entity;
(iv) act solely in its name in the conduct of its business and shall
conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned;
(v) maintain company records and books of account and shall not
commingle its company records and books of account with the records and books of
account of any entity;
(vi) not engage in any business or activity other than in connection
with or relating to the Articles of Incorporation and/or Bylaws;
(vii) not form, or cause to be formed, any subsidiaries;
(viii) comply with all restrictions and covenants in, and shall not
fail to comply with the corporate formalities established in, the Articles of
Incorporation and/or Bylaws;
(ix) maintain separate bank accounts;
(x) manage its day-to-day business without the involvement of First
Sierra;
(xi) maintain a separate office from that of First Sierra;
(xii) not act as an agent of First Sierra; and
(xiii) maintain at all times two independent directors as required by
the Articles of Incorporation and/or Bylaws.
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SECTION 4.03 Transfer of Conveyed Assets. Each Seller, Receivables III
and each Investor understands that the Transferor intends to convey the Conveyed
Assets and its rights under this Agreement to the Trust and the Trust intends to
pledge the Pledged Property to the Indenture Trustee on behalf of the Note
Insurer, the Letter of Credit Bank and the Noteholders, as their interests may
appear, pursuant to the Indenture. Each Seller and each Investor agrees that any
such assignee of the Transferor may exercise the rights of the Transferor
hereunder and shall be entitled to all of the benefits of the Transferor
hereunder to the extent provided for in such assignment.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions to Transferor Obligations. The obligations of
the Transferor to accept the transfer of the Conveyed Assets on the Closing Date
shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of each Seller, Receivables III
and each Investor contained in this Agreement shall be true and correct on the
Closing Date with the same effect as though such representations and warranties
had been made on such date;
(b) All information concerning the Conveyed Assets provided to the
Transferor shall be true and correct as of the Cut-Off Date in all material
respects;
(c) Each Seller shall have delivered to the Transferor a List of
Contracts with respect to its respective Contracts as of the Cut-Off Date and
shall have substantially performed all other obligations required to be
performed by the provisions of this Agreement;
(d) Each Seller shall have recorded and filed, at its expense, any
financing statement with respect to the Contracts and the other Conveyed Assets
to be transferred from time to time to the Transferor from each Seller pursuant
to this Agreement meeting the requirements of applicable state law in such
manner in such jurisdictions as are necessary to perfect the transfer of the
Contracts and the other Conveyed Assets from each such Seller to the Transferor,
and shall deliver a file-stamped copy of such financing statements or other
evidence of such filings to the Transferor;
(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 Transferor, and the Transferor 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 Transferor 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
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Section 4.01(f) hereof), to its respective Contracts and interests in Equipment
shall have been satisfied.
SECTION 5.02 Conditions to Sellers' and Investors' Obligations. The
obligations of each Seller to convey and contribute the Conveyed Assets on the
Closing Date and the obligations of each Investor and Receivables III to direct
Bankers Trust Company, as Trustee of each of the Warehouse Trusts, to convey the
assets of the Warehouse Trusts to the Transferor on the Closing Date shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Transferor contained in
this Agreement shall be true and correct with the same effect as though such
representations and warranties had been made on such date; and
(b) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to each Seller, and each Seller shall have
received from the Transferor copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as each Seller may reasonably have requested.
ARTICLE VI
TERMINATION
SECTION 6.01 Termination. The respective obligations and
responsibilities of each Seller and the Transferor 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; (ii) the
distribution to the Transferor of all amounts required to be paid to it pursuant
to this Agreement; and (iii) the termination of the Indenture in accordance with
the terms thereof; provided, however, that the indemnifications contained in
Section 4.01(i) herein shall survive the termination of this Agreement.
SECTION 6.02 Effect of Termination. No termination or rejection or
failure to assume the executory obligations of this Agreement in the bankruptcy
of any Seller or the Transferor shall be deemed to impair or affect the
obligations pertaining to any executed contribution or executed obligations,
including, without limitation, pre-termination breaches of representations and
warranties by any Seller or the Transferor. Without limiting the foregoing,
prior to termination, neither the failure of the Transferor to deliver a
Transferor 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 contribution 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; provided, however, that no such amendment shall
materially and adversely affect the interests of the Letter of Credit Bank,
without the prior written consent of the Letter of Credit Bank.
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: Texas Commerce Tower 70th Floor, 600 Travis Street, Houston,
Texas 77002, Fax No.: (713) 221-1818, (b) in the case of Receivables III, at the
following address: Texas Commerce Tower 70th Floor, 600 Travis Street, Houston,
Texas 77002, Fax No.: (713) 221-1818 (c) in the case of Prudential, 1220 N.
Market Street, Wilmington, Delaware 19801, (d) in the case of First Union, One
First Union Center, 301 South College Street, Charlotte, North Carolina
28288-0610, (e) in the case of the Indenture Trustee, Four Albany Street, New
York, New York 10006, Attention: Corporate Trust and Agency Group - Structure &
Finance, Fax No.: (212) 250-6439, (f) in the case of VFCC, One First Union
Center, 301 South College Street, Charlotte, North Carolina 28288-0610,(g) in
the case of the Transferor, Texas Commerce Tower 70th Floor, 600 Travis Street,
Houston, Texas 77002, Fax No.: (713) 221-1818, and (h) in the case of the Note
Insurer, the Letter of Credit Bank 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
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whatsoever held invalid, then such covenants, agreements, provisions, or terms
shall be deemed severable from the remaining covenants, agreements, provisions,
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 7.05 Assignment. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement may not be assigned by First Sierra,
without the prior written consent of the Transferor, the Note Insurer (or,
following the Class A Termination Date, the Letter of Credit Bank) 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 Transferor without the prior written consent of First Sierra, the Note
Insurer (or, following the Class A Termination Date, the Letter of Credit Bank)
and the Indenture Trustee. Whether or not expressly stated, all representations,
warranties, covenants and agreements of First Sierra, Receivables III, the
Investors and the Transferor in this Agreement, or in any document delivered by
any of them in connection with this Agreement, shall be for the benefit of, and
shall be exercisable by, the Indenture Trustee for the benefit of the
Noteholders, the Note Insurer and the Letter of Credit Bank, as their interests
may appear.
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, the Letter of Credit Bank or the Note Insurer
to carry into effect the purposes of this Agreement or to better assure and
confirm unto the Indenture Trustee, the Letter of Credit Bank 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 Transferor 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 Trust, the Note Insurer, the Letter of
Credit Bank 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.
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SECTION 7.11 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.12 Schedules and Exhibits. The schedules and exhibits
attached hereto and referred to herein shall constitute a part of this Agreement
and are incorporated into this Agreement for all purposes.
SECTION 7.13 No Bankruptcy Petition Against the Transferor or the
Trust. Each of the parties hereto agrees that, prior to the date that is one
year and one day after the payment in full of the of the latest maturing Notes
issued by the Trust, it will not institute against the Transferor or the Trust,
or join any other Person in instituting against the Transferor 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]
28
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IN WITNESS WHEREOF, the parties hereto have caused this Receivables
Transfer Agreement to be duly executed by their respective officers as of the
day and year first above written.
