<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1994
REGISTRATION NO. 33-51935
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
GREEN TREE FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
MINNESOTA 41-1263905
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
(612) 293-3400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DREW S. BACKSTRAND
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
(612) 293-3400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
CHARLES F. SAWYER CATHY M. KAPLAN
DORSEY & WHITNEY BROWN & WOOD
220 SOUTH SIXTH STREET ONE WORLD TRADE CENTER
MINNEAPOLIS, MINNESOTA 55402 NEW YORK, NEW YORK 10048
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 185,862.06
Blue Sky fees and expenses.................................... 10,000.00
Accountant's fees and expenses................................ 500,000.00*
Attorney's fees and expenses.................................. 100,000.00*
Trustee's fees and expenses................................... 15,000.00
Printing and engraving expenses............................... 150,000.00*
Rating Agency fees............................................ 150,000.00*
-------------
Total....................................................... $1,110,862.06
=============
</TABLE>
--------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Statutes requires Green Tree ("the
Company") to indemnify a person made or threatened to be made a party to a
proceeding by reason of the former or present official capacity of the person
with respect to the Company, against judgments, penalties, fines, including
reasonable expenses, if such person (1) has not been indemnified by another
organization or employee benefit plan for the same judgments, penalties, fines,
including without limitations, excise taxes assessed against the person with
respect to an employee benefit plan, settlements, and reasonable expenses,
including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding with respect to the same acts or omissions; (2)
acted in good faith; (3) received no improper personal benefit, and statutory
procedure has been followed in the case of any conflict of interest by a
director; (4) in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and (5) in the case of acts or omissions
occurring in the person's performance in the official capacity of director or,
for a person not a director, in the official capacity of officer, committee
member, employee or agent, reasonably believed that the conduct was in the best
interests of the Company, or, in the case of performance by a director,
officer, employee or agent of the Company as a director, officer, partner,
trustee, employee or agent of another organization or employee benefit plan,
reasonably believed that the conduct was not opposed to be best interests of
the Company, unless otherwise limited by the Articles of Incorporation or
Bylaws of the Company. In addition, Section 302A.521, subd. 3, requires payment
by the Company, upon written request, of reasonable expenses in advance of
final disposition in certain instances, upon receipt of a written undertaking
by the person to repay all amounts so paid if it is ultimately determined that
the person is not entitled to indemnification, unless otherwise limited by the
Articles of Incorporation or Bylaws of the Company. A decision as to required
indemnification is made by a disinterested majority of the Board of Directors
present at a meeting at which a disinterested quorum is present, or by a
designated committee of the Board, by special legal counsel, by the
shareholders, or by a court.
The Company's Articles of Incorporation provide that a director is not liable
to the Company or its shareholders for monetary damages for a breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law; (iii) under Sections 302A.559 or 80A.23 of the
Minnesota Statutes; (iv) for any transaction from which the director derived an
improper personal benefit; or (v) for any act or omission occurring prior to
the date such indemnification provision became effective.
The Company maintains a directors' and officers' insurance policy.
II-1
<PAGE>
Pursuant to the form of Underwriting Agreement, a copy of which is included
as Exhibit 1.1 hereto, the Underwriters will agree, subject to certain
conditions, to indemnify the Company, its directors, certain of its officers
and persons who control the Company within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), against certain liabilities.
ITEM 16. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Not Applicable
(b) Exhibits:
<TABLE>
<C> <S>
*1.1 Proposed form of Underwriting Agreement
**3.1 Articles of Incorporation of Green Tree Financial Corporation
**3.2 Bylaws of Green Tree Financial Corporation
*4.1 Form of Trust Agreement
*4.2 Form of Assignment made by Green Tree Financial Corporation in favor
of Finance I
*4.3 Form of Assignment made by Green Tree Financial Corporation in favor
of Finance I and Finance II
*4.4 Form of Transfer Agreement among Finance I, Finance II and the Trust
*4.5 Form of Finance I Note
*4.6 Form of Servicing Agreement between Green Tree Financial Corporation
and the Trust
*4.7 Form of Security Agreement between Finance I and the Trust
*4.8 Form of Administration Agreement among the Trust, the Administrator
and the Trustee
*5.1 Opinion and consent of Dorsey & Whitney as to legality
8.1 Opinion of Dorsey & Whitney as to tax matters
***21.1 Subsidiaries of the Registrant
*23.1 Consent of Dorsey & Whitney (included as part of Exhibit 5.1)
24.1 Power of attorney from officers and directors of the Registrant
signed by an attorney-in-fact (included on page II-4)
</TABLE>
--------
* Previously filed.
