<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1995
REGISTRATION NO. 33-62433
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GREEN TREE FLOORPLAN RECEIVABLES MASTER TRUST
(ISSUER WITH RESPECT TO OFFERED CERTIFICATES)
GREEN TREE FLOORPLAN FUNDING CORP.
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE APPLIED FOR
(STATE OR OTHER 6189
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
500 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)
--------------
JOEL H. GOTTESMAN, ESQ.
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 RENWICK D. MARTIN
DORSEY & WHITNEY P.L.L.P. BROWN & WOOD
220 SOUTH SIXTH STREET, MINNEAPOLIS, ONE WORLD TRADE CENTER, NEW YORK, NEW
MINNESOTA 55402 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 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, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Floorplan Receivable
Trust Certificates,
Series 1995-1........ $400,000,000 100% $400,000,000 $137,931.04(2)
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee on
the basis of the proposed maximum aggregate offering price, pursuant to
Rule 457(c).
(2) Previously paid.
--------------
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.
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<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM AND CAPTION IN FORM S-1 CAPTION IN PROSPECTUS
---------------------------- ---------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Forepart of Registration Statement; Outside
Cover Page of Prospectus... Front Cover Page of Prospectus
2. Inside Front and Outside
Back Cover Pages of Pro- Inside Front Cover Page; Outside Back Cover
spectus.................... Page of Prospectus
3. Summary Information, Risk
Factors and Ratio of Earn-
ings to Fixed Charges...... Prospectus Summary; Risk Factors
4. Use of Proceeds............. Use of Proceeds
5. Determination of Offering
Price...................... *
6. Dilution.................... *
7. Selling Security Holders.... *
8. Plan of Distribution........ Underwriting
9. Description of Securities to The Trust; The Transferor; The Receivables;
be Registered.............. Description of the Offered Certificates
10. Interests of Named Experts
and Counsel................ Legal Matters
11. Information with Respect to
the Registrant............. The Trust; The Transferor
12. Disclosure of Commission Po-
sition on Indemnification
for Securities Act Liabili-
ties....................... See Part II
</TABLE>
- --------
*Not applicable
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DECEMBER , 1995
PROSPECTUS
LOGO
GREEN TREE FLOORPLAN RECEIVABLES MASTER TRUST
$ FLOATING RATE FLOORPLAN RECEIVABLE TRUST CERTIFICATES, SERIES 1995-1,
CLASS A
$ FLOATING RATE FLOORPLAN RECEIVABLE TRUST CERTIFICATES, SERIES 1995-1,
CLASS B
GREEN TREE FLOORPLAN GREEN TREE FINANCIAL CORPORATION
FUNDING CORP.
TRANSFEROR SERVICER
-----------
Each of the Floating Rate Floorplan Receivable Trust Certificates, Series
1995-1, Class A (the "Class A Certificates") and each of the Floating Rate
Floorplan Receivable Trust Certificates, Series 1995-1, Class B (the "Class B
Certificates," and, together with the Class A Certificates, the "Offered
Certificates") will represent an undivided interest in the Green Tree Floorplan
Receivables Master Trust (the "Trust"), created pursuant to a Pooling and
Servicing Agreement among Green Tree Floorplan Funding Corp., as transferor
(the "Transferor"), Green Tree Financial Corporation, as servicer ("Green Tree"
or the "Servicer") and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee"). The fractional undivided interests in the Trust represented by
the Class B Certificates will be subordinated to fund certain payments with
respect to the Class A Certificates as described in "Description of the Offered
Certificates--Application of Collections," "--Reallocated Principal
Collections," and "--Investor Charge-Offs." The assets of the Trust will
include the amounts owed from time to time ("Receivables") by retail dealers,
manufacturers and distributors ("Dealers") pursuant to revolving financing
arrangements (each such arrangement, an "Account") between such Dealers and
Green Tree to finance (i) in the case of retail dealers, their inventory of
consumer and commercial products and (ii) in the case of manufacturers and
distributors, their inventory of finished goods, parts and other items and the
accounts receivable arising from the sale thereof. Any increase in the
Receivables referred to in clause (ii) to an amount in excess of 20% of total
Receivables will be subject to the limitations described under "Description of
the Offered Certificates--The Overconcentration Amounts."
Concurrently with the issuance of the Offered Certificates, the Trust will
issue the Floorplan Receivable Trust Certificates, Series 1995-1, Class C (the
"Class C Certificates"), which may be privately placed, and the Floorplan
Receivable Trust Certificates, Series 1995-1, Class D (the "Class D
Certificates," and, together with the Class C Certificates and the Offered
Certificates, the "Certificates") to the Transferor. The Offered Certificates,
the Class C Certificates and the Class D Certificates constitute "Series 1995-
1." The fractional undivided interests in the Trust represented by the Class C
Certificates will be subordinated to fund certain payments with respect to the
Offered Certificates and the Class D Certificates will be subordinated to fund
certain payments with respect to the Class C Certificates and the Offered
Certificates as described in "Description of the Offered Certificates--
Application of Collections," "--Reallocated Principal Collections," and "--
Investor Charge-Offs." The Transferor will own the remaining undivided interest
in the Trust not represented by the Certificates and any other investor
certificates issued by the Trust, which retained interest will be represented
by the Exchangeable Transferor Certificate. The Exchangeable Transferor
Certificate will be held initially by the Transferor and will be transferable
only as provided in the Pooling and Servicing Agreement. The Transferor from
time to time may offer to the public or other investors under a prospectus or
other disclosure document in transactions either registered under the
Securities Act of 1933, as amended, or exempt from registration thereunder,
other series of certificates that evidence undivided interests in certain
assets of the Trust by exchanging a portion of its interest in the Trust
therefor. Only the Offered Certificates are being offered pursuant to this
Prospectus.
Interest on the outstanding principal balance of the Class A Certificates
will accrue at a rate per annum equal to the lesser of (i) the applicable one-
month LIBOR (calculated and determined as described under "Description of the
Offered Certificates--Interest Payments") plus % per annum or (ii) the Net
Receivables Rate (as defined under "Description of the Offered Certificates--
Interest") (the "Class A Certificate Rate"). Interest on the outstanding
principal balance of the Class B Certificates will accrue at a rate per annum
equal to the lesser of (i) the applicable one-month LIBOR plus % per annum or
(ii) the Net Receivables Rate (as defined under "Description of the Offered
Certificates--Interest") (the "Class B Certificate Rate"). Interest with
respect to the Certificates will be distributed on January 15, 1996 and on the
15th day of each month thereafter (or, if such 15th day is not a business day,
the next succeeding business day) (each, a "Distribution Date"). Principal on
the Class A Certificates is scheduled to be distributed on each Distribution
Date commencing on the Distribution Date in but may be paid earlier
under certain limited circumstances described herein. Principal on the Class B
Certificates will be payable monthly on each Distribution Date on or after the
Distribution Date on which the Class A Invested Amount is paid in full.
Application will be made to list the Offered Certificates on the Luxembourg
Stock Exchange.
There currently is no secondary market for the Offered Certificates, and
there is no assurance that one will develop or, if one does develop, that it
will continue until the Offered Certificates are paid in full.
-----------
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" ON PAGES 23 THROUGH 28 HEREIN.
-----------
THE OFFERED CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF THE TRANSFEROR, GREEN
TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF. NEITHER THE
OFFERED CERTIFICATES NOR THE RECEIVABLES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING THE
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
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<S> <C> <C> <C>
Per Class A Certificate.............. % % %
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Per Class B Certificate.............. % % %
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Total................................ $ $ $
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</TABLE>
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(1) Plus accrued interest, if any, from , 1995.
(2) Before deduction of expenses estimated to be $ .
-----------
The Offered Certificates are offered by the Underwriters as described in
"Underwriting," subject to prior sale, when, as and if issued to and accepted
by the Underwriters and subject to approval of certain legal matters by counsel
for the Underwriters. The Underwriters reserve the right to reject orders in
whole or in part. It is expected that the Offered Certificates will be
delivered in book-entry form on or about December , 1995 through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System.
-----------
MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC.
-----------
The date of this Prospectus is December , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co., as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Certificates, pursuant to the Pooling and Servicing Agreement (as
defined herein). All references herein to "holders" or "Certificateholders" of
the Class A or Class B Certificates reflect the rights of the owners of the
beneficial interests in the Offered Certificates ("Certificate Owners") as they
may indirectly exercise such rights through DTC and its participants, except as
otherwise specified herein. Neither Green Tree Financial Corporation nor any
successor servicer intends to send any of such monthly and annual reports to
Certificate Owners. See "Description of the Offered Certificates--Book-Entry
Registration," "--Reports to Certificateholders" and "--Evidence as to
Compliance." Certificate Owners may receive such reports upon written request,
together with (i) a certification that they are Certificate Owners and (ii)
payment of reproduction and postage expenses associated with the distribution
of such reports, from the Trustee at Norwest Bank Minnesota, National
Association, Norwest Center, Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479-0069, Attention: Corporate Trust Department. Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Servicer will file with the Securities and
Exchange Commission (the "Commission") such periodic reports with respect to
the Trust as are required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the Commission
thereunder.
AVAILABLE INFORMATION
Green Tree Floorplan Funding Corp., as originator of the Trust, has filed a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Commission on behalf of the Trust with respect to
the Certificates offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement and amendments thereof and
exhibits thereto, which are available for inspection without charge at the
public references facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the Registration Statement and amendments thereof and
exhibits thereto may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Periodic reports with respect to the Trust that have been filed under
the Exchange Act and the rules and regulations of the Commission thereunder and
other information filed by the Servicer can be inspected and copied at the
public reference facilities maintained by the Commission referred to above.
OTHER INFORMATION
Upon receipt of a request by an investor who has received an electronic
Prospectus from an Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
the Transferor or such Underwriter will promptly deliver, or cause to be
delivered, without charge, a paper copy of the Prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain
capitalized terms used herein are defined in the "Glossary of Terms" or
elsewhere in this Prospectus. Unless the context requires otherwise, certain
capitalized terms, when used in this Prospectus, relate only to the Series
1995-1 Certificates and not to other certificates which may exist from time to
time.
Offered Certificates......... $ aggregate principal amount of Class A
Certificates and $ aggregate principal
amount of Class B Certificates are being of-
fered hereby. The Offered Certificates will be
available for purchase in minimum denominations
of $1,000 and in integral multiples of $1,000
in excess thereof.
The Offered Certificates represent obligations
of the Trust only and do not represent inter-
ests in or recourse obligations of Green Tree,
the Transferor, or any affiliate of either of
them.
The Class B Certificates will be subordinated to
fund certain payments with respect to the Class
A Certificates as described herein. See "De-
scription of the Offered Certificates--Subordi-
nation of the Class B Certificates."
Other Series 1995-1
Certificates................ $ aggregate principal amount of Class C
Certificates, which may be privately placed,
and Class D Certificates, which are being is-
sued concurrently to the Transferor. The Class
D Invested Amount will initially equal the
Class D Incremental Invested Amount ($
as of the Cut-off Date), and will be adjusted
from time to time as described under "Descrip-
tion of the Offered Certificates--The Overcon-
centration Amounts." Only the Offered Certifi-
cates are being offered pursuant to this Pro-
spectus.
Transferor................... Green Tree Floorplan Funding Corp., a wholly
owned subsidiary of Green Tree, is the Trans-
feror. The principal executive offices of the
Transferor are located at 500 Landmark Towers,
345 St. Peter Street, St. Paul, Minnesota
55102-1639, telephone number (612) 293-3400.
See "The Transferor."
Servicer..................... Green Tree Financial Corporation (in such capac-
ity, "Green Tree" or the "Servicer"). The prin-
cipal executive offices of the Servicer are lo-
cated at 1100 Landmark Towers, 345 St. Peter
Street, St. Paul, Minnesota 55102-1639, tele-
phone number (612) 293-3400. A substitute
Servicer may be appointed in certain circum-
stances. See "Green Tree Financial Corporation
and its Commercial Finance Division" and "De-
scription of the Offered Certificates--Certain
Matters Regarding the Transferor and the
Servicer."
Trustee .....................
Norwest Bank Minnesota, National Association, is
the Trustee. Under certain circumstances speci-
fied herein, the beneficial owners of investor
certificates representing more than 50% of the
aggregate invested amount of all Series will
have the right to remove the Trustee. See "De-
scription of the Offered Certificates--The
Trustee."
3
<PAGE>
Trust........................ The Trust will be formed pursuant to the Pooling
and Servicing Agreement, which will be supple-
mented by the Series 1995-1 Supplement relating
to the Series 1995-1 Certificates, and by Sup-
plements applicable to other Series that may be
issued in the future. See "The Trust."
Trust Assets.................
The Trust assets will include (i) all Receiv-
ables existing as of the Cut-off Date and
thereafter arising under the Accounts from time
to time satisfying certain criteria described
herein (see "The Receivables--Eligible Receiv-
ables and Eligible Accounts"), (ii) all funds
to be collected in respect of the Receivables,
(iii) all the rights of the Transferor under
the Receivables Purchase Agreement between the
Transferor and Green Tree (the "Purchase Agree-
ment"), (iv) all funds on deposit in certain
accounts of the Trust, (v) any amounts received
by the Servicer with respect to Receivables
that were previously charged off as uncollecti-
ble in accordance with the Servicer's customary
and usual servicing procedures ("Recoveries"),
(vi) an assignment of a security interest in
the consumer and commercial products or other
assets securing each Receivable (collectively,
the "Collateral Security"), (vii) the Transfer-
or's rights under all Floorplan Agreements with
Manufacturers relating to the Collateral Secu-
rity, and (viii) all proceeds of the foregoing.
The Offered Certificates will not have the ben-
efit of any credit enhancement other than the
subordination of the Class B Certificates,
Class C Certificates and Class D Certificates
for the benefit of each Class of Series 1995-1
Certificates with an earlier alphabetical des-
ignation as described above.
Pursuant to the Purchase Agreement, the Trans-
feror will purchase from Green Tree all of the
Receivables arising from time to time under the
Accounts, whether such Receivables are existing
as of the Cut-off Date or thereafter created.
See "Description of the Purchase Agreement--
Transfer of Receivables."
Pursuant to the Pooling and Servicing Agreement,
the Transferor will automatically transfer to
the Trust all of its right, title, and interest
in and to the Receivables. See "Risk Factors--
Transfer of the Receivables; Insolvency Risk
Considerations" for a discussion of certain le-
gal considerations relating to such transfer.
The Accounts.................
The Accounts pursuant to which the Receivables
will be generated are revolving credit agree-
ments entered into with Green Tree or one of
its subsidiaries by dealers, manufacturers and
distributors located throughout the United
States ("Dealers") to finance their production
and inventory of consumer and commercial prod-
ucts. The Receivables constitute payment obli-
gations arising from time to time under the Ac-
counts. "Floorplan Receivables" represent ex-
tensions of credit to finance product inventory
for dealers, and are secured by the related
dealer's product inventory. The products for
which
4
<PAGE>
Green Tree currently provides floorplan financ-
ing to dealers include manufactured housing,
recreational vehicles and marine products. "As-
set-Based Receivables" represent extensions of
credit to finance production and inventory by
manufacturers and distributors, and are secured
by finished goods inventory, accounts receiv-
able, certain work-in-process, raw materials
and component parts, as well as other assets of
the borrower. In general, Green Tree's credit
approval process focuses on the creation of the
Account with the Dealer, with credit limits and
other appropriate restrictions established upon
creation of the Account. The amount of Receiv-
ables arising under an Account at any time will
be determined primarily by the financing needs
of the Dealer.
Green Tree expects that it will provide financ-
ing to Dealers in other products in the future,
and that the relative proportions of the Re-
ceivables representing financing for each type
of product will change over time as the Receiv-
ables balance of each Dealer fluctuates over
time. The Accounts will be selected from all
such credit agreements of Green Tree that meet
the credit and eligibility criteria specified
in the Pooling and Servicing Agreement and the
related Series Supplement (the "Eligible Ac-
counts"). Under certain circumstances Accounts
may be added to, or removed from, the Trust,
and the Transferor expects to add additional
Accounts to the Trust from time to time. See
"Description of the Offered Certificates--Rep-
resentations and Warranties" "--Addition of Ac-
counts" and "--Removal of Accounts."
Receivables..................