FIRST SIERRA FINANCIAL, INC.,
as Seller
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:
29
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PRUDENTIAL SECURITIES CREDIT
CORPORATION, as Certificateholder
of the First Sierra Equipment Lease
Trust 1997-C
By:________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity, but solely
as Trustee of each of the First
Equipment Lease Trust 1997-A, the
First Sierra Equipment Lease
Trust 1997-B and the First Sierra
Equipment Lease Trust 1997-C
By:________________________________
Name:
Title:
FIRST SIERRA RECEIVABLES IV, INC.,
as Transferor
By:________________________________
Name:
Title:
30
Conformed Copy
DEPOSITOR TRANSFER AGREEMENT
---------------------------
among
FIRST SIERRA RECEIVABLES IV, INC.,
FIRST SIERRA FINANCIAL, INC.,
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1997-1
and
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
---------------------------
Dated as of September 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS.......................................................2
Section 1.01 Definitions................................................2
ARTICLE TWO TRANSFER OF CONTRACTS.............................................3
Section 2.01 Agreement to Transfer......................................3
Section 2.02 Transfer Price.............................................3
Section 2.03 Transfer of Transferred Property...........................3
Section 2.04 Delivery of Contract Files.................................4
Section 2.05 Cost of Delivery of Documents..............................4
ARTICLE THREE REPRESENTATIONS AND WARRANTIES AND COVENANTS....................5
Section 3.01 Representations and Warranties of the Transferor...........5
Section 3.02 Covenants of the Transferor................................8
Section 3.03 Representations and Warranties of PSSFC....................9
Section 3.04 Representations and Warranties of First Sierra............10
ARTICLE FOUR MERGER OR CONSOLIDATION; COSTS; INDEMNIFICATION.................11
Section 4.01 Merger or Consolidation...................................11
Section 4.02 Costs.....................................................12
Section 4.03 Indemnification...........................................12
Section 4.04 Liabilities...............................................14
ARTICLE FIVE CONDITIONS OF CLOSING...........................................14
Section 5.01 Conditions of PSSFC's Obligations.........................14
Section 5.02 Conditions of the Transferor's Obligations................16
Section 5.03 Termination of PSSFC's Obligations........................16
ARTICLE SIX MISCELLANEOUS....................................................17
Section 6.01 Notices...................................................17
Section 6.02 Severability of Provisions................................17
Section 6.03 Further Assurances........................................18
Section 6.04 Survival..................................................18
Section 6.05 Effect of Headings and Table of Contents..................18
Section 6.06 Successors and Assigns....................................18
Section 6.07 Governing Law.............................................18
Section 6.08 Confirmation of Intent....................................18
Section 6.09 Execution in Counterparts.................................19
Section 6.10 Miscellaneous.............................................19
i
<PAGE>
This DEPOSITOR TRANSFER AGREEMENT (this "Agreement"), dated as of
September 1, 1997, among FIRST SIERRA FINANCIAL, INC., a Delaware corporation
("First Sierra"), FIRST SIERRA RECEIVABLES IV, INC., a Delaware corporation (the
"Transferor"), FIRST SIERRA EQUIPMENT CONTRACT TRUST 1997-1, a Delaware business
trust (the "Issuer" or the "Trust") and PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation ("PSSFC").
W I T N E S S E T H:
WHEREAS, pursuant to a Receivables Transfer Agreement (the
"Receivables Transfer Agreement"), First Sierra and Bankers Trust Company, not
in its individual capacity but solely as trustee under certain equipment trusts
formed by First Sierra and certain third party investors, sold all of its right,
title and interest in and to the Transferred Property (as defined below) to the
Transferor either directly or indirectly through one or more investment trusts;
and
WHEREAS, First Sierra Equipment Contract Trust 1997-1, is a Delaware
business trust formed pursuant to the Trust Agreement dated as of September 1,
1997 (the "Trust Agreement") among PSSFC, the Transferor and Delaware Trust
Capital Management, Inc., as owner trustee (the "Owner Trustee"); and
WHEREAS, the Transferor desires to transfer and assign all of its
right, title and interest in and to the Transferred Property to the Trust upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Issuer intends to pledge all of its right, title and
interest in and to the Transferred Property to Bankers Trust Company, as
Indenture Trustee for the benefit of the Noteholders, the Note Insurer and the
Letter of Credit Bank, as their interests appear under the Indenture dated as of
September 1, 1997 (the "Indenture") among the Issuer, the Servicer, the
Originator and Bankers Trust Company, as indenture trustee (the "Indenture
Trustee"); and
WHEREAS, it is contemplated that following such transfers and
assignments, First Sierra will service the Transferred Property (in such
capacity, the "Servicer") pursuant to the Servicing Agreement dated as of
September 1, 1997 (the "Servicing Agreement") among the Servicer, the
Originator, the Back-up Servicer, the Issuer and the Indenture Trustee; and
WHEREAS, the Transferor desires to transfer to the Issuer, all of the
Transferor's right, title and interest in, to and under the Receivables Transfer
Agreement; and
WHEREAS, the Transferor agrees that all covenants and agreements made
by it herein shall also be for the benefit of the Issuer, the Note Insurer, the
Letter of Credit Bank and the Noteholders;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
<PAGE>
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions. Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the meanings
specified in this Article:
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Offering Documents" means collectively the Prospectus, the Prospectus
Supplement, the Private Placement Memorandum, together with other information
and documents specifically approved by First Sierra or the Transferor for
distribution to prospective holders of Class B Notes.
"Private Placement Memorandum" means the Private Placement Memorandum
dated August 28, 1997, relating to the offering of the Class B Notes, which
Private Placement Memorandum incorporates the Prospectus and the Prospectus
Supplement.
"Prospectus" means the Prospectus dated December 2, 1994 relating to
the offering by PSSFC from time to time of its Equipment Contract Backed
Securities (Issuable in Series) in the form in which it was or will be filed
with the Securities Exchange Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Class A Notes.
"Prospectus Supplement" means the Preliminary Prospectus Supplement
dated August 22, 1997 and the Prospectus Supplement dated August 28, 1997,
relating to the offering of the Class A Notes in the form in which it was or
will be filed with the Commission pursuant to Rule 424(b) under the Securities
Act with respect to the offer and sale of the Class A Notes.
"Registration Statement" means that certain registration statement on
Form S-3, as amended (Registration No. 33-84918) relating to the offering by
PSSFC from time to time of its Equipment Contract Backed Securities (Issuable in
Series) as heretofore declared effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of the
following conditions:
(a) A stop order suspending the effectiveness of the Registration
Statement shall have been issued or a proceeding for that purpose shall have
been initiated or threatened by the Commission; or
(b) Subsequent to the execution and delivery of this Agreement, a
downgrading, or public notification of a possible change, without indication of
direction, shall have occurred in the rating afforded any of the debt securities
or claims paying ability of any person providing any form of credit enhancement
for any of the Notes, by any "nationally recognized statistical rating
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<PAGE>
organization," as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act; or
(c) Subsequent to the execution and delivery of this Agreement, there
shall have occurred an adverse change in the condition, financial or otherwise,
earnings, affairs, regulatory situation or business prospects of First Sierra
reasonably determined by PSSFC to be material; or
(d) Subsequent to the date of this Agreement there shall have occurred
any of the following: (a) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (b) trading of any certificates of First
Sierra 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 PSSFC's 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 PSSFC's reasonable judgment impractical to market
the Class A Notes.