** Incorporated by reference to the similarly numbered exhibit to the
Registrant's Registration Statement on Form S-11 (File No. 33-50236),
as amended, which became effective on September 11, 1992.
*** Incorporated by reference to Exhibit 22.1 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this registration statement in reliance upon Rule
II-2
<PAGE>
430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAINT PAUL, STATE OF MINNESOTA, ON
MARCH 2, 1994.
Green Tree Financial Corporation
/s/ John W. Brink
By:
---------------------------------
JOHN W. BRINK
EXECUTIVE VICE PRESIDENT,
TREASURER AND CHIEF FINANCIAL
OFFICER
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the March 2, 1994
- ------------------------------------- Board and Chief
LAWRENCE M. COSS Executive Officer
(Principal
Executive Officer)
and Director
/s/ John W. Brink Executive Vice March 2, 1994
- ------------------------------------- President,
JOHN W. BRINK Treasurer and Chief
Financial Officer
(Principal
Financial Officer)
* Vice President and March 2, 1994
- ------------------------------------- Controller
ROBLEY D. EVANS (Principal
Accounting Officer)
* Director March 2, 1994
- -------------------------------------
RICHARD G. EVANS
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director March 2, 1994
- -------------------------------------
C. THOMAS MAY, JR.
* Director March 2, 1994
- -------------------------------------
W. MAX MCGEE
* Director March 2, 1994
- -------------------------------------
ROBERT S. NICKOLOFF
* Director March 2, 1994
- -------------------------------------
KENNETH S. ROBERTS
/s/ John W. Brink
* By
--------------------------------
JOHN W. BRINK
AS ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S> <C>
*1.1 Proposed form of Underwriting Agreement
**3.1 Articles of Incorporation of Green Tree Financial Corporation
**3.2 Bylaws of Green Tree Financial Corporation
*4.1 Form of Trust Agreement
*4.2 Form of Assignment made by Green Tree Financial Corporation in
favor of Finance I
*4.3 Form of Assignment made by Green Tree Financial Corporation in
favor of Finance I and Finance II
*4.4 Form of Transfer Agreement among Finance I, Finance II and the
Trust
*4.5 Form of Finance I Note
*4.6 Form of Servicing Agreement between Green Tree Financial
Corporation and the Trust
*4.7 Form of Security Agreement between Finance I and the Trust
*4.8 Form of Administration Agreement among the Trust, the
Administrator and the Trustee
*5.1 Opinion and consent of Dorsey & Whitney as to legality
8.1 Opinion of Dorsey & Whitney as to tax matters
***21.1 Subsidiaries of the Registrant
*23.1 Consent of Dorsey & Whitney (included as part of Exhibit 5.1)
24.1 Power of attorney from officers and directors of the Registrant
signed by an attorney-in-fact (included on page II-4)
</TABLE>
- --------
* Previously filed.
** Incorporated by reference to the similarly numbered exhibit to the
Registrant's Registration Statement on Form S-11 (File No. 33-50236), as
amended, which became effective on September 11, 1992.
*** Incorporated by reference to Exhibit 22.1 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.
<PAGE>
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Registration Statement on Form S-3
File No. 33-51935
Tax Characterization Issues
Gentlemen and Ladies:
We have acted as counsel to Green Tree Financial Corporation, a Minnesota
corporation ("Green Tree"), in connection with the preparation of a
Registration Statement on Form S-3, File No. 33-51935, filed with the
Securities and Exchange Commission on January 18, 1994, as amended by
Amendment No. 1 thereto filed on February 25, 1994 (the "Registration
Statement"), relating to the registration of $508,000,000 of __% Securitized
Net Interest Margin Certificates (the "Senior Certificates"). The Senior
Certificates are to be issued under a Trust Agreement (the "Trust Agreement")
substantially in the form filed as Exhibit 4.1 to the Registration Statement,
among Green Tree Manufactured Housing Net Interest Margin Finance Corp. I, a
Delaware corporation ("Finance I"), Green Tree Manufactured Housing Net
Interest Margin Finance Corp. II, a Delaware corporation ("Finance II"), and
Wilmington Trust Company, as trustee (the "Trustee").