The Receivables represent the amounts payable
from time to time pursuant to the Accounts. The
Receivables will bear interest at an adjustable
rate described herein. Certain Receivables do
not bear interest for a specified period fol-
lowing their origination. Generally, the prin-
cipal amount of a Receivable is due (i) in the
case of Floorplan Receivables, in scheduled in-
stallments with payment in full due upon the
retail sale of the related product, or (ii) in
the case of Asset-Based Receivables, upon the
reduction of eligible collateral or as the bor-
rower's needs decline, and in full upon the
termination of the facility. Accordingly, the
amount of Receivables will fluctuate from day
to day as new Receivables are generated and as
existing Receivables are collected, written off
as uncollectible, or otherwise adjusted. See
"Green Tree Financial Corporation and its Com-
mercial Finance Division."
Overconcentration Amounts.... In order to reduce the Trust's exposure to any
single Dealer or any single industry, certain
diversification thresholds ("Overconcentration
Amounts") will be tested at the end of each
Monthly Period. Initially, except as provided
below, no more than 20% (or, prior to the first
anniversary of the Closing Date, a lesser per-
centage) of the Receivables may be Asset-Based
Receivables; no more than 2% of the Receivables
may
5
<PAGE>
have arisen under an Account with a single
Dealer; no more than 15% of the Receivables may
be Floorplan Receivables financing products
from a single manufacturer; no more than 5% of
the Receivables may be Floorplan Receivables
financing marine products; no more than 5% of
the Receivables may be Floorplan Receivables
financing recreational vehicles, and no more
than 5% of the Receivables may be Floorplan Re-
ceivables financing products other than manu-
factured housing, marine products or recre-
ational vehicles. Green Tree expects that the
Receivables will from time to time exceed one
or more of these thresholds. To the extent that
any such threshold is exceeded at the end of a
Monthly Period, the Class D Invested Amount
will be increased by an equivalent amount.
These threshold percentages may, however, be
increased in the future without the consent of
any Certificateholder, to a level acceptable to
each Rating Agency without any reduction or
withdrawal of its rating of the Class A, Class
B or Class C Certificates. See "Description of
the Offered Certificates--The Overconcentration
Amounts."
Collections..................
The Servicer will deposit all collections of Re-
ceivables (other than collections allocable to
the Exchangeable Transferor Certificate, sub-
ject to certain exceptions specified herein) in
the Collection Account on each business day.
The aggregate of (A) all collections on the Re-
ceivables with respect to interest or other
fees, (B) investment earnings on amounts on de-
posit in all Trust Accounts on such business
day and (C) Recoveries will be treated as "Fi-
nance Charge Collections." In addition, in or-
der to provide additional yield to the Trust to
offset the effect of any increase in Receiv-
ables that do not bear interest for a specified
period, any increase in the length of such a
period or any decrease in the level of interest
rates borne by the Receivables, the Transferor
may elect at any time to instruct the Servicer
to allocate a specified percentage (the "Dis-
count Factor") of Principal Collections to be
treated as interest collections ("Imputed Yield
Collections"). The Discount Factor, if any, may
vary from time to time (subject to the limita-
tions set forth in the Series 1995-1 Supple-
ment), and initially will be zero. Finance
Charge Collections and Imputed Yield Collec-
tions, if any, are collectively referred to as
"Interest Collections." The remainder of the
collections on the Receivables received on any
business day will be treated as "Principal Col-
lections." Principal Collections and Interest
Collections are collectively sometimes referred
to herein as "Collections." See "Description of
the Offered Certificates--Interest Collections;
Principal Collections." All such amounts will
then be allocated in accordance with the re-
spective interests of the Certificateholders,
the certificateholders of any other Series, and
the holder of the Exchangeable Transferor Cer-
tificate in the Principal Receivables and in
the Interest Receivables in the Trust. During
the Revolving Period, upon the retail sale of a
product securing a
6
<PAGE>
Receivable where Green Tree is providing the
customer financing for such retail sale, Green
Tree will not, except under certain limited
circumstances, be obligated to deposit cash in
the Collection Account in respect of the prin-
cipal amount of such Receivable but may instead
replace such Receivable with other Receivables.
See "Description of the Offered Certificates--
Allocation Percentages."
The Series 1995-1
Certificates
A. Class A Certificates.... The Class A Certificates will evidence undivided
interests in the assets of the Trust allocated
to the Class A Certificateholders' Interest and
will represent the right to receive from such
assets funds up to (but not in excess of) the
amounts required to make payments of interest
on the Class A Certificates at the Class A Cer-
tificate Rate and the payment of principal to
the extent of the Class A Invested Amount
(which may be less than the aggregate unpaid
principal amount of the Class A Certificates,
in certain circumstances, if the Investor De-
fault Amount exceeds funds allocable thereto
and the Class B Invested Amount, the Class C
Invested Amount and the Class D Invested Amount
are reduced to zero). See "Description of the
Offered Certificates--Subordination of the
Class B Certificates," "--Allocation Percent-
ages" and "--Investor Charge-Offs."
B. Class B Certificates.... The Class B Certificates will evidence undivided
interests in the assets of the Trust allocated
to the Class B Certificateholders' Interest and
will represent the right to receive from such
assets funds up to (but not in excess of) the
amounts required to make payments of interest
on the Class B Certificates at the Class B Cer-
tificate Rate and the payment of principal to
the extent of the Class B Invested Amount
(which may be less than the aggregate unpaid
principal amount of the Class B Certificates,
in certain circumstances, if the Investor De-
fault Amount exceeds funds allocable thereto
and the Class C Invested Amount and the Class D
Invested Amount are reduced to zero). See "De-
scription of the Offered Certificates--Subordi-
nation of the Class B Certificates," "--Alloca-
tion Percentages" and "--Investor Charge-Offs."
C. Class C Certificates....
The Class C Certificates will evidence undivided
interests in the assets of the Trust allocated
to the Class C Certificateholders' Interest and
will represent the right to receive from such
assets funds up to (but not in excess of) the
amounts required to make payments of interest
on the Class C Certificates at the Class C Cer-
tificate Rate, the payment of principal to the
extent of the Class C Invested Amount (which
may be less than the aggregate unpaid principal
amount of the Class C Certificates, in certain
circumstances, if the Investor Default Amount
exceeds funds allocable thereto and the Class D
Invested Amount is reduced to zero), and rights
to receive payments
7
<PAGE>
under a Limited Guaranty of Green Tree for the
benefit of the Class C Certificateholders. See
"Description of the Offered Certificates--Allo-
cation Percentages" and "--Investor Charge-
Offs." The Class C Certificates are not being
offered hereby.
D. Class D Certificates....
The Class D Certificates will evidence undivided
interests in the assets of the Trust allocated
to the Class D Certificateholders' Interest and
will represent the right to receive from such
assets funds up to (but not in excess of) the
amounts required to make payments of principal
to the extent of the Class D Invested Amount.
The Class D Invested Amount will initially
equal the Class D Incremental Invested Amount
($ as of the Cut-off Date), and will
be adjusted from time to time, as described un-
der "Description of the Offered Certificates--
The Overconcentration Amounts." The Class D
Certificates are not being offered hereby.
Transferor Interest..........
The Pooling and Servicing Agreement provides
that the Trustee will issue two types of cer-
tificates: (i) investor certificates in one or
more Series, each of which may have multiple
classes and of which one or more such classes
may be transferable, and (ii) the Exchangeable
Transferor Certificate. The Exchangeable Trans-
feror Certificate will evidence the Transferor
Interest, will be held by the Transferor, and
will be transferable only as provided in the
Pooling and Servicing Agreement.
Issuance of New Series.......
The Pooling and Servicing Agreement provides
that, pursuant to any one or more supplements
thereto (each, a "Supplement"), the Transferor
may cause the Trustee to issue one or more new
Series of certificates (a "New Issuance"). The
Transferor may create a New Issuance pursuant
to an Exchange (described below) when there is
a sufficient amount of Receivables in the
Trust. The Transferor may offer any Series for
sale in transactions either registered under
the Securities Act or exempt from registration
thereunder, directly or through one or more un-
derwriters or placement agents, in fixed-price
offerings, in negotiated transactions or other-
wise. The Transferor currently intends to of-
fer, from time to time, additional Series is-
sued by the Trust.
Exchanges.................... The Pooling and Servicing Agreement provides
that, pursuant to any one or more Supplements
to the Pooling and Servicing Agreement, the
Transferor may tender the Exchangeable Trans-
feror Certificate or, if provided in the rele-
vant Supplement, certificates comprising any
Series and the Exchangeable Transferor Certifi-
cate, to the Trustee in exchange for certifi-
cates comprising one or more new Series and a
reissued Exchangeable Transferor Certificate
(an "Exchange"). Any Exchange will be subject
to certain conditions specified in the Pooling
and Servicing Agreement, including the require-
ment that at all times, the interest in the
Principal Receivables in
8
<PAGE>
the Trust (plus amounts on deposit in the Ex-
cess Funding Account, if any) represented by
the Transferor Interest must equal or exceed
the Minimum Transferor Interest. See "Descrip-
tion of the Offered Certificates--Exchanges."
Interest.....................
Interest on the respective outstanding balance
of each Class of Series 1995-1 Certificates
(other than the Class D Certificates) will ac-
crue at the applicable Certificate Rate (as de-
fined below) and will be payable on the 15th
day of each month, or if such day is not a
business day, on the next succeeding business
day (each a "Distribution Date"), beginning
January 15, 1996. Interest will accrue from and
including the preceding Distribution Date (or,
in the case of the first Distribution Date,
from and including the Closing Date) to but ex-
cluding such Distribution Date (each an "Inter-
est Accrual Period") and will be calculated on
the basis of the actual number of days in the
related Interest Accrual Period divided by 360.
Interest on the outstanding principal balance of
the Class A Certificates will accrue for each
Interest Accrual Period at a rate per annum
equal to the lesser of (i) one-month LIBOR
(calculated as described under "Description of
the Offered Certificates--Interest Payments")
determined as of the second LIBOR business day
prior to such Interest Accrual Period plus %
per annum or (ii) the Net Receivables Rate (as
described under "Description of the Offered
Certificates--Interest") (the "Class A Certifi-
cate Rate"). Interest on the outstanding prin-
cipal balance of the Class B Certificates will
accrue for each Interest Accrual Period at a
rate per annum equal to the lesser of (i) one-
month LIBOR determined as of the second LIBOR
business day prior to such Interest Accrual Pe-
riod plus % per annum or (ii) the Net Re-
ceivables Rate (the "Class B Certificate Rate"
and together with the Class A Certificate Rate,
the "Certificate Rates"). The Class C Certifi-
cates will bear interest at a rate equal to the
lesser of (i) a specified margin in excess of
LIBOR and (ii) the Net Receivables Rate.
Interest payments on the Series 1995-1 Certifi-
cates will be made from Series Available Inter-
est Collections, as described under "Descrip-
tion of the Offered Certificates--Application
of Collections--Payment of Fees, Interest and
Other Items," and from certain other funds al-
located for such purpose under the Pooling and
Servicing Agreement. See "Description of the
Offered Certificates--Reallocated Principal
Collections."
Revolving Period............. The "Revolving Period" with respect to Series
1995-1 means the period from and including the
Closing Date to, but not including, the earlier
of (a) the Initial Principal Payment Date (de-
scribed below), (b) the commencement of the
Controlled Accumulation Period (described be-
low) and (c) the commencement of the Early Am-
ortization Period. During the Revolving Period,
Principal Collections otherwise allocable to
the
9
<PAGE>
Certificateholders (other than any Reallocated
Principal Collections applied to make interest
distributions) will, subject to certain limita-
tions, be paid from the Trust to the holder of
the Exchangeable Transferor Certificate or ap-
plied as Shared Principal Collections and paid
to holders of certificates of other series, as
described below under "Shared Principal Collec-
tions."
The aggregate principal amount of the Series
1995-1 Certificates, except as otherwise pro-
vided herein, will remain fixed during the Re-
volving Period.
Principal Payments
A. Initial Principal
Payment Date............
Unless a Pay Out Event has occurred, principal
with respect to the Class A Certificates is ex-
pected to be paid on the Distribution Date in
(the "Class A Scheduled Payment Date"),
and principal with respect to the Class B Cer-
tificates is expected to be paid on the Distri-
bution Date in (the "Class B Scheduled
Payment Date"). However, if the Servicer elects
not to extend the Initial Principal Payment
Date, the Revolving Period or the Controlled
Accumulation Period, as applicable, will end
and principal will be paid to the Class A
Certificateholders on the Initial Principal
Payment Date and, if necessary, on each Distri-
bution Date thereafter until the earlier of the
date on which the Class A Invested Amount has
been paid in full or the Series 1995-1 Termina-
tion Date, and after the Class A Invested
Amount has been paid in full, principal will be
paid to the Class B Certificateholders on each
Distribution Date until the earlier of the date
on which the Class B Invested Amount has been
paid in full or the Series 1995-1 Termination
Date. The "Initial Principal Payment Date" will
initially be the January 1998 Distribution
Date, but will successively and automatically
be extended to the next Distribution Date after
the then-current Initial Principal Payment Date
unless the Servicer elects not to so extend;
provided that the Initial Principal Payment
Date may not be later than the Class A Sched-
uled Payment Date. See "Description of the Of-
fered Certificates--Extension of Initial Prin-
cipal Payment Date" herein.
B. Controlled Accumulation
Period..................
On September 15, 1998, the Servicer will deter-
mine the Accumulation Period Length. The "Accu-
mulation Period Length" will be one, two, three
or four month(s) and will be calculated as the
product, rounded upwards to the nearest inte-
ger, of (a) four and (b) a fraction, the numer-
ator of which is the Invested Amount as of Sep-
tember 15, 1998 (after giving effect to all
changes therein on such date) and the denomina-
tor of which is the sum of such Invested Amount
and the invested amounts as of September 15,
1998 (after giving effect to all changes
therein on such date) of all other outstanding
Series whose respective revolving periods are
not scheduled to end
10
<PAGE>
before the last day of the January 1999 Monthly
Period. Depending on whether the Accumulation
Period Length is one month, two months, three
months or four months, the "Accumulation Period
Commencement Date" will be the first day of the
January 1999 Collection Period, the December
1998 Collection Period, the November 1998 Col-
lection Period or the October 1998 Collection
Period, respectively. Notwithstanding the fore-
going, the Accumulation Period Commencement
Date will be October 1, 1998 if, prior to such
date, any other outstanding Series has entered
into an early amortization period. In addition,
if the Accumulation Period Length has been de-
termined to be less than four months and,
thereafter, any outstanding Series enters into
an early amortization period, the Accumulation
Period Commencement Date will be the earlier of
(i) the date that such outstanding Series en-
tered into its early amortization period and
(ii) the Accumulation Period Commencement Date
as previously determined.
The Controlled Accumulation Period will end on
the earliest of (i) the commencement of the
Early Amortization Period, (ii) the Initial
Principal Payment Date, (iii) payment of the
Invested Amount in full and (iv) the Series
1995-1 Termination Date.
On each business day during the Controlled Accu-
mulation Period, prior to the payment of the
Class A Invested Amount in full, the Servicer
will deposit into an account established for
the Certificateholders (the "Principal Ac-
count") an amount equal to the lesser of (a)
Principal Collections allocable to the Class A,
Class B and Class C Certificateholders' Inter-
ests plus Shared Principal Collections, if any,
from other Series allocable to the Class A,
Class B and Class C Certificates, plus certain
other amounts comprising Class A, Class B and
Class C Principal, and (b) the amount, if any,
by which (i) the sum of the Controlled Accumu-
lation Amount for such Monthly Period plus the
Accumulation Shortfall (described below), if
any (such sum being referred to as the "Con-
trolled Deposit Amount" for the related Monthly
Period) exceeds (ii) the amount in the princi-
pal account for the account of the Class A
Certificateholders.
On each business day during the Controlled Accu-
mulation Period, following the payment (or de-
posit in the Principal Account) of the Class A
Invested Amount in full but prior to the pay-
ment (or deposit in the Principal Account) of
the Class B Invested Amount in full, an amount
equal to the lesser of (a) Principal Collec-
tions allocable to the Class B and Class C
Certificateholders' Interests (on the basis of
the ABC Fixed/Floating Allocation Percentage)
plus Shared Principal Collections, if any, from
other Series allocable to the Class B
11
<PAGE>
and Class C Certificates, plus certain other
amounts comprising Class B and Class C Princi-
pal, and (b) the amount, if any, by which (i)
the Controlled Deposit Amount for the related
Monthly Period exceeds (ii) the amount in the
Principal Account for the account of the Class
B Certificateholders, will be deposited daily
in the Principal Account.
On any business day when the amount on deposit
in the Principal Account equals or exceeds the
Controlled Deposit Amount for the related Dis-
tribution Date, the balance of all such funds
remaining on deposit in the Collection Account
will be treated as Shared Principal Collections
and may be used to make payments to other Se-
ries which are in an accumulation or amortiza-
tion period.