"Transferred Property" means (a) the Conveyed Assets conveyed to the
Transferor under the Receivables Transfer Agreement, (b) all of the Transferor's
right, title and interest in and to, and rights under, the Receivables Transfer
Agreement and (c) any and all income and proceeds of any of the foregoing.
Capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in Annex A hereto.
ARTICLE TWO
TRANSFER OF CONTRACTS
Section 2.01 Agreement to Transfer. (a) Subject to the terms and
conditions of this Agreement, the Transferor hereby agrees to transfer to the
Issuer, and the Issuer hereby agrees to accept the transfer of, on the Closing
Date, the Transferred Property.
(b) The closing for the transfer of the Transferred Property shall
take place at the offices of Dewey Ballantine, New York, New York, at 10:00
a.m., New York time, on the Closing Date or such other place and time as
the parties shall agree.
Section 2.02 Transfer Price. On the Closing Date, as full
consideration for the Transferor's assignment and conveyance of the Transferred
Property to the Issuer at the direction of PSSFC, the Issuer will deliver to the
Transferor (i) cash equal to the $__________, payable by wire transfer of same
day funds and (ii) the Trust Certificate to be issued pursuant to the Trust
Agreement.
Section 2.03 Transfer of Transferred Property . On the Closing Date,
the Transferor shall transfer, assign, set over and convey to the Issuer,
without recourse but subject
3
<PAGE>
to the terms of this Agreement, all right, title and interest in and to the
Transferred Property. Upon payment of the transfer price for the Transferred
Property as provided in Section 2.02 of this Agreement, the Transferor shall
have, and shall be deemed to have, transferred, assigned, set over and conveyed
such Transferred Property. The Transferor's accounting and other records shall
accurately reflect the transfer of the Transferred Property to the Issuer. Upon
the transfer of such Transferred Property, the ownership of each related
Contract, and the contents of the related Contract File shall immediately vest
in the Issuer and the ownership of all related records and documents with
respect to each Contract prepared by or which come into the possession of the
Transferor shall immediately vest in the Issuer. The contents of any Contract in
the possession of the Transferor at any time after such transfer, and any
Scheduled Payments due after the Cut-Off Date and received by the Transferor,
shall be held in trust by the Transferor for the benefit of the Issuer as the
owner thereof, and shall be promptly delivered by the Transferor to or upon the
order of the Issuer.
Section 2.04 Delivery of Contract Files. In connection with the
assignment and transfer of the Transferred Property and Contract Files to the
Issuer pursuant to this Agreement, the Transferor shall cause the Contract Files
relating to the Contracts to be delivered to the Indenture Trustee to be held on
behalf of the Noteholders, the Note Insurer and the Letter of Credit Bank, as
their interests may appear.
Section 2.05 Cost of Delivery of Documents. As between the Transferor
and the Issuer, the costs relating to the delivery of the documents specified in
this Article Two in connection with the Contracts shall be borne by the
Transferor.
4
<PAGE>
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES AND COVENANTS
Section 3.01 Representations and Warranties of the Transferor.
(a) The Transferor hereby represents and warrants to First Sierra, the
Indenture Trustee, the Issuer, the Owner Trustee, the Note Insurer, the
Letter of Credit Bank and PSSFC, as of the date of execution of this
Agreement and as of the Closing Date, that:
(i) The Transferor is duly organized, validly existing, and in good
standing as a corporation under the laws of the State of Delaware and has
all licenses necessary to carry on its business as now being conducted and
is licensed, qualified and in good standing in each State the laws of which
require licensing or qualification in order to conduct business of the type
conducted by the Transferor and to perform its obligations as the
Transferor hereunder; the Transferor has the full power and authority to
own its property, to carry on its business as presently conducted to
execute and deliver this Agreement and the other Transaction Documents to
which it is a party and to perform in accordance herewith and therewith;
the execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) and the
other Transaction Documents to which it is a party by the Transferor and
the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action; this Agreement
and each other Transaction Document to which it is a party evidences the
valid, binding and enforceable obligation of the Transferor; and all
requisite action has been taken by the Transferor to make this Agreement
and each other Transaction Document to which it is a party valid, binding
and enforceable upon the Transferor in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other, similar laws relating to or affecting
creditors' rights generally or by the application of general equitable
principles in any proceeding, whether at law or in equity;
(ii) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required
to be taken, given or obtained, as the case may be, by or from any federal,
state or other governmental authority or agency, that are necessary in
connection with the execution, delivery and performance by the Transferor
of this Agreement and the other Transaction Documents to which it is a
party have been duly taken, given or obtained, as the case may be, are in
full force and effect, are not subject to any pending proceedings or
appeals (administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be obtained
has expired or no review thereof may be obtained or appeal therefrom taken,
and are adequate to authorize the consummation of the transactions
contemplated by this Agreement and each other Transaction Document to which
it is a party on the part of the Transferor and the performance by the
Transferor of its obligations under this Agreement and each other
Transaction Document to which it is a party;
5
<PAGE>
(iii) The consummation of the transactions contemplated by this
Agreement and the other Transaction Documents to which it is a party will
not result in the breach of any terms or provisions of the charter or
bylaws of the Transferor or result in the breach of any term or provision
of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture,
contract or loan or credit agreement or other material instrument to which
the Transferor or its property, is subject, or result in the violation of
any law, rule, regulation, order, judgment or decree to which the
Transferor or its property is subject;
(iv) There is no action, suit, proceeding or investigation pending or,
to the best of the knowledge of the Transferor, threatened, before any
court, administrative agency or tribunal against the Transferor which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties
or assets of the Transferor or in any material prohibition or impairment of
the right or ability of the Transferor to carry on its business
substantially as now conducted, or in any material liability on the part of
the Transferor or which would draw into question the validity or
enforceability of this Agreement, any other Transaction Document to which
it is a party, or the Contracts or of any action taken or to be taken in
connection with the obligations of the Transferor contemplated herein, or
which would be likely to impair materially the ability of the Transferor to
perform under the terms of this Agreement or any other Transaction Document
to which it is a party or that might prohibit its entering into this
Agreement or any other Transaction Document to which it is a party or the
consummation of any of the transactions contemplated hereby or thereby;
(v) The Transferor is not in violation of or in default with respect
to, and the execution and delivery of this Agreement or any other
Transaction Document to which it is a party by the Transferor and its
performance of and compliance with the terms hereof and thereof will not
constitute a violation or default with respect to, any order or decree of
any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which violation or default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Transferor or its properties or
might have consequences that would materially and adversely affect its
performance hereunder or under any other Transaction Document to which it
is a party;
(vi) This Agreement constitutes a valid transfer and assignment of the
Transferred Property to the Trust. Upon the transfer of the Transferred
Property to the Trust at the direction of PSSFC, the Trust will have good
title to each related Contract and such other items comprising the corpus
of the Trust free and clear of any Lien;
(vii) In the event that the transfer of the Transferred Property by
the Transferor to the Trust at the direction of PSSFC is deemed to be a
grant to the Trust of a security interest in the Transferred Property
rather than a transfer, the Trust will have a valid first priority
perfected security interest in all of the Transferor's right, title and
interest in and to the Transferred Property, except for the Equipment not
owned by the Transferor and a valid assignment of its security interest in
the Equipment not owned by the Transferor;
6
<PAGE>
(viii) The transfer, assignment and conveyance of the Contracts by the
Transferor pursuant to this Agreement are not subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction; and
(ix) The consideration received by the Transferor as set forth herein
is fair consideration having value reasonably equivalent to or in excess of
the value of the Conveyed Assets and the performance of the Transferor's
obligations hereunder.