You have requested our opinion with respect to the federal income tax
characterization of the Trust and the Senior Certificates. For purposes of
rendering our opinion we have examined the Registration Statement, the Trust
Agreement and the related documents and agreements contemplated therein
(collectively, the "Transaction Documents") and we have reviewed such questions
of law as we have considered necessary and appropriate. Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to them
in the Trust Agreement.
Our opinion is based upon the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), currently applicable Treasury Department
regulations issued thereunder, current published administrative
positions of the Internal Revenue Service (the "Service") contained in revenue
rulings and revenue procedures, and judicial decisions, all of which are subject
to
<PAGE>
change, either prospectively or retroactively, and to possibly differing
interpretations. Any change in such authorities may affect the opinions
rendered herein. Our opinion is also based on the projections,
representations, warranties, covenants and agreements set forth in the
Transaction Documents and the assumption that Green Tree, the Senior
Certificateholders, the Subordinated Certificateholders and the Trustee will
at all times comply with the requirements of the Transaction Documents. We
have also relied in part on various factual representations made to us by the
Subordinated Certificateholders, including the following:
1. There are and will be during the life of the Trust no contracts or
other agreements between the Subordinated Certificateholders and the
Senior Certificateholders other than as set forth in the Transaction
Documents.
2. The Senior Certificateholders will not control the Subordinated
Certificateholders or otherwise cause the Subordinated
Certificateholders to act as their agent, and will not use the
Subordinated Certificateholders to conceal their own active
involvement in the conduct of the business of the Trust.
3. The net worth of each Subordinated Certificateholder shall be not less
than the Minimum Net Worth.
Although we have not undertaken an independent investigation of any factual
matters, nothing contrary to any of these representations has come to our
attention in the course of our consideration of these matters. Any alteration
of such factual representations may adversely affect our opinion.
An opinion of counsel is predicated on all the facts and conditions set
forth in the opinion and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of the opinion.
It is not a guarantee of the current status of the law and should not be
accepted as a guarantee that a court of law or an administrative agency will
concur in the opinion.
1. Federal Tax Characterization of the Trust. Based principally on
-----------------------------------------
currently applicable Treasury Regulations issued under Section 7701 of the Code,
which Regulations we believe to be controlling, it is our opinion that the Trust
will not be treated as an "association" taxable as a corporation for federal
income tax purposes. In two significant cases regarding the classification of
limited partnerships for tax purposes, the opinions of the Court of Claims and
the United States Tax Court closely followed the tests set forth in these
regulations. See Zuckman v.
<PAGE>
United States, 524 F.2d 79 (Ct. Cl. 1975); Larson v. Commissioner, 66 T.C. 159
(1976), acq., 1979-1 C.B. 1; see also Rev. Rul. 79-106, 1979-1 C.B. 448, Rev.
Rul. 93-50, 1993-25 I.R.B. 13, and Rev. Proc. 89-12, 1989-1 C.B. 798.
Furthermore, in Revenue Ruling 88-79, 1988-2 C.B. 361, the Service ruled that
the tests set forth in these regulations to distinguish a partnership from an
association should also be applied to determine the tax characterization of a
business trust.
Section 301.7701-2(a)(1) of the Treasury Regulations lists six major
characteristics ordinarily found in a corporation which distinguish a
corporation from other forms of organizations. Section 301.7701-2(a)(2) of the
Treasury Regulations provides that since two of these factors (associates and an
objective to carry on business and divide the gains therefrom) are generally
common to both corporations and partnerships, the determination of whether an
organization that has such characteristics is to be treated for tax purposes as
a partnership or as an association taxable as a corporation depends upon an
analysis of the remaining factors: continuity of life, free transferability of
interests, centralization of management and limited liability.