If, for any Monthly Period, the amount deposited
in the Principal Account is less than the Con-
trolled Deposit Amount, the amount of such de-
ficiency will be the "Accumulation Shortfall"
for the succeeding Monthly Period.
All funds on deposit in the Principal Account
will be invested at the direction of the
Servicer by the Trustee in certain Cash Equiva-
lents. Investment earnings (net of investment
losses and expenses) on funds on deposit in the
Principal Account (the "Principal Investment
Proceeds") during the Controlled Accumulation
Period will be treated as Available Series In-
terest Collections. Amounts, if any, in the
Principal Account may be expected to earn in-
terest at a rate that is less than the weighted
average of the Class A Certificate Rate, the
Class B Certificate Rate and the Class C Cer-
tificate Rate plus 2% (the "Base Rate"). The
difference between the amount of interest actu-
ally earned on investments in the Principal Ac-
count on any day and the amount of interest
that would have been earned on such investments
at the Base Rate is the "Principal Funding In-
vestment Shortfall" for such day. On each busi-
ness day, the Servicer will apply an amount
equal to the lesser of (i) the Series Alloca-
tion Percentage of the Interest Collections al-
locable to the Transferor Interest ("Transferor
Interest Collections") on such business day and
(ii) the Principal Funding Investment Shortfall
plus the Negative Carry Amount (described below
under "Excess Funding Account"), if any, for
such business day, in the manner specified for
application of Available Series Interest Col-
lections.
Funds on deposit in the Principal Account will
be available to pay the Class A
Certificateholders the Class A Invested Amount
on the Class A Scheduled Payment Date. If the
aggregate principal amount of deposits made to
the Principal Account is insufficient to pay
the Class A Invested Amount on the Class A
Scheduled Payment Date, the Early Amortization
Period will commence as described below. Al-
though it is
12
<PAGE>
anticipated that during the Controlled Accumu-
lation Period prior to the payment of the Class
A Invested Amount in full, funds will be depos-
ited in the Principal Account in an amount
equal to the applicable Controlled Deposit
Amount for each Monthly Period and that sched-
uled principal will be available for distribu-
tion to the Class A Certificateholders on the
Class A Scheduled Payment Date, no assurance
can be given in that regard. See "Risk Fac-
tors--Certificate Rating" and "Maturity Consid-
erations."
On the Class B Scheduled Payment Date, provided
that the Class A Invested Amount is paid in
full on the Class A Scheduled Payment Date and
the Early Amortization Period has not com-
menced, Principal Collections will be paid to
the Class B Certificateholders in respect of
the Class B Invested Amount as described here-
in. If the Principal Collections are insuffi-
cient to pay the Class B Invested Amount in
full on the Class B Scheduled Payment Date, the
Early Amortization Period will commence as de-
scribed below. Although it is anticipated that
scheduled principal will be available for dis-
tribution to the Class B Certificateholders on
the Class B Scheduled Payment Date, no assur-
ance can be given in that regard. See "Risk
Factors--Certificate Rating" and "Maturity Con-
siderations."
If a Pay Out Event occurs during the Controlled
Accumulation Period, the Early Amortization Pe-
riod will commence and any amounts on deposit
in the Principal Account will be applied as de-
scribed under "C. Early Amortization Period"
below.
Other Series issued by the Trust may have either
an accumulation period or an amortization peri-
od. Such periods may have different lengths and
begin on different dates than the Controlled
Accumulation Period described herein. Thus,
certain Series may be in their revolving peri-
ods while others are in their amortization or
accumulation periods. In addition, other Series
may allocate Principal Collections based upon
different investor percentages. No Supplement
with respect to any such Series, however, may
change the terms of the Series 1995-1 Certifi-
cates or the terms of the Pooling and Servicing
Agreement as it relates to the Offered Certifi-
cates. See "Description of the Offered Certifi-
cates--Exchanges" for a discussion of the po-
tential terms of other Series.
C. Early Amortization If a Pay Out Event occurs, either during the Re-
Period...................... volving Period or the Controlled Accumulation
Period, the Early Amortization Period will be-
gin. During the Early Amortization Period,
Principal Collections allocable to the respec-
tive Certificateholders' Interest (other than
an interest represented by any class of in-
vestor certificates which is retained by the
Transferor (a "Transferor Retained Class")) and
certain other amounts (including Shared Princi-
pal Collections from any
13
<PAGE>
other Series and funds on deposit in the Excess
Funding Account, if any) will no longer be re-
invested in the Trust or otherwise used to
maintain the Certificateholders' Interest, but
instead will be distributed as principal pay-
ments monthly on each Distribution Date begin-
ning with the first Distribution Date following
the Monthly Period in which a Pay Out Event oc-
curs or is deemed to have occurred. Principal
payments will be made first to the Class A
Certificateholders until the Class A Invested
Amount has been paid in full, and then to the
Class B Certificateholders until the Class B
Invested Amount has been paid in full, and then
to the Class C Certificateholders until the
Class C Invested Amount has been paid in full,
and then to the Class D Certificateholders un-
til the Class D Invested Amount has been paid
in full. See "Description of the Offered Cer-
tificates--Pay Out Events."
Allocation of Trust Assets...
The Trust's assets will be allocated among the
Class A Certificateholders' Interest, the Class
B Certificateholders' Interest, the Class C
Certificateholders' Interest, the Class D
Certificateholders' Interest, the interest of
the certificateholders of any other Series is-
sued pursuant to the Pooling and Servicing
Agreement and applicable Supplements, and the
Transferor Interest. The interest of the
certificateholders of any class of any Series
in the assets of the Trust will be limited to
the certificateholders' interest for such class
and Series, and such certificateholders will
not have any recourse against any assets of the
Trust other than those allocated to such
certificateholders' interest pursuant to the
Pooling and Servicing Agreement and any appli-
cable Supplement. The Transferor Interest will
represent the right to the assets of the Trust
not allocated to the Series 1995-1
Certificateholders' Interest or the interest of
the holders of certificates of any future Se-
ries pursuant to the Pooling and Servicing
Agreement and applicable Supplements. The prin-
cipal amount of the Transferor Interest will
fluctuate as the amount of Receivables in the
Trust, the invested amount of each Series, and
the amounts, if any, on deposit in the Excess
Funding Account change from time to time. See
"Description of the Offered Certificates--Gen-
eral" and "--Excess Funding Account."
The Class A Certificateholders' Interest, the
Class B Certificateholders' Interest, the Class
C Certificateholders' Interest, and the Class D
Certificateholders' Interest will each include
the right to receive (but only to the extent
needed to make required payments under the
Pooling and Servicing Agreement) varying per-
centages of Interest Collections and Principal
Collections during each Monthly Period. Inter-
est Collections and the amount of Defaulted Re-
ceivables will be allocated on each business
day, and Principal Collections will be allo-
cated on each business day during the Revolving
Period, to the Class A Certificateholders' In-
terest, the Class B Certificateholders' In-
14
<PAGE>
terest, the Class C Certificateholders' Inter-
est, and the Class D Certificateholders' Inter-
est based on the Class A Floating Allocation
Percentage, the Class B Floating Allocation
Percentage, the Class C Floating Allocation
Percentage, and the Class D Floating Allocation
Percentage, respectively. During the Revolving
Period for each Series, all Principal Collec-
tions that would otherwise be allocated to the
Certificateholders will be allocated on each
business day and paid to the Transferor (except
for Shared Principal Collections used to make
payments to other Series and Reallocated Prin-
cipal Collections). During the Controlled Accu-
mulation Period, until the Class A Scheduled
Payment Date, Principal Collections will gener-
ally be allocated on each business day to the
Class A Certificateholders' Interest based on
the ABC Fixed/Floating Allocation Percentage.
On and after the Class A Scheduled Payment
Date, Principal Collections will generally be
allocated on each business day to the Class B
Certificateholders' Interest based on the ABC
Fixed/Floating Allocation Percentage. On and
after the Class B Scheduled Payment Date, all
Principal Collections will generally be allo-
cated on each business day to the Class C
Certificateholders' Interest based on the ABC
Fixed/Floating Allocation Percentage. See "De-
scription of the Offered Certificates--Alloca-
tion Percentages."
Shared Principal To the extent that Principal Collections and
Collections................. other amounts that are allocated to the
certificateholders' interest of any class of
any series (other than any Transferor Retained
Class) are not needed to make payments to the
certificateholders of such class or required to
be deposited in the Principal Account, they may
be applied to cover principal payments due to
or for the benefit of certificateholders of an-
other Series. Any such reallocation will not
result in a reduction in the certificate-
holders' interest of the Series to which such
Principal Collections were initially allocated.
As a result, Principal Collections and certain
other amounts otherwise allocable to other Se-
ries, to the extent such collections are not
needed to make payments to the
certificateholders of such other Series, may be
applied to cover principal payments due to or
for the benefit of the holders of the Series
1995-1 Certificates, and Principal Collections
and certain other amounts otherwise allocable
to the Series 1995-1 Certificates, to the ex-
tent such collections are not needed to make
payments to the Series 1995-1 Certificates, may
be applied to cover principal payments due to
or for the benefit of the holders of certifi-
cates of other Series. See "Description of the
Offered Certificates--Application of Collec-
tions."
Excess Funding Account....... At any time during which the Transferor Interest
is less than the Minimum Transferor Interest,
funds (to the extent available therefor as de-
scribed herein) otherwise payable to the Trans-
feror will be deposited in the Excess Funding
Account on each
15
<PAGE>
business day until the Transferor Interest is
equal to the Minimum Transferor Interest. If
for any reason the Transferor Interest (plus
any funds on deposit in the Excess Funding Ac-
count) is less than the Minimum Transferor In-
terest, or if the amount of funds in the Excess
Funding Account exceeds certain threshholds for
a specified period of time, a Pay Out Event
would occur and the Early Amortization Period
would begin. Funds on deposit in the Excess
Funding Account will be withdrawn and paid to
the Transferor to the extent that on any day
the Transferor Interest exceeds the Minimum
Transferor Interest. No funds will be deposited
in the Excess Funding Account, however, if any
Series is in an amortization or accumulation
period (including any early amortization peri-
od), unless the principal account for such Se-
ries has been fully funded for such Monthly Pe-
riod.
Any funds on deposit in the Excess Funding Ac-
count at the beginning of the Controlled Accu-
mulation Period will be deposited in the Prin-
cipal Account. See "Description of the Offered
Certificates--Excess Funding Account."
Amounts, if any, in the Excess Funding Account
may be expected to earn interest at a rate that
is less than the Base Rate (described above un-
der "Principal Payments--B. Controlled Accumu-
lation Period"). The difference between the
amount of interest actually earned on invest-
ments in the Excess Funding Account on any day
and the amount of interest that would have been
earned on such investments at the Base Rate is
the "Negative Carry Amount" for such day. On
each business day, the Servicer will apply an
amount equal to the lesser of (i) the Trans-
feror Interest Collections on such business day
and (ii) the Principal Funding Investment
Shortfall plus the Negative Carry Amount, if
any, for such business day, in the manner spec-
ified for application of Available Series In-
terest Collections.
Distribution of Available
Series Interest Collections
Allocable to
Certificateholders..........
Available Series Interest Collections will be
applied on each business day in a Monthly Pe-
riod in the following order of priority:
(i) an amount equal to the amount of Class A
Monthly Interest and any overdue Class A
Monthly Interest not previously deposited in
the Interest Funding Account for such
Monthly Period and interest on any overdue
interest amounts will be deposited in the
Interest Funding Account;
(ii) an amount equal to the amount of Class
B Monthly Interest and any overdue Class B
Monthly Interest not previously deposited in
the Interest Funding Account for such
Monthly Period and interest on any overdue
interest amounts will be deposited in the
Interest Funding Account;
16
<PAGE>
(iii) an amount equal to the amount of Class
C Monthly Interest and any overdue Class C
Monthly Interest not previously deposited in
the Interest Funding Account for such
Monthly Period and interest on any overdue
interest amounts will be deposited in the
Interest Funding Account;
(iv) if Green Tree or an affiliate of Green
Tree is not the Servicer, an amount equal to
the Monthly Servicing Fee plus any Monthly
Servicing Fee that was due but not paid on
any prior business day will be paid to the
Servicer;
(v) an amount equal to the ABC Investor
Default Amount on such business day and, to
the extent not previously paid, the ABC
Investor Default Amount for each prior
business day in such Monthly Period will be
(a) during the Revolving Period, treated as
Shared Principal Collections, (b) during the
Controlled Accumulation Period, deposited in
the Principal Account (up to the Controlled
Deposit Amount) or (c) during any Early
Amortization Period, deposited in the
Principal Account;
(vi) an amount equal to the Class D Investor
Default Amount on such business day and, to
the extent not previously paid, the Class D
Investor Default Amount for each prior
business day in such Monthly Period will be
(a) during the Revolving Period and the
Controlled Accumulation Period prior to the
payment in full of the Class C Invested
Amount, paid to the Transferor in order to
maintain the Class D Invested Amount, (b)
during the Controlled Accumulation Period
following the payment in full of the Class C
Invested Amount, paid to Class D
Certificateholders up to the Class D
Invested Amount;
(vii) an amount equal to unreimbursed Class
A Investor Charge-Offs on such business day
will be (a) during the Revolving Period,
treated as Shared Principal Collections, (b)
during the Controlled Accumulation Period,
on or prior to the Class B Scheduled Payment
Date, deposited in the Principal Account (up
to the Controlled Deposit Amount), or (c)
during any Early Amortization Period,
deposited in the Principal Account;
(viii) an amount equal to the accrued and un-
paid interest on the outstanding aggregate
principal amount of the Class B Certificates
not previously paid to the Class B
Certificateholders for such Monthly Period
will be deposited in the Interest Funding Ac-
count;
(ix) an amount equal to the accrued and un-
paid interest on the outstanding aggregate
principal amount of the Class C Certificates
not previously deposited in the Interest
Funding Account for such Monthly Period will
be deposited in the Interest Funding Account;
17
<PAGE>
(x) an amount equal to unreimbursed Class B
Investor Charge-Offs on such business day
will be (a) during the Revolving Period,
treated as Shared Principal Collections, (b)
during the Controlled Accumulation Period, on
or prior to the Class B Scheduled Payment
Date, deposited in the Principal Account (up
to the Controlled Deposit Amount) for the
Class A Certificateholders, (c) during the
Controlled Accumulation Period, on and after
the Class B Scheduled Payment Date, deposited
in the Principal Account up to the Class B
Invested Amount for the Class B
Certificateholders, or (d) during any Early
Amortization Period, deposited in the Princi-
pal Account;
(xi) an amount equal to unreimbursed Class C
Investor Charge-Offs on such business day
will be (a) during the Revolving Period,
treated as Shared Principal Collections, (b)
during the Controlled Accumulation Period, on
or prior to the Class B Scheduled Payment
Date, deposited in the Principal Account (up
to the Controlled Deposit Amount) for the
Class A Certificateholders, (c) during the
Controlled Accumulation Period, prior to the
Class C Principal Commencement Date, paid to
the Class B Certificateholders up to the
Class B Invested Amount for the Class B
Certificateholders, or (d) during any Early
Amortization Period, deposited in the Princi-
pal Account;
(xii) an amount equal to unreimbursed Class D
Investor Charge-Offs on such business day
will be (a) during the Revolving Period and
during the Controlled Accumulation Period
prior to the payment in full of the Class C
Invested Amount, paid to the Transferor in
order to maintain the Class D Invested Amount
and (b) during the Controlled Accumulation
Period following the payment in full of the
Class C Invested Amount, paid to the Class D
Certificateholders;
(xiii) if Green Tree or an affiliate of Green
Tree is the Servicer, an amount equal to the
Monthly Servicing Fee plus any Monthly Ser-
vicing Fee that was due but not paid on any
prior business day will be paid to the
Servicer; and
(xiv) the remainder will be treated as Excess
Interest Collections. See "Description of the
Offered Certificates--Application of Collec-
tions."
Sharing of Excess Interest
Collections................. Interest Collections on any business day in ex-
cess of the amounts necessary to make required
payments in respect of the Series 1995-1 Cer-
tificates on such business day will be applied
to cover any shortfalls with respect to amounts
payable from Interest Collections allocable to
any other Series then outstanding, pro rata
based upon the amount of the shortfall, if any,
with respect to such other Series. Any Excess
Interest Collections remaining after covering
shortfalls with respect to all outstanding Se-
ries will be paid to the Transferor.
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<PAGE>
Investor Default Amount;
Investor Charge-Offs........