(b) The Transferor additionally represents and covenants that:
(i) The Transferor shall be operated in such a manner that it would
not be substantively consolidated in the trust estate of any other Person
in the event of a bankruptcy or insolvency of such Person and in such
regard, the Transferor shall:
(A) not become involved in the day-to-day management of any other
Person;
(B) not permit First Sierra to become involved in the day-to-day
management of the Transferor except to the extent provided in the
Transaction Documents;
(C) not engage in transactions with any other Person other than those
activities described in Article II hereof and matters necessarily
incident thereto;
(D) maintain separate corporate records and books of account in a
separate business office from any other Person;
(E) prepare financial statements and books and records of First
Sierra after the Closing Date which will reflect the separate
existence of the Transferor;
(F) maintain its assets separately from the assets of any other
Person (including through the maintenance of a separate bank
account);
(G) maintain separate financial statements, books and records from
any other Person;
(H) not guarantee any other Person's obligations or advance funds to,
or accept funds from, any other Person for the payment of
expenses or otherwise permit First Sierra to guarantee any of the
Transferor's obligations;
(I) conduct all business correspondence of the Transferor and other
communications in the Transferor's own name;
(J) not act as an agent of any other Person in any capacity except
pursuant to contractual documents indicating such capacity and
only in respect of transactions described in Article II hereof
and matters necessarily incident thereto;
(K) not fail to hold appropriate meetings of the Board of Directors
at least three times per annum and otherwise as necessary to
authorize all corporate action;
(L) not fail to hold meetings of the stockholders at least one time
per annum;
(M) not form, or cause to be formed, any subsidiaries;
(N) not act as an agent of First Sierra nor permit First Sierra to
act as its agent except to the limited extent permitted under the
Transaction Documents;
(O) maintain two independent directors at all times;
(P) maintain a separate office from First Sierra; and
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<PAGE>
(Q) not engage in intercorporate transactions except to the extent
permitted under the Transaction Documents or its Certificate of
Incorporation; and
(ii) The Transferor's Certificate of Incorporation limits the
Transferor's activities to (A) the purchasing and lending against interests
in pools of trade, account, consumer and receivables, loans and other
obligations representing part or all of the sales price of merchandise,
insurance or services or the obligations due under Contracts, (B) issuing
securities secured by such obligations, (C) holding Trust Certificates and
(D) any activities incidental to the foregoing.
Section 3.02 Covenants of the Transferor. The Transferor covenants to
First Sierra, the Indenture Trustee, the Note Insurer, the Letter of Credit
Bank, the Issuer, the Owner Trustee and PSSFC as follows:
(a) The Transferor shall cooperate with PSSFC, the Issuer and the firm
of independent certified public accountants retained with respect to the
issuance of the Notes in making available all information and taking all
steps reasonably necessary to permit the accountants' letters required
hereunder to be delivered within the times set for delivery herein.
(b) The Transferor agrees to satisfy or cause to be satisfied on or
prior to the Closing Date all of the conditions to PSSFC's obligations set
forth in Section 5.01 hereof that are within the Transferor's (or its
agents') control.
(c) The Transferor hereby agrees to do all acts, transactions, and
things and to execute and deliver all agreements, documents, instruments,
and papers by and on behalf of the Transferor as the Issuer or its
respective counsel may reasonably request in order to consummate the
transfer of the Transferred Property to the Issuer and the subsequent
pledge thereof to the Indenture Trustee for the benefit of the Noteholders,
the Note Insurer and the Letter of Credit Bank, as their interests may
appear, and the rating, issuance and sale of the Notes.
(d) The Transferor hereby agrees to arrange separately for the payment
by a Person other than PSSFC to (i) the Indenture Trustee, (ii) the Owner
Trustee, (iii) the Note Insurer and (iv) the Letter of Credit Bank of all
of their fees and expenses in connection with the transactions contemplated
by the Offering Documents. For the avoidance of doubt, the parties hereto
acknowledge that it is the intention of the parties that PSSFC shall not
pay any of the Indenture Trustee's, the Owner Trustee's, the Note Insurer's
or the Letter of Credit Bank's fees and expenses in connection with the
transactions contemplated by the Offering Documents.
(e) The Transferor 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 Trust
in the Conveyed Assets. The Transferor shall deliver (or cause to be
delivered) to the Owner Trustee file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following
such filing.
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Section 3.03 Representations and Warranties of PSSFC. PSSFC hereby
represents and warrants to First Sierra, the Issuer, the Letter of Credit Bank,
the Note Insurer, the Owner Trustee and the Transferor as of the date of
execution of this Agreement and as of the Closing Date, that:
(a) PSSFC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(b) PSSFC has the corporate power and authority to execute, deliver
and perform, and to enter into and consummate all the transactions
contemplated by this Agreement and the other Transaction Documents to which
it is a party;
(c) Each of this Agreement and the other Transaction Documents to
which it is a party has been duly and validly authorized, executed and
delivered by PSSFC, and constitutes the legal, valid and binding agreement
of PSSFC, enforceable against PSSFC in accordance with its respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law);
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by PSSFC with
this Agreement or any other Transaction Document to which it is a party or
the consummation by PSSFC of any of the transactions contemplated hereby or
thereby, except such as have been made on or prior to the Closing Date;
(e) PSSFC has filed or will file the Prospectus and Prospectus
Supplement with the Commission in accordance with Rule 424(b) under the
Securities Act;
(f) None of the execution and delivery of this Agreement or any other
Transaction Document to which it is a party, the consummation of the other
transactions contemplated hereby or thereby, or the fulfillment of or
compliance with the terms and conditions of this Agreement or any other
Transaction Document to which it is a party, (i) conflicts or will conflict
with the charter or bylaws of PSSFC or conflicts or will conflict with or
results or will result in a breach of, or constitutes or will constitute a
default or results or will result in an acceleration under, any term,
condition or provision of any material indenture, deed of trust, contract
or other agreement or other instrument to which PSSFC is a party or by
which it is bound and which is material to PSSFC, or (ii) results or will
result in a violation of any law, rule, regulation, order, judgment or
decree of any court or governmental authority having jurisdiction over
PSSFC; and
(g) There is no action, suit, proceeding or investigation pending or,
to the best of the knowledge of PSSFC, threatened, before any court,
administrative agency or tribunal against PSSFC which, either in any one
instance or in the aggregate, may result in any material adverse change in
the business, operations, financial condition, properties or assets of
PSSFC or in any material prohibition or impairment of the right or ability
of the PSSFC to carry on its business substantially as now conducted, or in
any material
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liability on the part of PSSFC or which would draw into question the
validity or enforceability of this Agreement, any other Transaction
Document to which it is a party, or the Contracts or of any action taken or
to be taken in connection with the obligations of PSSFC contemplated
herein, or which would be likely to impair materially the ability of PSSFC
to perform under the terms of this Agreement or any other Transaction
Document to which it is a party or that might prohibit its entering into
this Agreement or any other Transaction Document to which it is a party or
the consummation of any of the transactions contemplated hereby or thereby.