Section 301.7701-2(a)(3) of the Treasury Regulations specifies that an
unincorporated organization shall not be classified as an association taxable as
a corporation unless such organization has more corporate characteristics than
noncorporate characteristics, excluding characteristics common to both types of
organizations. Under Section 301.7701-2(a)(3) of the Treasury Regulations, each
of the four above-described characteristics is assigned equal weight in
determining whether an organization has more corporate characteristics than non-
corporate characteristics. See Larson and Rev. Rul. 93-50, 1993-25 I.R.B. 13,
each of which applied equal weight to each of the four characteristics.
We conclude that under the Treasury Regulations' tests and relevant
judicial authorities, the Trust lacks continuity of life and limited liability
and that the Trust therefore will not be treated as an association taxable as a
corporation for federal income tax purposes. The basis for this conclusion is
discussed in more detail below.
(a) Continuity of Life. Under Section 301.7701-2(b)(1) of the Treasury
------------------
Regulations, an organization is deemed to lack the corporate characteristic of
continuity of life if the death, insanity, bankruptcy, retirement, resignation
or expulsion of any member will cause a dissolution of the organization.
Section 301.7701-2(b)(1) of the Treasury Regulations further provides that a
limited partnership will not have continuity of life if such an event of
withdrawal of a general partner causes a dissolution of the partnership,
notwithstanding the fact that a dissolution upon such an event may be avoided by
the remaining general partners
<PAGE>
or at least a majority in interest of all remaining partners agreeing to
continue the partnership.
Section 10.2 of the Trust Agreement provides that if (A) both of the
Subordinated Certificateholders experience a Dissolution Event (consisting of
the withdrawal or expulsion of such Subordinated Certificateholder as a
Subordinated Certificateholder of the Trust, the termination or dissolution of
such Subordinated Certificateholder, or the occurrence of an Insolvency Event
with respect to such Subordinated Certificateholder), or (B) one of the
Subordinated Certificateholders experiences a Dissolution Event and the
remaining Subordinated Certificateholder is unable, within 90 days of such
Dissolution Event, to locate a successor Subordinated Certificateholder and to
obtain a satisfactory opinion of counsel to the effect that the Trust will not
thereafter be an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes, the Trust shall terminate. Based
on this provision and the foregoing authorities, we conclude that the Trust
lacks the corporate characteristic of continuity of life.
(b) Limited Liability. Section 301.7701-2(d)(1) of the Treasury
-----------------
Regulations provides that an organization has the corporate characteristic of
limited liability if there is no member who is personally liable for the debts
of the organization. Section 301.7701-2(d)(1) of the Treasury Regulations
further provides that in the case of a corporate general partner of a limited
partnership, personal liability exists with respect to such general partner if
the general partner has "substantial assets" (in addition to its interest in the
partnership) which could be reached by a creditor of the partnership or if the
general partner is not merely a "dummy" acting as the agent for the limited
partners. For advance ruling purposes, a limited partnership generally will be
deemed to lack limited liability where the net worth of its corporate general
partners at the time of the ruling request equals at least 10% of the total
contributions to the partnership, and such net worth is expected to continue to
equal at least 10% of the total contributions throughout the life of the
partnership. Rev. Proc. 89-12 at (S) 4.07. In Larson, the Tax Court held that,
in the case of corporate general partners, if (1) the persons controlling the
general partners are independent from, and unrelated to, the limited partners,
and (2) the general partners are not being used by the limited partners "as a
screen to conceal their own active involvement in the conduct of the business"
of the partnership, then the general partner or partners will not be considered
as agents of the limited partners.
Although the Subordinated Certificateholders have represented that each of
them will have a net worth at least equal to the Minimum Net Worth, we have not
determined if the Subordinated Certificateholders have "substantial assets"
within the meaning of the Treasury Regulations. Consistent with the
<PAGE>
discussion below, if the Senior Certificates are treated as debt of the Trust,
it would appear, however, that the Subordinated Certificateholders may satisfy
the 10% net worth condition to an advance ruling discussed above. Moreover, if
the Senior Certificates are treated as debt of the Trust, the Subordinated
Certificateholders will be the only parties who can be treated as partners in
the Trust, and thus the Subordinated Certificateholders could not be
considered to be "dummies" acting as agents for any other partners.