A portion of all Defaulted Receivables (the "In-
vestor Default Amount") will be allocated to
the Certificateholders in an amount equal to
the product of the Floating Allocation Percent-
age applicable during the related Monthly Pe-
riod and the principal amount of Defaulted Re-
ceivables for such Monthly Period. Available
Series Interest Collections will be applied to
the payment thereof as described in clauses (v)
and (vi) of "Distribution of Available Series
Interest Collections Allocable to
Certificateholders" above. If such application
is not sufficient to cover the entire Investor
Default Amount, then the amount of Excess In-
terest Collections, to the extent applied to
the payment thereof as described in "Sharing of
Excess Interest Collections" above and any Re-
allocated Principal Collections applied with
respect thereto, as described under "Descrip-
tion of the Offered Certificates--Reallocated
Principal Collections," will be applied to
cover any remaining Investor Default Amount. If
such amounts are not sufficient to cover such
remaining Investor Default Amount, then the
Class D Invested Amount will be reduced by the
remaining aggregate Investor Default Amount (a
"Class D Investor Charge-Off") for such Monthly
Period to avoid a charge-off with respect to
the Class A Certificates, the Class B Certifi-
cates or the Class C Certificates.
The Class D Invested Amount will thereafter be
increased (but not in excess of the unpaid
principal balance of the Class D Certificates)
on any business day by the amount of Available
Series Interest Collections allocated and
available for such purpose as described in
clause (xii) of "Distribution of Available Se-
ries Interest Collections Allocable to Certifi-
cateholders." If the Class D Invested Amount
(which initially will equal the Class D Incre-
mental Amount and will be adjusted as described
under "Description of the Offered Certifi-
cates--The Overconcentration Amounts") is equal
to or reduced to zero, a portion of the Class C
Invested Amount equal to the amount by which
such insufficiency would have caused the Class
D Invested Amount to be reduced below zero (but
not in excess of the remaining aggregate In-
vestor Default Amount for such Monthly Period)
will be deducted from the Class C Invested
Amount (a "Class C Investor Charge-Off") to
avoid a charge-off with respect to the Class A
Certificates or the Class B Certificates. If
and for so long as the Class D Invested Amount
is reduced to zero, the Class C
Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust.
The Class C Invested Amount will thereafter be
increased (but not in excess of the unpaid
principal balance of the Class C Certificates)
on any business day by the amount of Available
Series Interest Collections allocated and
available for that purpose as described in
clause (xi) of "Distribution of Available
19
<PAGE>
Series Interest Collections Allocable to
Certificateholders." If the Class C Invested
Amount is reduced to zero, a portion of the
Class B Invested Amount equal to the amount by
which such insufficiency would have caused the
Class C Invested Amount to be reduced below
zero (but not in excess of the remaining aggre-
gate Investor Default Amount for such Monthly
Period) will be deducted from the Class B In-
vested Amount (a "Class B Investor Charge-Off")
to avoid a charge-off with respect to the Class
A Certificates. If and for so long as the Class
C Invested Amount is reduced to zero, the Class
B Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust.
The Class B Invested Amount will thereafter be
increased (but not in excess of the unpaid
principal balance of the Class B Certificates)
on any business day by the amount of Available
Series Interest Collections allocated and
available for that purpose as described in
clause (x) of "Distribution of Available Series
Interest Collections Allocable to
Certificateholders." If the Class B Invested
Amount is reduced to zero, a portion of the
Class A Invested Amount equal to the amount by
which such insufficiency would have caused the
Class B Invested Amount to be reduced below
zero (but not in excess of the remaining aggre-
gate Investor Default Amount for such Monthly
Period) will be deducted from the Class A In-
vested Amount (a "Class A Investor Charge-
Off"). If and for so long as the Class B In-
vested Amount and the Class C Invested Amount
are reduced to zero, the Class A
Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust.
The Class A Invested Amount will thereafter be
increased (but not in excess of the unpaid
principal balance of the Class A Certificates)
on any business day by the amount of Available
Series Interest Collections allocated and
available for that purpose as described in
clause (vii) of "Distribution of Available Se-
ries Interest Collections Allocable to
Certificateholders." See "Description of the
Offered Certificates--Investor Charge-Offs."
Subordination of the Class B
Certificates, the Class C
Certificates and the Class
D Certificates..............
The Class B Certificates will be subordinated to
fund payments of principal and interest on the
Class A Certificates. The Class C Certificates
will be subordinated to fund payments of prin-
cipal and interest on the Class A Certificates
and the Class B Certificates. The Class D Cer-
tificates will be subordinated to fund payments
of principal and interest on the Class A Cer-
tificates, the Class B Certificates and the
Class C Certificates. See "Description of the
Offered Certificates--Subordination of the
Class B Certificates," "--Reallocation of Cash
Flows" and "--Reallocated Principal Collec-
tions" herein. The Class B In-
20
<PAGE>
vested Amount, the Class C Invested Amount, and
the Class D Invested Amount will be subordi-
nated as described herein to the extent neces-
sary to fund certain payments with respect to
each Class of Certificates with an earlier al-
phabetical designation as described herein. If
at the end of any Monthly Period there is a
positive Class A Required Amount, Class B Re-
quired Amount or Class C Required Amount, then,
commencing on the first business day of the
following Monthly Period, certain Principal
Collections for such business day will be used
to fund first the Class A Required Amount, sec-
ond the Class B Required Amount and third the
Class C Required Amount, as more fully de-
scribed herein in "Description of the Offered
Certificates--Reallocated Principal Collec-
tions." To the extent the Class B Invested
Amount, the Class C Invested Amount or the
Class D Invested Amount is reduced, the per-
centage of Interest Collections allocated to
the Class B Certificateholders, the Class C
Certificateholders, or the Class D
Certificateholders, as applicable, will be re-
duced. Moreover, to the extent the amount of
such reduction in the Class B Invested Amount,
the Class C Invested Amount, or the Class D In-
vested Amount is not reimbursed, the amount of
principal distributable to the Class B
Certificateholders, the Class C
Certificateholders, or the Class D
Certificateholders, as applicable, from the
Collection Account will be reduced. Principal
payments with respect to the Class B Certifi-
cates will not be made until the final payment
of the Class A Invested Amount has been made to
the Class A Certificateholders. Principal pay-
ments with respect to the Class C Certificates
will not be made until the final payment of the
Class A Invested Amount has been made to the
Class A Certificateholders and the final pay-
ment of the Class B Invested Amount has been
made to the Class B Certificateholders. Princi-
pal payments with respect to the Class D Cer-
tificates will not be made until the final pay-
ment of the Class A Invested Amount has been
made to the Class A Certificateholders, the fi-
nal payment of the Class B Invested Amount has
been made to the Class B Certificateholders and
the final payment of the Class C Invested
Amount has been made to the Class C Certifi-
cateholders. See "Description of the Offered
Certificates--Subordination of the Class B Cer-
tificates," "--Reallocation of Cash Flows" and
"--Reallocated Principal Collections."
Servicing Compensation.......
The Servicer will receive a monthly servicing
fee as described herein as servicing compensa-
tion from the Trust. See "Description of the
Certificates--Servicing Compensation and Pay-
ment of Expenses." In certain circumstances,
the Servicer will be permitted to use for its
own benefit and not segregate collections on
the Receivables received by it during each
Monthly Period until no later than the business
day prior to
21
<PAGE>
the related Distribution Date. See "Description
of the Certificates--Application of Collec-
tions."
Companion Series............ On or prior to the commencement of the Con-
trolled Accumulation Period or the Early Amor-
tization Period, the Series 1995-1 Certificates
may be paired with one or more other Series
(each a "Companion Series"). Each Companion Se-
ries either will be prefunded with an initial
deposit to a prefunding account in an amount up
to the initial principal balance of such Com-
panion Series, funded primarily from the pro-
ceeds for the sale of such Companion Series, or
will have a variable principal amount. Any such
prefunding account will be held for the benefit
of such Companion Series and not for the bene-
fit of Series 1995-1 Certificateholders. As
principal is paid with respect to the Series
1995-1 Certificates, either (i) in the case of
a prefunded Companion Series, an equal amount
of funds on deposit in any prefunding account
for such prefunded Companion Series will be re-
leased (which funds will be distributed to the
Transferor) or (ii) in the case of a Companion
Series having a variable principal amount, an
interest in such variable Companion Series in
an equal or lesser amount may be sold by the
Trust (and the proceeds thereof will be dis-
tributed to the Transferor) and, in either
case, the invested amount in the Trust of such
Companion Series will increase by up to the
corresponding amount. See "Description of the
Offered Certificates--Companion Series."
Optional Repurchase.......... The Class A Certificates, the Class B Certifi-
cates and the Class C Certificates will be sub-
ject to optional repurchase by the Transferor
on any Distribution Date after the Invested
Amount of the Class A Certificates, the Class B
Certificates and the Class C Certificates is
reduced to an amount less than or equal to 10%
of the initial Invested Amount of the Class A
Certificates, the Class B Certificates and the
Class C Certificates, respectively, if certain
conditions set forth in the Pooling and Servic-
ing Agreement are met. The repurchase price
will be equal to the Invested Amount plus ac-
crued and unpaid interest on the Class A Cer-
tificates, the Class B Certificates and the
Class C Certificates through the day preceding
the Distribution Date on which the repurchase
occurs. See "Description of the Offered Certif-
icates--Final Payment of Principal; Termina-
tion."
Tax Status................... In the opinion of counsel to Green Tree and the
Transferor, the Class A Certificates and the
Class B Certificates will be characterized as
debt and the Trust will not be characterized as
an association, publicly traded partnership or
taxable mortgage pool taxable as a corporation
for federal income tax purposes under existing
law. Under the Pooling and Servicing Agreement,
the Transferor, the Servicer, the Class A
Certificateholders and the Class B
Certificateholders will agree to treat
22
<PAGE>
the Class A Certificates and the Class B Cer-
tificates as debt for federal, state, and other
tax purposes. See "Certain Federal Income Tax
Consequences" for additional information con-
cerning the application of federal income tax
laws.
ERISA Considerations......... Under regulations issued by the U.S. Department
of Labor, the Trust's assets would not be
deemed "plan assets" of an employee benefit
plan holding an interest in the Certificates if
certain conditions are met, including that in-
terests in each Class of the Certificates be
held by at least 100 persons independent of the
Transferor and each other upon completion of
the public offering being made hereby. The Un-
derwriters expect, although no assurance can be
given, that the Class A Certificates will be
held by at least 100 such persons, and the
Transferor anticipates that the other condi-
tions of the "publicly offered security" excep-
tion contained in the regulations will be met
with respect to the Class A Certificates. No
monitoring or other measures will be taken to
ensure that any such conditions will be met
with respect to the Class A Certificates. The
Underwriter of the Class B Certificates expects
that the Class B Certificates will not be held
by at least 100 persons. Consequently, the pub-
licly offered security exception contained in
the regulations will not be met with respect to
the Class B Certificates. If the Trust's assets
were deemed to be "plan assets" of such a plan,
there is uncertainty as to whether existing ex-
emptions from the "prohibited transaction"
rules of the Employee Retirement Income Secu-
rity Act of 1974, as amended ("ERISA"), and the
Internal Revenue Code of 1986, as amended (the
"Code") would apply to all transactions involv-
ing the Trust's assets. Accordingly, employee
benefit plans contemplating purchasing the Of-
fered Certificates should consult their counsel
before making a purchase. See "Employee Benefit
Plan Considerations."
Offered Certificate Ratings..
It is a condition to the issuance of the Class A
Certificates that they be rated "AAA" or its
equivalent by at least one nationally recog-
nized rating agency (the rating agency or agen-
cies selected by the Transferor to rate any Se-
ries, is hereafter referred to as the "Rating
Agency").
It is a condition to the issuance of the Class B
Certificates that they be rated at least
" " or its equivalent by the Rating
Agency.
A rating is not a recommendation to buy, sell or
hold securities and may be subject to revision
or withdrawal at any time by the assigning Rat-
ing Agency. Each rating should be evaluated in-
dependently of any other rating. See "Risk Fac-
tors--Certificate Rating."
Listing...................... Application will be made to list the Offered
Certificates on the Luxembourg Stock Exchange.
23
<PAGE>
RISK FACTORS
Prospective investors in the Offered Certificates should consider, among
other things, the following factors in connection with the purchase of the
Offered Certificates:
LIMITED EXPERIENCE
Green Tree began originating and servicing revolving credit arrangements in
February 1994, and thus has limited underwriting and servicing experience, and
very limited delinquency, default and loss experience, with respect to such
accounts. Green Tree's substantial experience in underwriting and servicing
retail installment sales contracts is not necessarily indicative that
satisfactory results will be experienced on Accounts and the Receivables
generated in Accounts. See "Green Tree Financial Corporation and its Commercial
Finance Division."
Green Tree's historical loss experience with respect to its portfolio of
revolving credit agreements is presented under "The Accounts--Loss Experience."
However, because Green Tree's portfolio has grown rapidly in the past year, and
Green Tree expects to create a substantial number of Additional Accounts that
will be transferred to the Trust in the future, the actual loss experience with
respect to the Accounts owned by the Trust may be different. Since a
substantial number of receivables from which the Receivables will be selected
were only recently originated, it may be expected that such receivables have
not yet exhibited a loss experience that is representative of the losses that
may be experienced over a longer period of time. There can be no assurance that
the loss experience for the Receivables in the future will be similar to Green
Tree's historical experience. In addition, Green Tree's historical experience
includes the effect of the financial obligations of Manufacturers in respect of
repossessed products as described under "Green Tree Financial Corporation and
its Commercial Finance Division--Floorplan Agreements with Manufacturers." If
Manufacturers are not able to perform such obligations in the future, the loss
experience in respect of the portfolio and the Receivables may be adversely
affected.
ADDITION OF TRUST ASSETS; ADDITIONAL PRODUCT TYPES
The Transferor expects, and in some cases will be obligated, to designate
Additional Accounts, the Receivables in which will be conveyed to the Trust.
Such Additional Accounts may include accounts with dealers originated by Green
Tree under criteria different from those which were applied to the Dealers on
the Accounts designated on the Cut-off Date or to the dealers on previously
designated Additional Accounts, because such accounts were originated at a
different date. Such Accounts may also provide financing for products of types
different from those included in the Trust on the Closing Date. Consequently,
there can be no assurance that Additional Accounts designated in the future
will relate to the same types of products or will be of the same credit quality
as previously designated Accounts or that new product types that may secure the
Receivables in new Accounts will provide security that is as favorable as that
provided by manufactured homes or other additional product types. The
designation of Additional Accounts will be subject to the satisfaction of
certain conditions described herein under "Description of the Certificates--
Addition of Accounts."
MASTER TRUST CONSIDERATIONS; POSSIBLE EFFECTS OF NEW SERIES ON PREVIOUSLY
ISSUED SERIES
In addition to the Certificates, the Trust, as a master trust, is expected to
issue additional Series from time to time. While the Principal Terms of any
Series will be specified in a Supplement to the Pooling and Servicing
Agreement, the provision of a Supplement and, therefore, the terms of any
additional Series, will not be subject to the prior review or consent of
holders of the certificates of any previously issued Series. Such Principal
Terms may include methods for determining applicable investor percentages and
allotting collections, provisions creating security or credit enhancement,
different classes of certificates (including subordinated classes of
certificates), provisions subordinating such Series to another Series (if the
Supplement relating to such Series so permits) or another Series to such Series
(if the Supplement for such other Series so
24
<PAGE>
permits), and any other amendment or supplement to the Pooling and Servicing
Agreement which is made applicable only to such Series. See "Description of the
Offered Certificates--Exchanges." In addition, the provisions of any Supplement
may give the holders of the certificates issued pursuant thereto consent,
approval, or other rights that could result in such holders having the power to
cause the Transferor, the Servicer, or the Trustee to take or refrain from
taking certain actions, including, without limitation, actions with respect to
the exercise of certain rights and remedies under the Pooling and Servicing
Agreement, without regard to the position or interest of the Certificateholders
of the 1995-1 Series or the certificateholders of any other Series. Similar
rights may also be given to the provider of any credit enhancement for any
Series. It is a condition precedent to issuance of any additional Series that
each Rating Agency that has rated any outstanding Series deliver written
confirmation to the Trustee that the Exchange will not result in such Rating
Agency reducing or withdrawing its rating on any outstanding Series. There can
be no assurance, however, that the Principal Terms of any other Series,
including any Series issued from time to time hereafter, might not have an
adverse impact on the timing and amount of payments received by a
Certificateholder or the value of Certificates even if there is no change in
the rating of any outstanding Series. See "Description of the Offered
Certificates--Exchanges."