Section 3.04 Representations and Warranties of First Sierra. First
Sierra hereby represents and warrants to the Transferor, the Issuer, the Note
Insurer, the Letter of Credit Bank, the Owner Trustee and PSSFC as of the date
of execution of this Agreement and as of the Closing Date, that:
(a) First Sierra is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware;
(b) First Sierra has the corporate power and authority to execute,
deliver and perform, and to enter into and consummate all the transactions
contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed and
delivered by First Sierra, and constitutes the legal, valid and binding
agreement of First Sierra, enforceable against First Sierra in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by First
Sierra with this Agreement or the consummation by First Sierra of any of
the transactions contemplated hereby or thereby, except such as have been
made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
First Sierra or conflicts or will conflict with or results or will result
in a breach of, or constitutes or will constitute a default or results or
will result in an acceleration under, any term, condition or provision of
any indenture, deed of trust, contract or other agreement or other
instrument to which First Sierra is a party or by which it is bound and
which is material to First Sierra, or (ii) results or will result in a
violation of any law, rule, regulation, order, judgment or decree of any
court or governmental authority having jurisdiction over First Sierra;
(f) Neither this Agreement nor the information contained in any
Offering Document, other than in the Prospectus Supplement under the
caption "Method of
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Distribution", nor any statement, report or other document prepared by the
Transferor or First Sierra and furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated hereby
contains any untrue statement or alleged untrue statement of any material
fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading; and
(g) First Sierra additionally represents and covenants that it shall
operate in such a manner that the Transferor would not be substantially
consolidated in the bankruptcy estate of First Sierra, such that the
separate existence of the Transferor would be disregarded in the event of a
bankruptcy of insolvency of First Sierra.
ARTICLE FOUR
MERGER OR CONSOLIDATION; COSTS; INDEMNIFICATION
Section 4.01 Merger or Consolidation. The Transferor 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.
Any partnership or corporation (i) into which the Transferor may be
merged or consolidated, (ii) resulting from any merger, conversion, or
consolidation to which the Transferor shall be party, or (iii) succeeding to the
Transferor's business substantially as a whole, shall execute an agreement of
assumption to perform all of the Transferor's obligations under this Agreement,
and upon such execution will be the Transferor's successor under this Agreement,
without the execution or filing of any document or any further act on the part
of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; provided, however, that (a) immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.01 shall have been breached, (b) the Transferor shall have delivered
to PSSFC, the Issuer, the Rating Agencies, the Note Insurer, the Letter of
Credit Bank, the Owner Trustee and the Indenture Trustee an Officer's
Certificate and an opinion of counsel, satisfactory to each of them, each
stating that such consolidation, merger, or succession and such agreement of
assumption comply with this Section 4.01 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, (c) the Transferor shall have delivered to PSSFC, the Issuer, the
Owner Trustee, the Note Insurer, the Letter of Credit Bank, 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
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 the
Transferor, and (e) the Note Insurer (or, following the Class A Termination
Date, the Letter of Credit Bank) has given its prior written consent.
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Section 4.02 Costs. In connection with the transactions contemplated
under this Agreement, the Transaction Documents and the Offering Documents, the
Transferor shall promptly pay or cause to be paid (or shall promptly reimburse
PSSFC to the extent that PSSFC shall have paid or otherwise incurred): (i) the
fees and disbursements of counsel to First Sierra and the Transferor's counsel;
(ii) the fees and disbursements of PSSFC's counsel; (iii) the fees and
disbursements of Arthur Andersen; (iv) the fees of each of the Rating Agencies;
(v) the fees of the Indenture Trustee and the reasonable fees and disbursements
of the Indenture Trustee's counsel; (vi) the fees of the Owner Trustee and the
reasonable fees and disbursements of the Owner Trustee's counsel; (vii) the fees
of the Note Insurer and the reasonable fees and disbursements of the Note
Insurer's counsel; (viii) the fees of the Letter of Credit Bank and the
reasonable fees and disbursements of the Letter of Credit Bank's counsel; (ix)
expenses incurred in connection with printing the Prospectus relating to the
Class A Notes, the Prospectus Supplement, the Private Placement Memorandum, any
amendment or supplement thereto, any preliminary prospectus and the Notes; (x)
fees and expenses relating to the filing of documents with the Commission
(including, without limitation, periodic reports under the Exchange Act) and
(xi) the shelf registration amortization fee paid in connection with the
issuance of the Class A Notes.
Section 4.03 Indemnification. (a) (i) First Sierra agrees to indemnify
and hold harmless PSSFC, each of its directors, each of its officers who have
signed the Registration Statement, each Underwriter and each of its directors
and each person or entity who controls PSSFC or either Underwriter or any such
person, within the meaning of Section 15 of the Securities Act, against any and
all losses, claims, damages or liabilities, joint and several, to which PSSFC,
either Underwriter or any such person or entity may become subject, under the
Securities Act or otherwise, and will reimburse PSSFC, each Underwriter and each
such controlling person for any legal or other expenses incurred by PSSFC, each
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Offering Document or any amendment or supplement
to any Offering Document approved in writing by the Transferor or First Sierra
or the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements in any
Offering Document or any amendment or supplement to any Offering Document
approved in writing by the Transferor or First Sierra, in light of the
circumstances under which they were made, not misleading, but only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission relates to the information contained in any Offering Document other
than the information excluded in Section 3.04(f). This indemnity agreement will
be in addition to any liability which First Sierra may otherwise have.
(ii) First Sierra agrees to indemnify and to hold each of PSSFC, the
Indenture Trustee, the Owner Trustee, the Issuer, the Note Insurer, the
Letter of Credit Bank and each Noteholder harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that PSSFC, the
Indenture Trustee, the Owner Trustee, the Issuer, the Note Insurer, the
Letter of Credit Bank and any Noteholder may sustain in any way related to
(i) the failure of the Transferor or First Sierra to perform its duties in
compliance with the terms of this Agreement or any other Transaction
Document to which it is a party or (ii) the breach by either the Transferor
or First Sierra of any of the representations or warranties made by it
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in this Agreement or any other Transaction Document to which it is a party.
First Sierra shall immediately notify PSSFC, the Transferor, the Indenture
Trustee, the Owner Trustee, the Issuer, the Note Insurer, the Letter of
Credit Bank and each Noteholder if a claim is made by a third party with
respect to this Agreement, and subject to clause (c) below, First Sierra
shall assume the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against
PSSFC, the Servicer, the Indenture Trustee, the Owner Trustee, the Issuer,
the Note Insurer, the Letter of Credit Bank and/or Noteholder in respect of
such claim.