In addition, the Subordinated Certificateholders have represented that the
Senior Certificateholders will not control the Subordinated Certificateholders
or otherwise cause the Subordinated Certificateholders to act as their agent,
and that the Senior Certificateholders will not use the Subordinated
Certificateholders to conceal their own active involvement in the conduct of the
business of the Trust. Thus, even if the Senior Certificates were
recharacterized as equity interests in the Trust, the Subordinated
Certificateholders would not be "dummies" acting as the agents of the Senior
Certificateholders. Therefore, based on the foregoing authorities and the
representations of the Subordinated Certificateholders, we conclude that the
Trust lacks the corporate characteristic of limited liability.
Thus, we conclude that under the tests of the applicable Treasury
Regulations, the Trust lacks the corporate characteristics of continuity of life
and limited liability. Under the Treasury Regulations, the absence of any two
of the four principal characteristics which distinguish a partnership from an
association is sufficient to establish that the Trust will not be treated as an
association for federal income tax purposes. Therefore, it is our opinion that
pursuant to Section 7701 of the Code, the Trust will not be treated as an
association taxable as a corporation for federal income tax purposes. It is
not necessary to determine and we do not express any opinion regarding whether
the Trust will possess the characteristics of free transferability or
centralized management.
(c) Publicly Traded Partnership. Under Section 7704 of the Code, certain
---------------------------
publicly traded partnerships are treated as corporations for federal income tax
purposes. This treatment does not apply, however, to any publicly traded
partnership if 90% or more of the gross income of the partnership constitutes
"qualifying income." For purposes of Section 7704, "qualifying income"
generally includes interest, dividends and certain other types of passive
income.
(i) Certain Qualifying Income. Pursuant to the Transaction Documents, the
-------------------------
sole sources of income for the Trust will be the Residual Assets (and the
related obligation of Green Tree to make Inside Refinancing Payments and
Repurchase Payments pursuant to the Residual Assets Assignment), the Finance I
Note and possibly income generated by the Reserve Fund from Eligible
<PAGE>
Investments. Based, in part, on the representations made in the documents
creating the REMICs in which the Residual Assets represent an ownership
interest, we conclude that the income of the Trust from the Residual Assets will
be considered qualifying income within Section 7704 of the Code. Furthermore,
we believe that the interest payments on the Finance I Note, as well as income
generated by the Reserve Fund, will also be treated as qualifying income.
(ii) Status of the Finance I Note. In general, for federal income tax
----------------------------
purposes, the characterization of a transaction as a sale of property or a
secured loan is a question of fact, the resolution of which is based upon a
determination of who will receive the benefits of, and bear the burdens relating
to, the property. Thus, the determination of whether an instrument arising from
such a transaction will be treated as debt for federal income tax purposes, or
instead will be treated as a sale of the assets which secure such debt, depends
on all the facts and circumstances in each case. See generally, Plumb, The
Federal Income Tax Significance of Corporate Debt: A Critical Analysis and a
Proposal, 26 Tax L. Rev. 369 (1971). In any such determination, several factors
must be considered, and debt characterization may be indicated by, among other
things, the independence of the debt holders and equity holders, the intention
of the parties to create a debt, the creation of a formal debt instrument, the
provision of a fixed maturity date, the safety of the principal amount, the debt
to equity ratio of the issuer, the nature of the assets serving as security for
the obligation, and various other factors.