TRANSFER OF THE RECEIVABLES; INSOLVENCY RISK CONSIDERATIONS
Green Tree will warrant to the Transferor in the Purchase Agreement relating
to any Series that the sale of the related Receivables by it to the Transferor
is a valid sale of such Receivables to the Transferor. Green Tree will take all
actions that are required under Minnesota law to perfect the Transferor's
ownership interest in such Receivables. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables." Notwithstanding the foregoing, if Green
Tree were to become a debtor in a bankruptcy case and a creditor or trustee-in-
bankruptcy of Green Tree, or Green Tree itself as debtor-in-possession, were to
take the position that any sale of Receivables to the Transferor should be
recharacterized as a pledge of such Receivables to secure a borrowing of Green
Tree, then delays in payments to the Transferor (and therefore to the Trust and
the Certificateholders) of collections on the Receivables could occur or
(should the court rule that such transfers were borrowings rather than sales)
reductions in the amount of such payments could result. Green Tree's Limited
Guaranty with respect to the Class C Certificates (which are not being offered
hereby) may increase the risk of such recharacterization. If a transfer of
Receivables to the Transferor were recharacterized as a pledge, a tax or
government lien on the property of Green Tree arising before any Receivables
come into existence may have priority over the Transferor's (and therefore the
Trust's) interest in such Receivables. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Bankruptcy." If the transfer of
Receivables to the Transferor were respected as a sale, the Receivables would
not be part of Green Tree's bankruptcy estate and would not be available to
Green Tree's creditors.
In addition, if Green Tree were to become a debtor in a bankruptcy case and a
creditor or trustee-in-bankruptcy of Green Tree, or Green Tree itself as
debtor-in-possession, were to request a bankruptcy court to order that the
Transferor be substantively consolidated with Green Tree, delays in and
reductions in the amount of distributions on the Certificates could occur.
Although the Pooling and Servicing Agreement will provide that the Transferor
is transferring all of its right, title, and interest in and to the Receivables
to the Trust, a court could treat such transactions as an assignment of
collateral as security for the benefit of holders of certificates issued by the
Trust. It is possible that the risk of such treatment may be increased by the
retention by the Transferor of the Exchangeable Transferor Certificate and the
Class D Certificates. The Transferor will represent and warrant in the Pooling
and Servicing Agreement that the transfer of the Receivables to the Trust is
either a valid transfer and assignment of the Receivables to the Trust or the
grant to the Trust of a security interest in the Receivables. The Transferor
has taken and will take certain actions required to perfect the Trust's
interest in the Receivables and will warrant that if the transfer to the Trust
is deemed to be a grant to the Trust of a security interest in the Receivables,
the Trustee will have a first priority perfected security interest therein,
subject only to Permitted Liens (as defined in the Pooling and Servicing
Agreement). If the transfer of the Receivables to the Trust is deemed to create
a security interest therein under the Uniform Commercial Code (the "UCC"),
25
<PAGE>
a tax or government lien on property of the Transferor arising before
Receivables come into existence may have priority over the Trust's interest in
such Receivables. In the event of the insolvency of the Transferor, certain
administrative expenses may also have priority over the Trust's interest in
such Receivables. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables."
In a recent decision, Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th
Cir. 1993), the United States Court of Appeals for the 10th Circuit suggested
that even where a transfer of accounts or chattel paper from a seller to a
buyer constitutes a "true sale," the accounts or chattel paper would
nevertheless constitute property of the seller's estate in a bankruptcy of the
seller. If Green Tree or the Transferor were to become subject to a bankruptcy
proceeding and a court were to follow the Octagon court's reasoning,
Certificateholders might experience delays in payment or possibly losses in
their investment in the Certificates. Counsel to the Transferor has advised the
Transferor that the reasoning of the Octagon case appears to be inconsistent
with established precedent and the UCC. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Bankruptcy."
To the extent that the Transferor is deemed to have granted a security
interest in the Receivables to the Trust and such security interest was validly
perfected before any insolvency of the Transferor and was not granted or taken
in contemplation of insolvency or with the intent to hinder, delay, or defraud
the Transferor or its creditors, such security interest should not be subject
to avoidance in the event of insolvency or receivership of the Transferor, and
payments to the Trust with respect to the Receivables should not be subject to
recovery by a bankruptcy trustee or receiver of the Transferor. If, however,
such a bankruptcy trustee or receiver were to assert a contrary position,
delays in payments on the Offered Certificates and possible reductions in the
amount of those payments could occur. If a bankruptcy trustee or receiver were
appointed for the Servicer, and no Servicer Default other than such bankruptcy
or receivership or insolvency of the Servicer exists, the bankruptcy trustee or
receiver may have the power to prevent either the Trustee or the majority of
the Certificateholders from effecting a transfer of servicing to a successor
Servicer. If a bankruptcy trustee or receiver were appointed for the
Transferor, causing a Pay Out Event to occur with respect to all Series then
outstanding, new Receivables would not be transferred to the Trust pursuant to
the Pooling and Servicing Agreement and the Trustee would sell the portion of
the Receivables allocable in accordance with the Pooling and Servicing
Agreement to each Series (unless holders of more than 50% of the principal
amount of each class of each Series, excluding any class or portion thereof
held by the Transferor, and the holders of any Supplemental Certificates or any
other interest in the Exchangeable Transferor Certificates other than the
Transferor instruct otherwise), thereby causing early termination of the Trust
and a loss to the Certificateholders if the net proceeds allocable to the
Certificateholders from such sale, if any, were insufficient to pay the
Certificateholders in full. The net proceeds of any such sale of the portion of
the Receivables allocated in accordance with the Pooling and Servicing
Agreement to each Series will first be used to pay amounts due to the Class A
Certificateholders, will thereafter be used to pay amounts due to the Class B
Certificateholders, will thereafter be used to pay amounts due to the Class C
Certificateholders, and will thereafter be used to pay amounts due to the Class
D Certificateholders. If the only Pay Out Event to occur is either the
insolvency of the Transferor or the appointment of a bankruptcy trustee or
receiver for the Transferor, the bankruptcy trustee or receiver may have the
power to continue to require the Transferor to transfer new Receivables to the
Trust and to prevent the early sale, liquidation, or disposition of the
Receivables and the commencement of the Early Amortization Period. In addition,
a bankruptcy trustee or receiver for the Transferor may have the power to cause
early payment of the Certificates. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Bankruptcy."
BASIS RISK
The Receivables will bear interest at a variable rate above a designated
index rate. See "Green Tree Financial Corporation and its Commercial Finance
Division--Floorplan Payment Terms." The Offered Certificates bear interest at a
floating rate based on LIBOR. If there is a decline in such index rate, the
amount of Interest Collections on such Accounts may be reduced, whereas the
amounts payable as Monthly Interest on such Series of Certificates and other
amounts required to be funded out of Interest Collections with respect to such
Series may not be similarly reduced and therefore might not be covered by such
Interest Collections. The Servicer has the right to change the Discount Factor
to offset any such reduced Interest Collections, but the Discount Factor may in
no event exceed %. There can be no assurance that any other assets of the
26
<PAGE>
Trust that are intended to be available to cover such shortfalls will be
available or sufficient to cover any such shortfalls. The interest rates borne
by the Receivables will be limited by the applicable state usury laws.
SOCIAL, ECONOMIC AND OTHER FACTORS; COMPETITION
Green Tree's ability to generate new Receivables, and the Dealers' ability to
make payments on the Receivables owned by the Trust, will depend upon the
retail sales of manufactured housing and the other products securing such
Receivables. The level of retail sales of such products will be affected by a
variety of social and economic factors, including national and regional
unemployment levels and levels of economic activity in general, interest rates
and consumer perceptions of economic conditions. In addition, Green Tree
competes with various other financing sources, including independent finance
companies, manufacturer-affiliated finance companies and banks, who are in the
business of providing floorplan financing arrangements to dealers. If, for any
reason, Green Tree were unable to or ceased to generate new Receivables, a Pay
Out Event would occur. See "Payments and Maturity; Reinvestment Risk" below.
LIMITED LIQUIDITY
The Underwriters currently intend to make a market in the Offered
Certificates but are not obligated to do so. There can be no assurance that a
secondary market will develop for the Offered Certificates, or, if it does
develop, that it will provide the holders of any of the Offered Certificates
with liquidity of investment or that if such a secondary market develops that
it will continue to exist for the term of the Offered Certificates.
NON-RECOURSE TO TRANSFEROR, GREEN TREE OR AFFILIATES THEREOF
No Certificateholder will have recourse for payment of its Certificates to
any assets of any of the Transferor (other than the Exchangeable Transferor
Certificate and an interest represented by any class of investor certificates
which is retained by the Transferor (a "Transferor Retained Class"), in each
case to the extent described herein), Green Tree (other than its Limited
Guaranty that will benefit the Class C Certificates only), or any affiliates
thereof. Consequently, Certificateholders must rely solely upon payments on the
Receivables for the payment of principal of and interest on the Certificates.
Furthermore, under the Pooling and Servicing Agreement, the Certificateholders
have an interest in the Receivables and Collections only to the extent of the
Certificateholders' Interest and, to the limited extent described herein, the
Transferor Interest. Should the Offered Certificates not be paid in full on a
timely basis, Certificateholders may not look to any assets of any of the
Transferor (other than the Exchangeable Transferor Certificate and any
Transferor Retained Class, in each case to the extent described herein), Green
Tree (other than its Limited Guaranty that will benefit the Class C
Certificates only) or any affiliates thereof to satisfy their claims.
PAYMENTS AND MATURITY; REINVESTMENT RISK
The Receivables may be paid at any time and there is no assurance that there
will be additional Receivables created or that any particular pattern of
repayments will occur. A significant decline in the amount of Receivables
generated could result in the occurrence of a Pay Out Event and the
commencement of the Early Amortization Period if, as a result, the Transferor
Interest were reduced below the Minimum Transferor Interest or amounts in the
Excess Funding Account result in significant Negative Carry Amounts. See
"Maturity Considerations" and "Description of the Offered Certificates--Pay Out
Events" for a discussion of other Pay Out Events. If a Pay Out Event occurs,
the Early Amortization Period will commence and the average life and maturity
of the Offered Certificates may be significantly reduced. There can be no
assurance in that event that the holders of the Offered Certificates would be
able to reinvest any accelerated distributions on account of such Offered
Certificates in other suitable investments having a comparable yield.
Floorplan Receivables are generally payable upon the retail sale of the
related product. Asset-Based Receivables are payable as described under "Green
Tree Financial Corporation and its Commercial Finance Division--Asset-Based
Receivables." The payment of principal on the Certificates is dependent on the
receipt of Principal Collections during the Controlled Accumulation Period. No
assurance can be given that the Principal Collections allocable to Series 1995-
1 during the Controlled Accumulation Period, especially if another Series
enters into an early amortization period during such time, will be sufficient
to fully pay the Class A Invested Amount on the Class A Scheduled Payment Date
or the Class B Invested Amount on the Class B Scheduled Payment Date.
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EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS
The Class B Certificates will be subordinated in right of payment of
principal to the Class A Certificates. Payments of principal in respect of the
Class B Certificates will not commence until after the Class A Invested Amount
has been paid in full. Moreover, the Class B Invested Amount is subject to
reduction on any Determination Date if collections of Principal Receivables
allocable to the Class B Certificates are reallocated to cover the Class A
Required Amount or if the aggregate Investor Default Amount, if any, for the
preceding Monthly Period exceeds the aggregate Available Series Interest
Collections applied to the payment thereof and is not funded from Excess
Interest Collections, Class C Reallocated Principal Collections or Class D
Reallocated Principal Collections and is not assessed against the Class C
Invested Amount or the Class D Invested Amount. If the Class B Invested Amount
suffers such a reduction, Interest Collections allocable to the Class B
Certificateholders' Interest in future Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B Invested
Amount is not reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. See "Description of the Offered
Certificates-- Allocation Percentages," "--Reallocated Principal Collections,"
"--Investor Charge-Offs" and
"--Subordination of the Class B Certificates."
NEGATIVE CARRY; DECREASE IN AVAILABLE SERIES INTEREST COLLECTIONS
If funds are deposited in the Excess Funding Account at any time, such funds
will be invested in Cash Equivalents and, as a result, would be expected to
earn a rate of return lower than the interest rates borne by a comparable
amount of Principal Receivables. Accordingly, any deposit of funds in the
Excess Funding Account may be expected to reduce the amount of Interest
Collections available to the Trust on each business day, until Green Tree is
able to generate sufficient Eligible Receivables to permit such funds to be
released from the Excess Funding Account.
ABILITY OF SERVICER TO CHANGE PAYMENT TERMS OF THE RECEIVABLES
The Servicer will have the right, on behalf of the Transferor, to change
payment terms (including without limitation the interest rate and repayment
terms) and various other terms with respect to the Receivables, subject to the
conditions described below. A decrease in the interest rate borne by the
Receivables or an increase in interest-free periods without an increase in the
Discount Factor would decrease the Portfolio Yield and could result in the
occurrence of a Pay Out Event. See "Payments and Maturity; Reinvestment Risk"
above. Green Tree will covenant that it will only change the terms relating to
the Receivables generally if in its reasonable judgment, no Pay Out Event will
occur as a result of the change and the interests of the certificateholders of
all outstanding Series will not be materially adversely affected. Except as
specified above, there are no restrictions on the ability of the Servicer to
change the terms of the Receivables. While the Servicer has no current
intention of taking actions which would change the payment or other terms of
the Receivables, other than in accordance with its customary and usual
procedures, there can be no assurance that changes in the marketplace or
prudent business practice might not result in a determination to do so.
Green Tree will have the right to generate new Receivables with payment terms
which are generally longer than the current payment terms on the Receivables.
Such a lengthening of the payment period could result in a reduction of the
monthly payment rate and consequently a reduction in the Portfolio Yield (if a
Discount Factor is in use), unless such Discount Factor is increased
accordingly for any Monthly Period.
CONTROL OF CERTAIN ACTIONS UNDER THE POOLING AND SERVICING AGREEMENT
Subject to certain exceptions, the consent or approval of the holders of a
specified percentage of the aggregate unpaid principal amount of all
outstanding investor certificates of each Series will be required to direct
certain actions to be taken, under the Pooling and Servicing Agreement or the
related Supplement. In determining whether the required percentage of
Certificateholders have given their approval or consent, except as otherwise
specified, the Class A Certificateholders, the Class B Certificateholders and
the Class C
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Certificateholders will be treated as a single Series. Accordingly, the Class A
Certificateholders will have the power to determine whether any such action is
taken without regard to the position or interests of the Class B
Certificateholders or the Class C Certificateholders relating to such action.
Neither the Class B Certificateholders nor the Class C Certificateholders will
have similar power. However, under certain circumstances the consent or
approval of a specified percentage of the aggregate invested amount of all
Series outstanding or of the invested amount of each class of each Series may
be required to direct certain actions, including requiring the appointment of a
successor Servicer following a Servicer Default, amending the Pooling and
Servicing Agreement in certain circumstances, directing the Servicer not to
sell the Receivables upon the occurrence of an Insolvency Event and directing a
repurchase of all outstanding Series upon the breach of certain representations
and warranties by the Transferor. In such instances, it may be difficult for
the Certificateholders to achieve the results that they desire.
CERTIFICATE RATING
It is a condition to issuance of the Class A Certificates that they have an
initial rating of "AAA" or its equivalent by at least one nationally recognized
rating agency. It is a condition to issuance of the Class B Certificates that
they have an initial rating of " " or its equivalent by at least one
nationally recognized rating agency. However, any such rating will not address
the likelihood that the principal of, or interest on, the Class A Certificates
will be paid by the Class A Scheduled Payment Date or that the principal of, or
interest on, the Class B Certificates will be paid by the Class B Scheduled
Payment Date. It is a condition to issuance of the Class C Certificates that
they be rated " " or its equivalent by at least one nationally
recognized rating agency. The Class D Certificates initially will not be rated.
The ratings will be based primarily on the value of the Receivables and the
funds on deposit in the Excess Funding Account, if any (and the manner in which
such funds are invested). The ratings are not a recommendation to purchase,
hold, or sell the Class A Certificates, the Class B Certificates or the Class C
Certificates, inasmuch as such ratings do not comment as to the market price or
suitability for a particular investor. There can be no assurance that the
ratings will remain in effect for any given period of time or that either
rating will not be lowered or withdrawn by any Rating Agency if in its judgment
circumstances so warrant.
The Transferor will request a rating of the Offered Certificates by at least
one nationally recognized rating agency. There can be no assurance as to
whether any rating agency not requested to rate the Offered Certificates will
nonetheless issue a rating with respect to any Class of the Offered
Certificates, and, if so, what such rating would be. A rating assigned to any
Class of the Offered Certificates by a rating agency that has not been
requested by the Transferor to do so may be lower than the ratings assigned by
the Rating Agencies pursuant to the Transferor's request.