(b) PSSFC agrees to indemnify and hold harmless the Transferor, each
of its directors and each person or entity who controls the Transferor or any
such person, within the meaning of Section 15 of the Securities Act, against any
and all losses, claims, damages or liabilities, joint and several, to which the
Transferor or any such person or entity may become subject, under the Securities
Act or otherwise, and will reimburse the Transferor and any such director or
controlling person for any legal or other expenses incurred by the Transferor or
any such director or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or in the Prospectus, any
amendment or supplement to the Registration Statement or the Prospectus or the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Such indemnity of
PSSFC does not relate to any information contained in the Private Placement
Memorandum or the Prospectus Supplement other than the information included in
the Prospectus Supplement under the caption "Method of Distribution". This
indemnity agreement will be in addition to any liability which PSSFC may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
4.03 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 4.03, notify the indemnifying party in writing of the commencement
thereof, but the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the indemnifying party may have
to any indemnified party hereunder except to the extent such indemnifying party
has been prejudiced thereby. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. After notice from the indemnifying party to such indemnified
party of its election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 4.03 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of
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such action on behalf of such indemnified party or parties. The indemnifying
party shall not be liable for the expenses of more than one separate counsel.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 4.03 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 4.03 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by the Transferor and First Sierra, on
the one hand, and PSSFC on the other, First Sierra's, the Transferor's and
PSSFC's relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and prevent
any statement or omission, and any other equitable considerations appropriate in
the circumstances. First Sierra, the Transferor and PSSFC agree that it would
not be equitable if the amount of such contribution were determined by pro rata
or per capita allocation. For purposes of this Section 4.03, each director of
PSSFC, each officer of PSSFC who signed the Registration Statement, and each
person, if any who controls PSSFC within the meaning of Section 15 of the
Securities Act, shall have the same rights to contribution as PSSFC, and each
director of the Transferor, and each person, if any who controls the Transferor
within the meaning of Section 15 of the Securities Act, shall have the same
rights to contribution as the Transferor.
Section 4.04 Liabilities. By entering into this Agreement, the
Transferor agrees to be liable, directly to each of PSSFC, the Issuer, the
Indenture Trustee, the Owner Trustee, the Note Insurer, the Letter of Credit
Bank and each Noteholder, for the entire amount of any losses, claims, damages
or liabilities (other than those incurred by a Noteholder in the capacity of an
investor in the Notes or those which arise from any action by any Noteholder) of
the Trust (to the extent Trust assets remaining after the Noteholders have been
paid in full are insufficient to pay such losses, claims, damages or
liabilities) and the actions of the Servicer taken pursuant to the Servicing
Agreement as though the Trust were a partnership under the New York Revised
Limited Partnership Act in which the Transferor was a general partner.
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01 Conditions of PSSFC's Obligations. The obligations of
PSSFC to enter into this Agreement will be subject to the satisfaction, on the
Closing Date of the following conditions. Unless otherwise specified, upon
payment of the transfer price for the Transferred Property such conditions shall
be deemed satisfied or waived.
(a) The obligations of the Transferor required to be performed by it
on or prior to the Closing Date pursuant to the terms of this Agreement shall
have been duly performed
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and complied with in all material respects and all of the representations and
warranties of the Transferor under this Agreement shall be true and correct as
of the Closing Date in all material respects and no event shall have occurred
which, with notice or the passage of time, would constitute a default under this
Agreement, and PSSFC shall have received a certificate to the effect of the
foregoing signed by an authorized officer of the Transferor.
(b) PSSFC shall have received a letter dated the date of this
Agreement, in form and substance acceptable to PSSFC and its counsel, prepared
by Arthur Andersen & Co., independent certified public accountants, regarding
the numerical information contained in the Prospectus Supplement.
(c) The Contracts will be acceptable to PSSFC, in its sole discretion.
(d) PSSFC shall have received the following additional closing
documents, in form and substance satisfactory to PSSFC and its counsel:
(i) the List of Contracts;
(ii) the Transaction Documents and all documents required thereunder,
duly executed and delivered by each of the parties thereto other than
PSSFC;
(iii) a copy of each of First Sierra's and the Transferor's respective
charters and bylaws and all amendments, revisions, and supplements thereto;
(iv) such opinions of the counsel for First Sierra and the Transferor
in form and substance acceptable to PSSFC (it being agreed that the opinion
shall expressly provide that the Indenture Trustee, the Note Insurer and
the Letter of Credit Bank shall be entitled to rely on the opinion);
(v) a letter from Moody's Investors Service 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;
(vi) a letter from Standard & Poor's Rating Services 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;
(vii) a letter from Duff & Phelps Credit Rating Co. that it has
assigned a rating of "BBB" to the Class B-1 Notes, a rating of "AA" to the
Class B-2 Notes and a rating of "B" to the Class B-3 Notes;
(viii) an opinion of counsel for the Indenture Trustee in form and
substance acceptable to PSSFC, (it being agreed that the opinion shall
expressly provide that the Indenture Trustee, Note Insurer and the Letter
of Credit Bank shall be entitled to rely on the opinion);
(ix) an opinion of counsel for the Servicer, in form and substance
acceptable to PSSFC, (it being agreed that the opinion shall expressly
provide that the Indenture
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Trustee, the Note Insurer and the Letter of Credit Bank shall be entitled
to rely on the opinion); and
(x) an opinion of counsel for the Owner Trustee in form and substance
acceptable to PSSFC, (it being agreed that the opinion shall expressly
provide that the Indenture Trustee, the Note Insurer and the Letter of
Credit Bank shall be entitled to rely on the opinion).
(e) All proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be satisfactory in
form and substance to PSSFC and its counsel.
(f) The Transferor shall have furnished PSSFC with such other
certificates of its officers or others and such other documents or opinions as
PSSFC or its counsel may reasonably request.
Section 5.02 Conditions of the Transferor's Obligations. The
obligations of the Transferor under this Agreement shall be subject to the
satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of PSSFC required to be performed by it at
or prior to the Closing Date, pursuant to the terms of this Agreement shall
have been duly performed and complied with and all of the representations
and warranties of PSSFC contained in this Agreement shall be true and
correct as of the Closing Date and the Transferor shall have received a
certificate to that effect signed by an authorized officer of PSSFC.
(b) The Transferor shall have received the following additional
documents:
(i) the Transaction Documents, in each case executed by PSSFC as
applicable;
(ii) a letter from Moody's Investors Service 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;
(iii) a letter from Standard & Poor's Rating Services 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;
(iv) a letter from Duff & Phelps Credit Rating Co. that it has
assigned a rating of "BBB" to the Class B-1 Notes, a rating of "AA" to
the Class B-2 Notes and a rating of "B" to the Class B-3 Notes;
(c) PSSFC shall have furnished the Transferor with such other
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Agreement as the Transferor
may reasonably request.