With respect to the Finance I Note, we note that the Trust, as the holder
of the Finance I Note, may be considered independent from Green Tree, the sole
owner of the equity interests in Finance I. Finance I and the Trust have
evidenced their intention to create a debt, and the Finance I Note is in form a
debt instrument which includes an unconditional promise to pay a sum certain,
together with interest on the unpaid balance thereof, by a reasonably close,
fixed maturity date. The Finance I Note's maturity date is February 15, 2004,
which is less than ten years from its date of issue, and it includes default
provisions which appear to be commercially reasonable and consistent with debt
characterization. With respect to the safety of the principal amount of the
Finance I Note, the debt to equity ratio of Finance I, evidenced by a
substantial retained interest accruing to the benefit of Finance I as measured
by the excess of the value of the Fee Assets over the face amount of the Finance
I Note, is within the range of commonly accepted debt to equity ratios. In
addition, the interest rate payable with respect to the unpaid principal of the
Finance I Note appears to be consistent with an investor's determination that
such note is a debt instrument. Finally, we note that the Fee Assets, which
serve as security for the Finance I Note, represent income for services yet to
be performed by Green Tree. Several cases have held that similar types of
service income streams cannot be sold, and that any attempted sale of such
income
<PAGE>
should be treated as a loan for federal income tax purposes. See, e.g.
Hydrometals, Inc. v. Commissioner, 31 T.C.M. 1250 (1972). Based on these
considerations and certain others, we conclude that the Finance I Note will be
treated as debt for federal income tax purposes and that the interest thereon
will be qualifying income within Section 7704 of the Code.
Thus, we conclude that if the Trust is treated as a partnership for federal
income tax purposes, 90% or more of the Trust's gross income will constitute
"qualifying income" within the meaning of Section 7704 of the Code. Therefore,
it is our opinion that the Trust will not be taxed as a corporation under the
publicly traded partnership rules of Section 7704 of the Code.
2. Federal Tax Characterization of the Senior Certificates. As discussed
-------------------------------------------------------
above, the characterization of an instrument as debt or equity for federal
income tax purposes depends on all of the facts and circumstances in each case.
In analyzing the federal income tax characterization of the Senior Certificates,
we note that the Senior Certificateholders will be independent from Finance I
and Finance II, the holders of the equity interests in the Trust. We also note
that, while the Senior Certificates are not clearly designated as notes or debt
obligations, the terms of the Senior Certificates and the Trust Agreement
contains an unconditional promise by the Trust to pay to Senior
Certificateholders a sum certain, together with interest on the unpaid balance
thereof, by a reasonably close fixed maturity date (February 15, 2004), and an
agreement by all parties to treat the Senior Certificates as debt for federal
income tax purposes. The Senior Certificates also include default provisions
which appear to be commercially reasonable and consistent with debt
characterization. With respect to the safety of the principal amount of the
Senior Certificates, we note that the debt to equity ratio of the Trust, as
evidenced by a substantial retained interest accruing to the benefit of the
Trust (and Subordinated Certificateholders) measured by the excess of the
value of the assets of the Trust (including the Reserve Fund and certain
reserve funds associated with the Trust's Residual Assets) over the
outstanding principal amount of the Senior Certificates, is within the range
of commonly accepted debt to equity ratios. As a result, the Senior
Certificates have received one of the four highest, i.e. investment grade,
ratings from two nationally recognized statistical rating organization.
Furthermore, the interest rate payable with respect to the unpaid principal of
the Senior Certificates appears to be consistent with a Senior
Certificateholder's determination that the Senior Certificates are debt
instruments.
Based on the factors listed above and certain other considerations,
although there are no regulations, published rulings or judicial decisions
involving the characterization for federal income tax purposes of interests with
the same terms as the Senior Certificates, and although the result is not free
from doubt in view of
<PAGE>
the treatment of the transactions contemplated by the Transaction Documents by
Green Tree for purposes of its financial statements and certain other features
of the Senior Certificates, on balance, it is our opinion that the Senior
Certificates will be treated as debt for federal income tax purposes.
We express no opinion about the tax treatment of any features of the
Trust's activities or an investment therein other than those expressly set forth
above.
Except as provided below, the foregoing opinions are being furnished to you
solely for your benefit and may not be relied upon by, nor may copies be
delivered to, any other person without our prior written consent.
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Certain
Federal Income Tax Consequences" in the prospectus forming a part of the
Registration Statement, and we hereby confirm that the discussion under such
heading accurately sets forth our advice as to the likely outcome of material
issues under the federal income tax laws.
Dated: March 2, 1994
Very truly yours,
CFS