THE TRUST
The Trust will be formed, in accordance with the laws of the State of
Minnesota, pursuant to the Pooling and Servicing Agreement. The Trust will be
formed for the transactions described herein and similar transactions, as
contemplated by the Pooling and Servicing Agreement, and prior to formation
will have no assets or obligations. The Trust will not engage in any business
activity, other than as described herein, but rather will only acquire and hold
the Receivables (and related assets), issue (or cause to be issued) the
Certificates, the Exchangeable Transferor Certificate, and certificates
representing additional Series and engage in related activities (including,
with respect to any Series, entering into any credit enhancement and credit
enhancement agreement relating thereto) and make payments thereon. As a
consequence, the Trust is not expected to have any need for additional capital
resources.
THE TRANSFEROR
Green Tree Floorplan Funding Corp., a wholly owned subsidiary of Green Tree,
was incorporated in Delaware in September 1995. The Transferor was organized
for the limited purposes of purchasing receivables from Green Tree and
transferring such receivables to third parties, and any activities incidental
to and necessary or convenient for the accomplishment of such purposes. The
principal executive offices of the Transferor are located at 500 Landmark
Towers, 345 St. Peter Street, St. Paul, Minnesota 55102-1639 (telephone (612)
293-3400).
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The Transferor has taken, and will take in connection with the creation of
each Series of Certificates, steps intended to ensure that the voluntary or
involuntary application for relief by Green Tree under the United States
Bankruptcy Code or similar applicable state laws ("Insolvency Laws") will not
result in consolidation of the assets and liabilities of the Transferor with
those of Green Tree. These steps include the creation of the Transferor as a
separate, limited-purpose subsidiary pursuant to a Certificate of Incorporation
containing certain limitations (including restrictions on the nature of the
Transferor's business and a restriction on the Transferor's ability to commence
a voluntary case or proceeding under any Insolvency Law without the unanimous
affirmative vote of all of its directors). The Transferor's Certificate of
Incorporation includes a provision that requires the Transferor to have two
directors who qualify under the Certificate of Incorporation as "Independent
Directors," meaning a person who is not now, and has never been, a director or
officer of, employed by, or the holder of any beneficial economic interest in
any Affiliate, and who may at no time hold any beneficial or economic interest
in the Transferor. "Affiliate" means any entity other than the Transferor (i)
which owns beneficially, directly or indirectly, 10% or more of the outstanding
shares of Common Stock of the Transferor, or (ii) of which 10% or more of the
outstanding shares of its Common Stock is owned beneficially, directly or
indirectly, by any entity described in clause (i) above, or (iii) which is
controlled by an entity described in clause (i) above, as the term "control" is
defined under the Rules and Regulations of the Commission. No assurance can be
given, however, that such a consolidation will not occur. See "Risk Factors--
Transfer of the Receivables; Insolvency Risk Considerations."
GREEN TREE FINANCIAL CORPORATION AND ITS COMMERCIAL FINANCE DIVISION
Green Tree is a Delaware corporation that, as of September 30, 1995, had
stockholders' equity of approximately $914,860,000. Through its various
divisions, Green Tree purchases, pools, sells and services retail installment
sales contracts for manufactured housing and retail installment sales contracts
for home improvements, a variety of consumer products and equipment finance,
and provides credit to Dealers for purposes of purchasing inventory from
manufacturers. Green Tree is currently the largest servicer of manufactured
housing government insured or guaranteed contracts, and is one of the largest
servicers of conventional manufactured housing contracts, in the United States.
Green Tree conducts its business throughout the United States through 51
manufactured housing offices, 80 home improvement locations and 3 regional
wholesale lending centers, as well as centralized operations in St. Paul,
Minnesota and Rapid City, South Dakota. Its principal executive offices are
located at 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota
55102-1639 (telephone (612) 293-3400). Green Tree's Annual Report on Form 10-K
for the year ended December 31, 1994, most recent Proxy Statement, and, when
available, subsequent quarterly or annual reports are available from Green Tree
upon written request. The Certificates do not represent an interest in or
obligation of Green Tree, the Transferor or any of their affiliates, and no
Certificateholder will have recourse for payment of its Certificates to any
assets of any of Green Tree (other than its Limited Guaranty that will benefit
the Class C Certificates only), the Transferor (other than the Exchangeable
Transferor Certificate and any Transferor Retained Class, to the extent
described herein) or any of their affiliates.
COMMERCIAL FINANCE DIVISION--GENERAL
The Receivables to be sold to the Transferor will be selected from extensions
of credit made by Green Tree's Commercial Finance Division ("CFD") under
revolving credit agreements with dealers, manufacturers and distributors of
various consumer and commercial products. The Green Tree party to such an
agreement may be a subsidiary of Green Tree. "Floorplan Receivables" represent
the financing of product inventory for retail dealers of a variety of consumer
products. "Asset-Based Receivables" represent the financing of production and
inventory by manufacturers, such revolving credit arrangements being secured by
finished goods inventory, accounts receivable arising from the sale of such
inventory, certain work-in-progress, raw materials and component parts, as well
as other assets of the borrower. The dealers, manufacturers and distributors
obligated under the Receivables are collectively referred to as "Dealers." The
products securing the Floorplan Receivables currently include manufactured
housing, recreational vehicles and marine products. Though the types of credit
arrangements are expected to remain the same, the products securing those
arrangements are expected to expand over time, and the relative proportions of
the various types of product collateral will change over time.
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FLOORPLAN RECEIVABLES--GENERAL
The Floorplan Receivables are secured by the products being financed and the
Dealer's other inventory, together with personal guaranties in some instances.
The amount of the advance is generally equal to 100% of the invoice price of
the product. The Floorplan Receivables are generally full recourse obligations
of the related Dealer.
FLOORPLAN AGREEMENTS WITH MANUFACTURERS
Green Tree will provide financing for products for a particular Dealer, in
most instances, only if Green Tree has also entered into a floorplanning
agreement (the "Floorplan Agreement") with the manufacturer, distributor or
other vendor (each a "Manufacturer") of such product. Pursuant to the Floorplan
Agreement, the Manufacturer will agree, among other matters, to purchase from
Green Tree those products sold by such Manufacturer to a Dealer and financed by
Green Tree if Green Tree acquires possession of such products pursuant to
repossession, voluntary surrender, or other circumstances. The terms of such
repurchase obligations may vary, both by industry and by Manufacturer. In some
instances, the Manufacturer will be obligated to repurchase the product for a
price equal to the unpaid principal balance owed by the Dealer for the product
in question whenever Green Tree acquires possession thereof. On occasion,
different terms may be negotiated. Such terms may provide for a smaller
purchase price, or a purchase price which declines over time, or time periods
beyond which no obligation to purchase by the Manufacturer shall apply. Certain
Floorplan Agreements may also eliminate the repurchase obligation or reduce the
purchase price payable by the Manufacturer, depending upon the condition of the
inventory acquired by Green Tree.
FLOORPLAN CREDIT UNDERWRITING PROCESS
A Dealer requesting the establishment of a credit line with Green Tree is
required to submit an application and financial information, including audited
or unaudited financial statements and, in some cases, tax returns. CFD attempts
to talk to, or receive reference letters from, several of the applicant's
current creditors and may also obtain a credit agency report on the applicant's
credit history. In addition to such current financial information and
historical credit information, CFD will consider the following factors: the
reason for the request for the extension of credit; the need for the credit
line; the products to be financed and the financial status of the manufacturer
of such products, if any, that would enter into a related Floorplan Agreement;
and the experience of the Dealer's management. The determination of whether to
extend credit and the amount to be extended is based upon a weighing of the
above factors.
Extensions of credit lines in excess of $5,000,000 must be approved at the
corporate level of Green Tree. Extensions of credit up to $5,000,000 may be
approved by division level credit officers and up to $1,000,000 by a business
center vice president. CFD reviews individual Dealer credit limits (i) prior to
any increase in such credit limit, (ii) generally every 12 to 18 months and
(iii) upon becoming aware that the Dealer is experiencing financial
difficulties or is in default on its obligations under its agreement with Green
Tree.
CREATION OF FLOORPLAN RECEIVABLES
Green Tree's floorplan business is typically documented by an agreement
between Green Tree and the dealer which provides for both the extension of
credit and a grant of a security interest. Such agreements are generally for an
unspecified period of time and create discretionary lines of credit, which
Green Tree may terminate at any time in its sole discretion, subject, however,
to prevailing standards of commercial reasonableness and good faith. Absent
default by the Dealer, the outstanding Floorplan Receivables owed by such
Dealer cannot be accelerated, even if the line of credit is terminated. After
the effective date of termination, Green Tree is under no obligation to
continue to provide additional financing, but the then current outstanding
balance will be repayable in accordance with the payment terms of such Dealer's
program with Green Tree, as described below.
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Advances made for the purchase of inventory are most commonly arranged in the
following manner: the Dealer will contact the manufacturer and place a purchase
order for a shipment of inventory. If the manufacturer has been advised that
Green Tree is the Dealer's inventory financing source, the manufacturer will
contact Green Tree to obtain an approval number with respect to such purchase
order. Upon such request, Green Tree will determine whether (i) the
manufacturer is in compliance with its Floorplan Agreement, (ii) the Dealer is
in compliance with its program with Green Tree and (iii) such purchase order is
within the Dealer's credit limit. If all of such requirements are met, Green
Tree will issue an approval number to the manufacturer. The manufacturer will
then ship the inventory and directly submit its invoice for such purchase order
to Green Tree for payment. Interest or finance charges normally begin to accrue
on the Dealer's accounts as of the invoice date. The proceeds of the loan being
made by Green Tree to the Dealer are paid directly to the manufacturer in
satisfaction of the invoice price and will normally be funded at that time. In
some cases, however, Green Tree will negotiate a delay in funding the advance
for a period which in most cases does not exceed 10 days after the date of the
invoice. Green Tree and the manufacturer may also agree that Green Tree may
discount the invoice price of the inventory ordered by the Dealer. Under this
arrangement, the manufacturer will deem itself paid in full upon receipt of
such discounted amount. Typically, in exchange for the increased yield created
by the discount, Green Tree will agree to provide the manufacturer's Dealers
with reduced interest, or perhaps no interest, for some period of time. Thus,
the Dealer's financing program may provide for so-called "interest free" or
"free flooring" periods during which no interest or finance charges will accrue
on their accounts. The price paid by the Trust for such a Receivable will be
the full amount payable by the Dealer.
FLOORPLAN PAYMENT TERMS
The Dealer is obligated to pay interest or finance charges monthly, but
principal repayment with respect to any particular item of inventory financed
by Green Tree is due and payable only upon the sale of such item by the Dealer,
subject in some cases to an ultimate maturity date. In addition, Green Tree
requires Dealers to begin repaying principal in installments if the unit has
not been sold within a specified period of time. These payments are referred to
as "curtailments." Even if a unit is subject to curtailment payments, the
outstanding balance with respect to such unit will remain fully payable upon
the sale of the unit.
Floorplan receivables generally accrue interest (subject to any "interest
free" or "free flooring" periods as described above) at a floating rate based
on a generally published prime rate or other index. Green Tree also charges the
Dealer a documentation, handling and inspection fee for each unit financed
("DHI Fees"). These fees will be included in the Finance Charge Collections
owned by the Trust. Interest and DHI Fees are due and payable on a monthly
basis.
FLOORPLAN BILLING PROCEDURES
At the beginning of each month Green Tree sends to each Dealer a billing
statement for the interest, DHI Fees, curtailments, if any, and any other non-
principal charges accrued or arising in the prior month. Payment is due in the
same month.
FLOORPLAN DEALER MONITORING
Inventory inspections are performed to physically verify the collateral used
to secure a Dealer's loan, check the condition of the inventory, account for
any missing inventory and collect any funds due. The inventory inspection is
one of the key tools utilized by CFD for monitoring inventory financed by Green
Tree, and is performed generally on a monthly basis with respect to each Dealer
account (and each location within a Dealer account to the extent that a dealer
conducts its business in more than one location). If an inspection reveals that
the Dealer has sold any inventory without immediate repayment to Green Tree,
the inventory is considered "sold and unpaid" ("SAU") and Green Tree demands
immediate repayment from the Dealer or initiates other appropriate steps to
resolve the SAU. Inspection dates within each month must vary, and unscheduled
inspections are performed whenever CFD deems it appropriate. CFD also requires
regular rotation of the individuals conducting a Dealer's inspections.
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In addition, Region Managers, within their respective portfolio of Dealers,
monitor each Dealer as to such Dealer's performance and adherence to Green
Tree's requirements. This includes a regular review of annual and interim
financial statements for trends, payments for sold inventory between
inspections, monitoring of Green Tree's on-going perfected security interests
in the inventory, existence of proper insurance coverage with respect to such
inventory at all times, timely payment of interest, DHI fees and curtailments,
proper recording of invoices, the maintenance of the Manufacturer Statements of
Origin which are on file with respect to each manufactured home financed, and
the requirement that all inventory stays within the repurchase period in effect
with respect to each Manufacturer.
ASSET-BASED RECEIVABLES
Asset-Based Receivables that may be sold to the Transferor arise from asset
based revolving credit facilities provided to certain manufacturers and
distributors. These facilities typically involve a revolving line of credit,
for a contractually committed period of time, pursuant to which the borrower
may draw the lesser of the maximum amount of such line of credit or a
specifically negotiated loan availability amount, subject to the availability
of adequate collateral. Interest is typically payable monthly, while principal
payments and draws are generally settled weekly or, if earlier, when and to the
extent principal outstandings exceed eligible collateral at negotiated advance
rates (i.e., the maximum percentage of the borrowing base, or portion thereof,
that the borrowed amount can represent). The loan availability amount is
determined by multiplying an agreed upon advance rate against the value of
certain types of assets. In these facilities, Green Tree will most typically
lend against finished inventory and eligible accounts receivable arising from
the sale of such inventory which are free and clear of other liens and
otherwise in compliance with specified standards. Green Tree's asset-based
revolving credit facilities are usually secured by the assets which constitute
the borrowing base against which the loan availability amount is calculated
and, occasionally, by other personal property, mortgages or other assets of the
borrower. Asset-Based Receivables are generally not supported by any Floorplan
Agreement with a Manufacturer, and for that reason generally have significantly
lower advance rates than a borrowing agreement supported by a Floorplan
Agreement with a Manufacturer.
Green Tree's underwriting of Asset-Based Receivables gives consideration to a
variety of factors, including, among others, the financial condition of the
borrowing entity, its credit history and relationship with current and previous
lenders and its historical performance and trends. Upon satisfaction of certain
credit criteria, terms and conditions, an account is approved for a revolving
line of credit, the size of which is based on a variety of factors including
the needs of the borrower.
Upon approval of the credit, an evaluation of the borrowing base is performed
and advance rates are established based on the type of collateral. For purposes
of evaluating items such as finished goods inventory, work-in-process, raw
materials and component parts, an independent appraisal is generally obtained
and used in connection with establishing advance rates. With respect to
accounts receivable, eligibility criteria, typically excluding items past due
in excess of 60 days or aged over 120 days from invoice date are established,
and concentration limits are set with respect to the individual items within
the receivables base. Next, an advance rate on eligible receivables is
determined based on a review of historical and projected data, giving
consideration to factors such as credit loss experience, dilution, contingent
sales and aged items. The intended result of the above analyses is to set
eligibility criteria and advance rates such that, under a collateral
liquidation scenario, Green Tree would fully recover any principal dollars
advanced on the revolving line of credit.
The credit facilities giving rise to the Asset-Based Receivables typically
provide for control of all cash receipts of the borrower through a bank lockbox
facility. The adequacy of the borrowing base is monitored weekly and audited
monthly. In addition, the financial condition of the borrower is monitored
monthly in connection with financial covenants set forth in the loan
agreements, and is subject to audit by Green Tree at any time.
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REALIZATION ON THE RECEIVABLES
Upon any default by a Dealer of its obligations to Green Tree under the
related financing agreement and expiration of any and all applicable notice and
cure periods that may have been agreed to between Green Tree and such Dealer,
Green Tree may declare such Dealer's obligations immediately due and payable
and enforce all of its legal rights and remedies, including commencement of
proceedings to realize upon any collateral, subject to prevailing standards of
commercial reasonableness and good faith. Upon learning of such a default
relating to Floorplan Receivables, Green Tree makes contact with the Dealer to
determine whether it can develop a workout arrangement with the Dealer to cure
all defaults. If disputes with the Dealer exist, such disputes may be submitted
to arbitration. If Green Tree determines that such an arrangement to cure a
default cannot be successfully implemented, the Dealer's payment obligations
are accelerated. Green Tree then attempts to obtain possession of the
collateral. If a Manufacturer is obligated to repurchase the collateral under a
Floorplan Agreement as described above under "Floorplan Agreements with
Manufacturers," the collateral is turned over to the related Manufacturer.