Section 5.03 Termination of PSSFC's Obligations. PSSFC may terminate
its
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obligations hereunder by notice to the Transferor at any time before delivery of
and payment of the transfer price for the Transferred Property if: (i) any of
the conditions set forth in Section 5.01 are not satisfied when and as provided
therein; (ii) there shall have been the entry of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to First Sierra or the Transferor; (iii) there shall
have been the consent by First Sierra or the Transferor to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
First Sierra or the Transferor or of or relating to substantially all of the
property of First Sierra or the Transferor; (iv) any purchase and assumption
agreement with respect to First Sierra or the Transferor or the assets and
properties of First Sierra or the Transferor shall have been entered into; or
(v) a Termination Event shall have occurred. The termination of PSSFC's
obligations hereunder shall not terminate PSSFC's rights hereunder or its right
to exercise any remedy available to it at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01 Notices . All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, (i)
if to PSSFC, addressed to PSSFC at Prudential Securities Secured Financing
Corporation, One New York Plaza, New York, New York 10292, Attention: General
Counsel, or to such other address as PSSFC may designate in writing to First
Sierra and the Transferor, (ii) if to the Transferor, addressed to First Sierra
Receivables IV, Inc. at Texas Commerce Tower, 70th Floor, 600 Travis Street,
Houston, Texas, Attention: Ms. Sandy B. Ho, or to such other address as the
Transferor may designate in writing to First Sierra and PSSFC, (iii) if to the
Issuer, addressed to Delaware Trust Capital Management Inc., 900 Market Street,
Wilmington, Delaware 19801, (v) if to First Sierra, addressed to First Sierra
Financial, Inc., Texas Commerce Tower, 70th Floor, 600 Travis Street, Houston,
Texas 77002, Attention: Ms. Sandy B. Ho, or to such other address as First
Sierra may designate in writing to PSSFC and the Transferor and (vi) if to the
Note Insurer, the Letter of Credit Bank or the Indenture Trustee at their
respective addresses set forth in Section 11.06 of the Indenture.
Section 6.02 Severability of Provisions . Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Contract shall not invalidate or render unenforceable
such provision in any other jurisdiction. To the extent permitted by applicable
law, the parties hereto waive any provision of law which prohibits or renders
void or unenforceable any provision hereof.
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Section 6.03 Further Assurances. The Transferor agrees to execute and
deliver such instruments and take such actions as PSSFC may, from time to time,
reasonably request in order to effectuate the purpose and to carry out the terms
of this Agreement and any other Transaction Document.
Section 6.04 Survival. The parties to this Agreement agree that the
representations, warranties and agreements made by each of them herein and in
any certificate or other instrument delivered pursuant hereto shall be deemed to
be relied upon by the other party hereto, notwithstanding any investigation
heretofore or hereafter made by such other party or on such other party's
behalf, and that the representations, warranties and agreements made by the
parties hereto in this Agreement or in any such certificate or other instrument
shall survive the delivery of and payment for the Transferred Property.
Section 6.05 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 6.06 Successors and Assign. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as expressly permitted by the terms
hereof, this Agreement may not be assigned, pledged or hypothecated by any party
hereto to a third party without the written consent of the other parties to this
Agreement and the Note Insurer (or, following the Class A Termination Date, the
Letter of Credit Bank); provided, however, that PSSFC may assign its rights
hereunder without the consent of the Transferor.
Section 6.07 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (without
regard to conflicts of laws principles), and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
Section 6.08 Confirmation of Intent. It is the intention of the
Transferor, PSSFC and the Issuer that the assignment and transfer hereunder and
under any Receivables Transfer Agreement transfers good title to the Transferred
Property to the Issuer and constitute a sale for financial accounting purposes,
free and clear of all Liens, from the Transferor to the Issuer, and that the
Transferred Property not be part of the Transferor's estate in the event of the
insolvency or bankruptcy of the Transferor. In the event that the Transferred
Property is held to be property of the Transferor's estate, or if for any reason
this Agreement or any Receivables Transfer Agreement is held or deemed to create
a security interest in the Transferred Property rather than a sale thereof, then
(x) this Agreement and the Receivables Transfer Agreement shall also be deemed
to be a security agreement within the meaning of Article 8 and Article 9 of the
Uniform Commercial Code as in effect in the States of New York, Texas and
Florida and (y) the transfer provided for in this Agreement and under any
Receivables Transfer Agreement shall be deemed to be a grant by the Transferor
to PSSFC and the Issuer of (A) a valid first priority perfected security
interest in all of the Transferor's right, title and interest in and to the
Transferred Property, except for the Equipment not owned by the Transferor, and
(B) a valid assignment of its security interest in the Equipment not owned by
the Transferor. The Transferor hereby grants such a security interest.
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Section 6.09 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 6.10 Miscellaneous. (a) (i) This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof and
(ii) this Agreement may be amended from time to time by First Sierra, the
Transferor, the Issuer and PSSFC with the consent of the Note Insurer but
without the consent of any of the Noteholders, to cure any ambiguity herein;
provided, however, that such action shall not, as evidenced by an opinion of
counsel acceptable to the Indenture Trustee and at the expense of the
Transferor, adversely affect in any respect the interests of any Noteholder or
the Letter of Credit Bank. A copy of any such opinion shall be delivered to the
Rating Agency by PSSFC.
(b) This Agreement may also be amended from time to time by First
Sierra, the Transferor, the Issuer and PSSFC 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 Agreement,
or of modifying in any manner the rights of the Noteholders; provided, that if
any such amendment would have a material and adverse affect on the Letter of
Credit Bank, such amendment shall require the prior written consent of the
Letter of Credit Bank.
(c) A copy of any amendment to this Agreement shall be delivered to
the Rating Agencies by PSSFC.
(d) The parties agree that each of the Letter of Credit Bank and the
Note Insurer is an intended beneficiary of this Agreement and the Indenture
Trustee is an intended third-party beneficiary of this Agreement to the extent
necessary to enforce the rights and to obtain the benefit of the remedies of
PSSFC and the Issuer under this Agreement which are assigned to the Indenture
Trustee for the benefit of the Noteholders, the Note Insurer and the Letter of
Credit Bank, as their interests may appear, pursuant to the Indenture and to the
extent necessary to obtain the benefit of the enforcement of the obligations and
covenants of the Transferor under this Agreement.
[Signatures Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
FIRST SIERRA RECEIVABLES IV, INC.
By:________________________________________
Name:
Title:
FIRST SIERRA FINANCIAL, INC.
By:________________________________________
Name:
Title:
FIRST SIERRA EQUIPMENT CONTRACT
TRUST 1997-1
By: DELAWARE TRUST CAPITAL
MANAGEMENT, INC., not in its individual
capacity, but solely as Owner Trustee
By:________________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:________________________________________
Name:
Title:
[Signature Page for Depositor Transfer Agreement]
20
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE
ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ______________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
FIRST SIERRA RECEIVABLES EQUIPMENT CONTRACT TRUST 1997-1
(Exact name of obligor as specified in its charter)
Delaware Pending
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
900 Market Street 19801
Wilmington, Delaware (Zip Code)
(Address of principal
executive offices)
FIRST SIERRA EQUIPMENT CONTRACT TRUST 1997-1
Equipment Contract - Backed Notes
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 3. -15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of Bankers
Trust Company dated August 7, 1990, Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
33-65171, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated June 19, 1997, copy
attached.
Exhibit 2 - Certificate of Authority to commence business
- Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No.
33-21047.
Exhibit 3 - Authorization of the Trustee to exercise
corporate trust powers - Incorporated herein by
reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust Company, as
amended on February 18, 1997, Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 333-24509-01.
<PAGE>
-2-
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company required by
Section 321(b) of the Act. - Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
Exhibit 7 - The latest report of condition of Bankers
Trust Company dated as of June 30, 1997, copy
attached.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
<PAGE>
-3-
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of September, 1997.