Green Tree repossesses, stores and then attempts to sell all other salable
collateral in a commercially reasonable manner. See "The Accounts--Loss
Experience."
Upon default by a Dealer under an Asset-Based Receivable revolving credit
arrangement, which, among other conditions, may arise as a result of the
borrower's failure to comply with certain specified debt covenants or failure
to maintain an adequate borrowing base to support outstanding balances, Green
Tree will continue its ongoing assessment of the borrower's financial condition
and determine its best course of action for purposes of obtaining repayment,
including the possibility of immediate liquidation of all collateral.
THE RECEIVABLES
The Receivables conveyed to the Trust will represent the amounts owed from
time to time under the Accounts. The Accounts will be selected from Green
Tree's portfolio of accounts on the basis of criteria set forth in the Pooling
and Servicing Agreement and the Series 1995-1 Series Supplement as applied on
the Cut-off Date and, with respect to Additional Accounts, as of the related
date of their designation (the "Trust Portfolio"). Many of the Accounts were
originated by subsidiaries of Green Tree. The Transferor will have the right
(subject to certain limitations and conditions set forth therein), and in some
circumstances will be obligated, to designate from time to time Additional
Accounts and to transfer to the Trust all Receivables arising from such
Additional Accounts, whether such Receivables are then existing or thereafter
created. Green Tree expects to transfer Receivables in Additional Accounts to
the Transferor, who will transfer such Receivables to the Trust, as Green
Tree's commercial finance business continues to grow. Any Additional Accounts
must be Eligible Accounts as of the date the Transferor designates such
accounts as Additional Accounts. Furthermore, pursuant to the Pooling and
Servicing Agreement, the Transferor has the right (subject to certain
limitations and conditions) to designate certain Accounts as Removed Accounts
and to require the Trustee to reconvey all Receivables in such Removed Accounts
to the Transferor, whether such Receivables are then existing or thereafter
created. Throughout the term of the Series, the Accounts from which the
Receivables arise will be the Accounts designated by the Transferor on the Cut-
off Date plus any Additional Accounts minus any Removed Accounts. Pursuant to
the Agreement and the Series 1995-1 Series Supplement, the Transferor will
represent and warrant to the Trust that, as of the Closing Date and the date
Receivables are conveyed to the Trust, such Receivables meet certain
eligibility requirements. See "Description of the Offered Certificates--
Representations and Warranties."
ELIGIBLE RECEIVABLES AND ELIGIBLE ACCOUNTS
The Receivables must arise under an Eligible Account. An "Eligible Account"
is defined to mean, as of the relevant Cut-off Date (or, with respect to
Additional Accounts, as of their date of designation for inclusion in the
Trust), an arrangement to provide a revolving extension of credit by Green Tree
or one of its subsidiaries to a Dealer (i) in order to finance the purchase by
a Dealer of consumer and commercial product
34
<PAGE>
inventory or (ii) as a line of credit secured by unencumbered assets of such
Dealer, which extension of credit, as of the date of determination thereof, (a)
is in existence and maintained with Green Tree or such subsidiary, (b) is
payable in United States dollars, (c) is with a Dealer whose most recent
billing address is in the United States or its territories or possessions, (d)
has been originated by Green Tree or such subsidiary in the ordinary course of
its business or acquired by Green Tree through the acquisition of an Eligible
Account from another lender upon satisfying Green Tree's customary underwriting
standards, (e) in respect of which no amounts have been charged off by Green
Tree or such subsidiary as uncollectible in its customary and usual manner as
of the Cut-off Date (or, with respect to Additional Accounts, as of their date
of designation for inclusion in the Trust), and (f) is with a Dealer that is
not involved in insolvency proceedings. The definition of Eligible Account may
be changed by amendment to the Pooling and Servicing Agreement without the
consent of the Certificateholders if (i) the Transferor delivers to the Trustee
a certificate of an authorized officer to the effect that, in the reasonable
belief of the Transferor, such amendment will not as of the date of such
amendment adversely affect in any material respect the interest of the
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the Trust.
An "Eligible Receivable" is defined as a Receivable (a) that was originated
by Green Tree or one of its subsidiaries in the ordinary course of business or
acquired by Green Tree through the acquisition of an Eligible Account from
another lender upon satisfying Green Tree's customary underwriting standards,
(b) that has arisen under an Eligible Account, (c) that was created in
compliance with all requirements of law applicable thereto and pursuant to a
floorplan or asset-based financing agreement that complies with all
requirements of law applicable thereto, (d) with respect to which all consents,
licenses or authorizations of, or registrations with, any governmental
authority required to be obtained or given by Green Tree or the Transferor in
connection with the creation of such Receivable, or the transfer thereof to the
Trust or the execution, delivery, creation and performance by Green Tree or
such subsidiary of the related floorplan or asset-based financing agreement
have been duly obtained or given and are in full force and effect as of the
date of the creation of such Receivable, (e) as to which, at the time of its
creation, the Transferor had good and marketable title free and clear of all
liens and security interests (other than certain liens permitted pursuant to
the Pooling and Servicing Agreement), and at all times following the transfer
of such Receivables to the Trust, the Trust will have good and marketable title
free and clear of all liens and security interests (other than certain liens
permitted pursuant to the Pooling and Servicing Agreement) or the grant of a
first priority security interest therein, (f) that is the legal, valid, binding
and assignable payment obligation of the related Dealer, legally enforceable
against such Dealer in accordance with its terms (with certain bankruptcy
related exceptions), (g) that constitutes "chattel paper," an "account" or a
"general intangible" under Article 9 of the UCC as then in effect in the State
of Minnesota, (h) if such Receivable has the benefit of a Floorplan Agreement
with a Manufacturer, such Floorplan Agreement provides, subject to the specific
terms thereof and any limitations therein (which may vary among Floorplan
Agreements), that the Manufacturer is obligated to repurchase the products
securing the Receivables upon the Servicer's repossession thereof upon the
related Dealer's default, (i) which has been the subject of a valid transfer
and assignment from the Transferor to the Trust of all the Transferor's
interest therein (including any proceeds thereof), (j) which at the time of
transfer to the Trust is not subject to any right of rescission, setoff, or any
other defense (including defenses arising out of violations of usury laws) of
the Dealer, (k) as to which, at the time of transfer of such Receivable to the
Trust, Green Tree (or such subsidiary) and the Transferor have satisfied all
their respective obligations with respect to such Receivable required to be
satisfied at such time, (l) as to which, at the time of transfer of such
Receivable to the Trust, neither Green Tree (or such subsidiary) nor the
Transferor has taken or failed to take any action which would impair the rights
of the Trust or the certificateholders therein and (m) which represents the
obligation of a Dealer to repay an advance made to or on behalf of such Dealer
to finance products or the accounts receivable arising from the sale of such
products.
The products financed by the Receivables as of November 10, 1995 are shown
below under "The Accounts--Description of the Portfolio." Currently,
substantially all the Receivables are Floorplan Receivables of manufactured
housing owed by manufactured housing dealers. These Receivables enable
manufactured housing dealers to finance their inventory of manufactured housing
units pending resale to consumers. A small percentage of the Receivables as of
November 10, 1995 are Floorplan Receivables relating
35
<PAGE>
to marine products (primarily boats, outboard motors and boat trailers) or
relating to recreational vehicles, which enable the related Dealers to finance
their inventory of such products pending resale to consumers. Green Tree
expects that it will establish Accounts for other Dealers in the future, whose
related Receivables will finance other types of products. A small percentage of
the Receivables as of November 10, 1995 are Asset-Based Receivables, arising
under revolving credit facilities for manufacturers and distributors of various
products. Green Tree expects that the composition of the Receivables will
change over time.
In order to reduce the Trust's exposure to any single Dealer or any single
industry, certain diversification thresholds ("Overconcentration Amounts") will
be tested at the end of each Monthly Period. Initially, except as provided
below, no more than 20% (or, prior to the first anniversary of the Closing
Date, a lesser percentage) of the Receivables may be Asset-Based Receivables;
no more than 2% of the Receivables may have arisen under an Account with a
single Dealer; no more than 15% of the Receivables may be Floorplan Receivables
financing products from a single manufacturer; no more than 5% of the
Receivables may finance marine products; no more than 5% of the Receivables may
finance recreational vehicles, and no more than 5% of the Receivables may be
Floorplan Receivables financing products other than manufactured housing,
marine products or recreational vehicles. Green Tree expects that the
Receivables will from time to time exceed one or more of these thresholds. To
the extent that any such threshold is exceeded at the end of a Monthly Period,
the Class D Invested Amount will be increased by an equivalent amount. These
threshold percentages may, however, be increased in the future without the
consent of any Certificateholder, to a level acceptable to each Rating Agency
without any reduction or withdrawal of its rating of the Class A, Class B or
Class C Certificates. See "Description of the Offered Certificates--The
Overconcentration Amounts."
THE ACCOUNTS
GENERAL
The Receivables have arisen or will arise in the Accounts. The Accounts have
been selected from all the accounts that were Eligible Accounts (the "Eligible
Portfolio") at the Cut-off Date. In order to be included in the Eligible
Portfolio, each Account must be an account established by Green Tree in the
ordinary course of business and meet certain other criteria provided in the
Pooling and Servicing Agreement. See "The Receivables--Eligible Receivables and
Eligible Accounts" and "Description of the Offered Certificates--
Representations and Warranties."
Pursuant to the Pooling and Servicing Agreement, the Transferor, and pursuant
to the Purchase Agreement, Green Tree, have the right (subject to certain
limitations and conditions), and in some circumstances are obligated, to
designate from time to time additional Eligible Accounts to be included as
Accounts ("Additional Accounts") and convey to the Trust the Receivables of
such Additional Accounts, including Receivables thereafter created. These
accounts must meet the eligibility criteria set forth above as of the date such
accounts are designated as Additional Accounts. Green Tree will convey the
Receivables then existing, with certain exceptions, or thereafter created under
such Additional Accounts to the Transferor, which will in turn convey them to
the Trust. See "Description of the Offered Certificates--Addition of Accounts."
DESCRIPTION OF THE PORTFOLIO
The following tables set forth the composition of the Receivables to be owned
by the Trust, as of November 10, 1995, by business line and other criteria.
Because Green Tree expects to designate Additional Accounts from time to time
and to transfer Receivables therein to the Transferor and thence to the Trust,
the business lines and the actual composition of the Receivables by business
line are expected to change over time. In addition, due to the variability and
uncertainty with respect to the rates at which receivables in the portfolio are
created, paid or otherwise reduced, the characteristics set forth below may
vary significantly as of any other date of determination.
In general, Green Tree considers any number of revolving financing
arrangements established with a group of affiliated Dealers to be single
account, because the affiliated Dealers represent a consolidated credit risk.
However, Green Tree also measures its exposure to Dealers in various
industries, and for this purpose it
36
<PAGE>
would, for example, consider revolving financing arrangements with a group of
affiliated dealers engaged in sales of manufactured housing and recreational
vehicles to be separate accounts, one relating to a group of manufactured
housing dealers and one relating to a group of recreational vehicle dealers.
Accordingly, the total number of Accounts in the tables below may vary.
COMPOSITION OF RECEIVABLES IN THE TRUST BY BUSINESS LINE
NOVEMBER 10, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF NUMBER OF NUMBER
RECEIVABLES RECEIVABLES OF OF
BUSINESS LINE BALANCE BALANCE ACCOUNTS ACCOUNTS
------------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Manufactured Housing Floorplan
Receivables.................... $450,138 92.2% 1,990 99.3%
Marine Floorplan Receivables.... 3,742 .8 10 .5
Recreational Vehicle Floorplan
Receivables.................... 74 -- 1 .1
Asset-Based Receivables......... 34,293 7.0 2 .1
-------- ----- ----- -----
Total......................... $488,247 100.0% 2,003 100.0%
======== ===== ===== =====
</TABLE>
COMPOSITION OF RECEIVABLES IN THE TRUST BY ACCOUNT BALANCE
AS OF NOVEMBER 10, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF NUMBER OF NUMBER
RECEIVABLES RECEIVABLES OF OF
ACCOUNT BALANCE RANGE BALANCE BALANCE ACCOUNTS ACCOUNTS
--------------------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
$0 to $500,000................... $198,017 40.6% 1,745 87.1%
$500,000.01 to $1,000,000........ 127,395 26.1 187 9.3
$1,000,000.01 to $5,000,000...... 107,265 22.0 67 3.3
$5,000,000.01 to $10,000,000..... 5,495 1.1 1 .1
Over $10,000,000.01.............. 50,075 10.2 3 .2
-------- ----- ----- -----
Total.......................... $488,247 100.0% 2,003 100.0%
======== ===== ===== =====
</TABLE>
GEOGRAPHIC DISTRIBUTION OF RECEIVABLES IN THE TRUST
AS OF NOVEMBER 10, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
RECEIVABLES RECEIVABLES NUMBER OF NUMBER OF
DEALER LOCATION(1) BALANCE BALANCE ACCOUNTS ACCOUNTS
------------------ ----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Georgia.................... $ 43,697 8.95% 76 3.61%
North Carolina............. 43,671 8.94 125 5.94
Texas...................... 41,370 8.47 112 5.32
Alabama.................... 30,591 6.27 75 3.56
Florida.................... 30,525 6.25 71 3.37
New Mexico................. 23,943 4.90 37 1.76
Michigan................... 23,103 4.73 71 3.37
Pennsylvania............... 18,346 3.76 21 1.00
Colorado................... 16,640 3.41 53 2.52
Other States(2)............ 216,361 44.31 1,464 69.55
-------- ------ ----- ------
Total.................... $488,247 100.00% 2,105 100.00%
======== ====== ===== ======
</TABLE>
- --------
(1) For purposes of this table, the accounts of affiliated Dealers have not
been aggregated, consequently, the total number of accounts is shown as
2,105 instead of 2,003. For purposes of this table, the Dealer's location
is based on the actual location of the Dealer's place of business rather
than, for example, the headquarters address.
(2) The percentage of the Receivables Balance represented by Receivables in
each state not specifically listed is less than 3% of the Receivables
balance.
37
<PAGE>
YIELD INFORMATION
The Receivables bear interest in their accrual periods at rates generally
equal to an index rate selected in the related financing agreement, which as of
the date hereof is generally a prime rate, plus a margin. Certain Receivables
do not bear interest for a specified period after their origination. During the
first ten months of 1995, the receivables in Green Tree's portfolio had a yield
of 10.2% per annum. The Trust's yield on its Receivables will be affected by
the interest rates borne by Receivables, the Discount Factor, if any, and the
rate at which the Receivables balances are paid.
MAJOR CUSTOMERS; MAJOR MANUFACTURERS
At November 10, 1995 no one Floorplan Dealer accounted for more than 3.5% of
the aggregate balance of the Receivables to be transferred to the Trust. At
November 10, 1995, except as discussed below, no one Manufacturer was obligated
under Floorplan Agreements relating to Receivables aggregating more than 7.1%
of the aggregate Receivables balance. At October 31, 1995, Fleetwood
Enterprises, Inc. was obligated under its Floorplan Agreement with Green Tree
with respect to receivables aggregating 14.74% of Green Tree's entire
portfolio. Fleetwood Enterprises, Inc. is a large manufacturer of both
manufactured housing and recreational vehicles, with production facilities
located throughout the United States and in Germany, and is not affiliated with
Green Tree. No prediction can be made as to what percentage of the Receivables
in the future may be obligations of a single Dealer or be related to a single
Manufacturer under its Floorplan Agreement, but such percentages are subject to
the effect of overconcentration amounts. See "Description of the Offered
Certificates--The Overconcentration Amounts."
DELINQUENCY EXPERIENCE
The following table sets forth the delinquency experience as of the dates
indicated for Green Tree's entire portfolio. Because Green Tree's portfolio has
grown rapidly in the past year, and Green Tree expects to create a substantial
number of Additional Accounts that will be transferred to the Trust in the
future, the actual delinquency experience with respect to the Eligible Accounts
may be different. There can be no assurance that the delinquency experience for
the Receivables in the future will be similar to the experience shown below.