BANKERS TRUST COMPANY
By: /s/ Lillian K. Peros
----------------------------
Lillian K. Peros
Assistant Vice President
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the
Banking Law," dated June 19, 1997, providing for an increase in authorized
capital stock from $1,601,666,670 consisting of 100,166,667 shares with a par
value of $10 each designated as Common Stock and 600 shares with a par value of
$1,000,000 each designated as Series Preferred Stock to $2,001,666,670
consisting of 100,166,667 shares with a par value of $10 each designated as
Common Stock and 1,000 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of New
York,
this 27th day of June in the Year of our Lord one thousand
nine hundred and ninety-seven.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended to
increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into One
Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 600 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred Million,
One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (100,166,667)
shares with a par value of $10 each designated as Common Stock and 1000
shares with a par value of One Million Dollars ($1,000,000) each designated
as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was authorized
by unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 19th
day of June, 1997.
James T. Byrne, Jr.
--------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
--------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
--------------------------
Lea Lahtinen
- -------
Sworn to before me this 19th day
of June, 1997.
Sandra L. West
- -----------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1997
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, reported the amount outstanding
as of the last business day of the quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
_________________
| C400 |
---------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS | / / / / / / / / / / / / / / / / / / |
1. Cash and balances due from depository institutions
(from Schedule RC-A): | / / / / / / / / / / / / / / / / / / |
a. Noninterest-bearing balances and currency
and coin(1) .............................................. | 0081 1,724,000 | 1.a.
b. Interest-bearing balances(2) ............................. | 0071 2,648,000 | 1.b.
2. Securities: | / / / / / / / / / / / / / / / / / / |
a. Held-to-maturity securities (from Schedule RC-B, column A) | 1754 0 | 2.a.
b. Available-for-sale securities (from Schedule RC-B,
column D)................................................. | 1773 3,990,000 | 2.b.
3 Federal funds sold and securities purchased under agreements to
resell in domestic offices....................................... | / / / / / / / / / / / / / / / / / / |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / / / / / / / / / / / / / / / / / |
a. Federal funds sold and securities purchased under agreements
to resell.................................................. | 1350 26,430,000| 3.
4. Loans and lease financing receivables: | / / / / / / / / / / / / / / / / / / |
a. Loans and leases, net of unearned
income (from Schedule RC-C)...............RCFD 2122 17,815,000 | / / / / / / / / / / / / / / / / / / | 4.a.
b. LESS: Allowance for loan
and lease losses..........................RCFD 3123 723,000 | / / / / / / / / / / / / / / / / / / | 4.b.
c. LESS: Allocated transfer risk reserve ..RCFD 3128 0 | / / / / / / / / / / / / / / / / / / | 4.c.
d. Loans and leases, net of unearned income, | / / / / / / / / / / / / / / / / / / |
allowance, and reserve (item 4.a minus 4.b and 4.c) ....... | 2125 17,092,000| 4.d.
5. Assets held in trading accounts ................................. | 3545 40,350,000| 5.
6. Premises and fixed assets (including capitalized leases) ........ | 2145 937,000| 6.
7. Other real estate owned (from Schedule RC-M) .................... | 2150 195,000| 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)................................... | 2130 96,000| 8.
9. Customers' liability to this bank on acceptances outstanding .... | 2155 691,000| 9.
10. Intangible assets (from Schedule RC-M) .......................... | 2143 85,000| 10.
11. Other assets (from Schedule RC-F) ............................... | 2160 4,633,000| 11.
12. Total assets (sum of items 1 through 11) ........................ | 2170 98,871,000| 12.
---------------------------------------------
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued __________________________________________
Dollar Amounts in Thousands | / / / / / / / / Bil Mil Thou |
- ---------------------------------------------------------------------------------------- ----------------------------------
<S> <C> <C>
LIABILITIES | / / / / / / / / / / / / / / / / / / |
13. Deposits: | / / / / / / / / / / / / / / / / / / |
a. In domestic offices (sum of totals of columns A
and C from Schedule RC-E, part I) | RCON 2200 18,026,000 | 13.a.
(1) Noninterest-bearing(1) .......RCON 6631 3,184,000.. | / / / / / / / / / / / / / / / / / / | 13.a.(1)
(2) Interest-bearing .............RCON 6636 14,842,000.. | / / / / / / / / / / / / / / / / / / | 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries,
and IBFs (from Schedule RC-E | / / / / / / / / / / / / / / / / / / |
part II) .................................................... | RCFN 2200 22,173,000 | 13.b.
(1) Noninterest-bearing ..........RCFN 6631 1,454,000.. | / / / / / / / / / / / / / / / / / / | 13.b.(1)
(2) Interest-bearing .............RCFN 6636 20,719,000.. | / / / / / / / / / / / / / / / / / / | 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase domestic offices of the bank and | RCFD 2800 14,623,000 | 14.
of its Edge and Agreement subsidiaries, and in IBFs:.............. | / / / / / / / / / / / / / / / / / / |
15. a. Demand notes issued to the U.S. Treasury .................... | RCON 2840 0 | 15.a.
b. Trading liabilities ......................................... | RCFD 3548 19,819,000 | 15.b.
16. Other borrowed money: | / / / / / / / / / / / / / / / / / / /|
a. With original maturity of one year or less .................. | RCFD 2332 6,877,000 | 16.a.
b. With original maturity of more than one year through
three years.................................................. | A547 217,000 | 16.b.
c. With a remaining maturity of more than three years............ | A548 4,848,000 | 16.c
17. Not Applicable. | / / / / / / / // / / / / / / / / / / | 17.
18. Bank's liability on acceptances executed and outstanding ......... | RCFD 2920 691,000 | 18.
19. Subordinated notes and debentures ................................ | RCFD 3200 1,251,000 | 19.
20. Other liabilities (from Schedule RC-G) ........................... | RCFD 2930 4,872,000 | 20.
21. Total liabilities (sum of items 13 through 20) ................... | RCFD 2948 93,397,000 | 21.
| / / / / / / / / / / / / / / / / / / |
22. Not Applicable | / / / / / / / / / / / / / / / / / / | 22.
EQUITY CAPITAL | / / / / / / / / / / / / / / / / / / |
23. Perpetual preferred stock and related surplus .................... | RCFD 3838 1,000,000 | 23.
24. Common stock ..................................................... | RCFD 3230 1,001,000 | 24.
25. Surplus (exclude all surplus related to preferred stock) ......... | RCFD 3839 540,000 | 25.
26. a. Undivided profits and capital reserves ...................... | RCFD 3632 3,314,000 | 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities .................................... | RCFD 8434 ( 3,000) | 26.b.
27. Cumulative foreign currency translation adjustments .............. | RCFD 3284 ( 378,000) | 27.
28. Total equity capital (sum of items 23 through 27) ................ | RCFD 3210 5,474,000 | 28.
29. Total liabilities, limited-life preferred stock,
and equity capital (sum of items 21, 22, | / / / / / / / / / / / / / / / / / / |
and 28) .......................................................... | RCFD 3300 98,871,000 | 29.
-------------------------------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of Number
auditing work performed for the bank by independent external -------------
auditors as of any date during 1995 ............. | RCFD 6724 N/A | M.1
-------------------------------------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