DELINQUENCY EXPERIENCE FOR TOTAL PORTFOLIO
RECEIVABLE BALANCES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30, SEPTEMBER 30,
1994 1994 1995 1995
-------- ------------ -------- -------------
<S> <C> <C> <C> <C>
Aggregate Principal Balance. $22,284 $166,507 $421,464 $469,562
30 days + Delinquencies
Curtailments.............. $0 $24 $46 $479
Finance Charges........... $0 $23 $322 $415
------- -------- -------- --------
Total................... $0 $47 $368 $894
======= ======== ======== ========
0.000% 0.028% 0.087% 0.190%
======= ======== ======== ========
SAU/NSF(1).................. (2) (2) (2) $188
======= ======== ======== ========
(2) (2) (2) 0.040%
</TABLE>
- --------
(1) A "SAU/NSF" ("sold and unpaid" or "not sufficient funds") Account is one
that is deemed delinquent when (i) there is an unpaid receivable balance as
to which the related product has been sold and such receivable balance has
not been paid by the related Dealer or (ii) a payoff check from the related
Dealer has been returned because of insufficient funds.
(2) Data for these periods are not available.
38
<PAGE>
LOSS EXPERIENCE
The following table sets forth Green Tree's average principal receivables
balance and loss experience for each of the periods shown with respect to its
portfolio. Because Green Tree's portfolio has grown rapidly in the past year,
and Green Tree expects to create a substantial number of Additional Accounts
that will be transferred to the Trust in the future, actual loss experience
with respect to the Eligible Accounts may be different. Since a substantial
number of receivables from which the Receivables will be taken were only
recently originated, it may be expected that such receivables have not yet
exhibited a loss experience that is representative of the losses that may be
experienced over a longer period of time. There can be no assurance that the
loss experience for the Receivables in the future will be similar to the
historical experience set forth below with respect to the portfolio. The
historical experience set forth below includes the effect of the financial
obligations of Manufacturers in respect of repossessed products as described
above under "Green Tree Financial Corporation and its Commercial Finance
Division--Floorplan Agreements with Manufacturers." If Manufacturers are not
able to perform such obligations in the future, the loss experience in respect
of the portfolio and the Receivables may be adversely affected.
LOSS EXPERIENCE FOR THE PORTFOLIO
<TABLE>
<CAPTION>
ELEVEN MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------- -------------
<S> <C> <C>
Average Principal Receivables Balance(1)........... $36,221,024 $346,920,556
Gross Losses....................................... 0 24,095
Net Losses(2)...................................... 0 24,095
Net Losses as a percentage of Average Principal
Receivables Balance............................... 0% .007%
</TABLE>
- --------
(1) Average Principal Receivables Balance is the average daily principal
balances for the eleven months ended December 31, 1994 and the nine months
ended September 30, 1995, respectively.
(2) Net losses in any period are gross losses less recoveries for such period.
Recoveries include recoveries from collateral security in addition to
recoveries from the products.
AGING EXPERIENCE
The following table provides the age distribution of inventory for all
dealers in the portfolio, as a percentage of total principal outstanding at the
date indicated. Because the Eligible Accounts will only be a portion of the
entire portfolio, actual age distribution with respect to the Eligible Accounts
may be different.
AGE DISTRIBUTION FOR THE PORTFOLIO(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE OF
RECEIVABLES RECEIVABLES
BALANCE BALANCE
NOVEMBER 10, NOVEMBER 10,
1995 1995
------------ -------------
<S> <C> <C>
Days
1-30............................................... $115,717 25.5%
31-60.............................................. 70,485 15.5
61-90.............................................. 53,397 11.8
91-120............................................. 43,200 9.5
121-180............................................ 57,868 12.8
181-270............................................ 71,016 15.6
Over 270........................................... 42,272 9.3
-------- -----
Total............................................ $453,955 100.0%
======== =====
</TABLE>
- --------
(1) Excludes Asset-Based Receivables.
39
<PAGE>
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement provides that Class A Certificateholders
will not receive payments of principal until the Class A Scheduled Payment
Date, or earlier in the event of a Pay Out Event that results in the
commencement of the Early Amortization Period. The Pooling and Servicing
Agreement also provides that Class B Certificateholders will not receive
payments of principal until the Class B Scheduled Payment Date, or earlier in
the event of a Pay Out Event that results in the commencement of the Early
Amortization Period (in either case, only after the Class A Invested Amount has
been paid in full). The Class B Certificateholders will not receive any
payments of principal until the final principal payment on the Class A
Certificates has been made.
Controlled Accumulation Period. On each business day during the Controlled
Accumulation Period, prior to the payment (or deposit in the Principal Account)
of the Class A Invested Amount in full, an amount equal to the lesser of (a)
Principal Collections allocable to the Class A, Class B and Class C
Certificateholders' Interest plus Shared Principal Collections, if any, from
other Series allocable to the Class A, Class B and Class C Certificates, plus
certain other amounts comprising Class A, Class B and Class C Principal, and
(b) the amount, if any, by which (i) the sum of the Controlled Accumulation
Amount for such Monthly Period plus the Accumulated Shortfall, if any (such sum
being referred to as the "Controlled Deposit Amount" for the related Monthly
Period) exceeds (ii) the amount in the Principal Account for the account of the
Class A, Class B and Class C Certificate Owners, will be deposited daily in the
Principal Account.
On each business day during the Controlled Accumulation Period, following the
payment (or deposit in the Principal Account) of the Class A Invested Amount in
full but prior to the payment (or deposit in the Principal Account) of the
Class B Invested Amount in full, an amount equal to the lesser of (a) Principal
Collections allocable to the Class A, Class B and Class C Certificateholders'
Interest plus Shared Principal Collections, if any, from other Series allocable
to the Class A, Class B and Class C Certificates, plus certain other amounts
comprising Class A, Class B and Class C Principal, and (b) the amount, if any,
by which (i) the Controlled Deposit Amount for the related Monthly Period
exceeds (ii) the amount in the Principal Account for the account of the Class B
Certificate Owners, will be deposited daily in the Principal Account.
Although it is anticipated that during the Controlled Accumulation Period
prior to the payment of the Class A Invested Amount in full, funds will be
deposited in the Principal Account in an amount equal to the applicable
Controlled Deposit Amount for each Monthly Period and that the Class A Invested
Amount will be available for distribution to the Class A Certificate Owners on
the Class A Scheduled Payment Date, and that the Class B Invested Amount will
be available for distribution to the Class B Certificate Owners on the Class B
Scheduled Payment Date, respectively, no assurance can be given in that regard.
Pay Out Event. If a Pay Out Event occurs, the Early Amortization Period will
commence and any amounts on deposit in the Principal Account will be paid to
the Class A Certificate Owners on the Distribution Date in the month following
the commencement of the Early Amortization Period. In addition, to the extent
that the Class A Invested Amount has not been paid in full on the Class A
Scheduled Payment Date, the Class A Certificate Owners will be entitled to
monthly payments of principal equal to the Principal Collections allocable to
the Class A, Class B and Class C Certificateholders' Interest plus Shared
Principal Collections, if any, from other Series allocable to the Class A,
Class B and Class C Certificates, plus certain other amounts comprising Class
A, Class B and Class C Principal, until the earlier of the date on which the
Class A Invested Amount has been paid in full and the Series 1995-1 Termination
Date. After the Class A Invested Amount has been paid in full and if the Series
1995-1 Termination Date has not occurred, Principal Collections allocable to
the Class B and Class C Certificateholders' Interest plus Shared Principal
Collections, if any, from other Series allocable to the Class A, Class B and
Class C Certificates, plus certain other amounts comprising Class B and Class C
Principal, will be paid to the Class B Certificate Owners on each Distribution
Date until the earlier of the date on which the Class B Invested Amount has
been paid in full and the Series 1995-1 Termination Date. Thereafter, on and
after the Class C Principal Commencement Date, the Class C Certificate Owners
will be entitled to receive monthly payments of principal, until the Class C
Invested Amount is paid in full or until the Series 1995-1 Termination Date.
40
<PAGE>
A "Pay Out Event" occurs, either automatically or after specified notice,
upon
(i) failure by the Transferor to convey Receivables in Additional
Accounts to the Trust within five Business Days after the day on which it
is required to convey such Receivables pursuant to the Pooling and
Servicing Agreement;
(ii) failure on the part of the Transferor, the Servicer or Green Tree,
as applicable, to make certain payments or transfers of funds for the
benefit of the Certificate Owners or to observe or perform in any material
respect certain other covenants within the time periods specified in the
Pooling and Servicing Agreement;
(iii) material breaches of certain representations, warranties or
covenants of Green Tree or the Transferor which remain uncured after the
grace periods specified in the Pooling and Servicing Agreement;
(iv) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to Green Tree or the Transferor;
(v) the Trust or the Transferor becomes an investment company within the
meaning of the Investment Company Act of 1940, as amended;
(vi) on any Determination Date, the Transferor Interest for the next
Distribution Date will be reduced to an amount less than the Minimum
Transferor Interest on such Determination Date after giving effect to the
distributions to be made on the next Distribution Date;
(vii) any Servicer Default occurs;
(viii) on any Determination Date, the average of the Monthly Payment
Rates for the three preceding Monthly Periods, where the Monthly Payment
Rate for a Monthly Period is the percentage obtained by dividing the
aggregate of the Receivables balances (without deducting therefrom any
discount portion) collected during such Monthly Period by the average daily
aggregate Receivables balance (without deducting therefrom any discount
portion) for such Monthly Period, is less than 15%;
(ix) the failure to pay the outstanding principal amount of the Class A,
Class B or Class C Certificates by the Class A Scheduled Payment Date, the
Class B Scheduled Payment Date or the Class C Expected Final Payment Date,
as applicable;
(x) the ratio (expressed as a percentage) of (i) the average for each
month of the net losses on the Receivables (exclusive of the Ineligible
Receivables) owned by the Trust (i.e., gross losses less recoveries on any
such Receivables (including, without limitation, recoveries from collateral
security in addition to recoveries from the products, recoveries from
Manufacturers and insurance proceeds)) during any three consecutive
calendar months to (ii) the average of the month-end aggregate balances of
such Receivables (without deducting therefrom the discount portion) for
such three-month period, exceeds 5% on an annualized basis; provided, that
this clause (x) may be amended or waived with the consent of the Transferor
and each Rating Agency and without the consent of any Certificate Owner,
and
(xi) the sum of all Cash Equivalents and amounts on deposit in the Excess
Funding Account represents more than 50% of the total assets of the Trust
on each of six or more consecutive Determination Dates, after giving effect
to all payments made or to be made on the Distribution Date next succeeding
each such respective Determination Date.
41
<PAGE>
The amount of new Receivables generated in any month and payment rates on the
Receivables may vary because of seasonal variations in product sales and
inventory levels, retail incentive programs provided by product manufacturers
and various economic factors affecting product sales generally. The following
table sets forth the monthly payment rates ("MPR") for the receivables
originated by Green Tree from Dealers for each month since February 1994 and
the average monthly payment rates for such receivables for all months during
the periods shown, in each case calculated by dividing the total collections
during a given month by total opening monthly balances of such receivables
during the periods shown and expressing such amounts as a percentage. Payment
rates shown in the table are based on amounts which would be deemed payments of
Principal Receivables with respect to such receivables.
MONTHLY PAYMENT RATES FOR THE PORTFOLIO
<TABLE>
<CAPTION>
PORTFOLIO
COMPOSITION (1)
--------------------
PAYMENT ASSET-
MONTH/YEAR RATE PRESOLD STOCK BASED
- ---------- ------- ------- ----- ------
<S> <C> <C> <C> <C>
February 1994...................................... 95% 97% 3% 0%
March 1994......................................... 115% 100% 0% 0%
April 1994......................................... 118% 100% 0% 0%
May 1994........................................... 135% 100% 0% 0%
June 1994.......................................... 124% 100% 0% 0%
July 1994.......................................... 108% 99% 1% 0%
August 1994........................................ 113% 99% 1% 0%
September 1994..................................... 115% 99% 1% 0%
October 1994....................................... 100% 83% 17% 0%
November 1994...................................... 51% 35% 65% 0%
December 1994...................................... 20% 10% 90% 0%
--- --- --- ---
1994 Average....................................... 56% 42% 58% 0%
--- --- --- ---
January 1995....................................... 22% 11% 89% 0%
February 1995...................................... 19% 9% 91% 0%
March 1995......................................... 24% 8% 92% 0%
April 1995......................................... 25% 9% 91% 0%
May 1995........................................... 28% 9% 91% 0%
June 1995.......................................... 29% 10% 90% 0%
July 1995.......................................... 29% 10% 90% 0%
August 1995........................................ 33% 10% 90% 0%
September 1995..................................... 28% 10% 90% 0%
October 1995....................................... 30% 9% 87% 4%
--- --- --- ---
1995 Average (2)................................... 28% 10% 89% 1%
--- --- --- ---
Life Average....................................... 30% 12% 88% 0%
=== === === ===
</TABLE>
- --------
(1) Green Tree began financing manufactured housing floorplan receivables on a
"Presold" basis in February 1994. Under the Presold program, floorplan
financing is provided to a dealer on units for which Green Tree has already
approved a retail contract for sale to a customer. In October 1994 Green
Tree began financing manufactured housing floorplan receivables on a dealer
"Stock" basis (where the dealer does not have a purchase order for the
product from a retail customer), and later began financing other products
through the Stock program as well.
(2) Through October 1995.
The amount of collections on Receivables may vary from month to month due to
seasonal fluctuations in sales of the products securing the Receivables and
other factors. There can be no assurance that Principal Collections with
respect to the Trust, and thus the rate at which the Certificate Owners could
expect to receive
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payments of principal on their Certificates during the Controlled Accumulation
Period, will be similar to the historical experience set forth above. If a Pay
Out Event occurs, the average life and maturity of the Offered Certificates
could be significantly reduced. Certificate Owners will bear the risk of being
able to reinvest principal received on the Certificates at a yield at least
equal to their yield on the Certificates. If an investor acquires a Certificate
at a discount, the repayment of principal on the Certificate later than on the
related Scheduled Payment Date will likely result in a lower than anticipated
yield. In addition, if an investor acquires a Certificate at a premium,
repayment of principal earlier than the related Scheduled Payment Date will
result in a yield to that investor that is lower than anticipated by that
investor.
USE OF PROCEEDS
The Trustee, on behalf of the Trust, will receive the Receivables from the
Transferor and, in exchange therefor, will issue the Exchangeable Transferor
Certificate, the Class A Certificates, the Class B Certificates, the Class C
Certificates and the Class D Certificates to or upon the order of the
Transferor. The Transferor will apply the entire net proceeds received from the
sale of the Offered Certificates, which is expected to be approximately
$ , to pay the purchase price of the Receivables.
DESCRIPTION OF THE OFFERED CERTIFICATES
The Offered Certificates will be issued pursuant to the Pooling and Servicing
Agreement and the Series 1995-1 Supplement. Pursuant to the Pooling and
Servicing Agreement, the Transferor and the Trustee may execute additional
Supplements in order to issue additional Series.
GENERAL
The Offered Certificates will represent undivided interests in certain assets
of the Trust, including the right to the investor allocation percentage of all
Obligor payments on the Receivables in the Trust. Each Class A Certificate and
Class B Certificate represents the right to receive payments of interest at the
Class A Certificate Rate or the Class B Certificate Rate, as the case may be,
funded from Available Series Interest Collections and the right to receive
payments of principal on or after the Class A Scheduled Payment Date or the
Class B Scheduled Payment Date, as applicable, in each case funded from
Principal Collections allocated to the Class A, Class B and Class C
Certificateholders' Interests.
The Transferor will own the Exchangeable Transferor Certificate and the Class
D Certificates. The Exchangeable Transferor Certificate will represent an
undivided interest in the Trust, including the right to a percentage (the
"Transferor Percentage") of all Obligor payments on the Receivables in the
Trust equal to 100% minus the sum of the applicable investor allocation
percentages (which shall not exceed 100%) for all Series of certificates then
outstanding. See "--Certain Matters Regarding the Transferor and the Servicer."
During the Revolving Period, the amount of the Invested Amount in the Trust
will remain constant except under certain limited circumstances. See "--
Defaulted Receivables" and "--The Overconcentration Amounts." The amount of
Principal Receivables in the Trust, however, will vary each day as new
Receivables arise in the Accounts and other Receivables are paid. The amount of
the Transferor Interest (or the amount in the Excess Funding Account, if
necessary) will fluctuate each day, therefore, to reflect the changes in the
amount of the Principal Receivables in the Trust. During the Controlled
Accumulation Period, the Invested Amount will decline as dealer payments of
Principal Receivables are collected and held for distribution or distributed to
the Certificate Owners. As a result, the Transferor Interest will generally
increase each month during the Controlled Accumulation Period to reflect the
reductions in the Invested Amount of such Series and will also change to
reflect the variations in the amount of the Principal Receivables in the Trust.
The Transferor Interest may be reduced as the result of an Exchange. See "--
Exchanges."
Each Class of Offered Certificates initially will be represented by
certificates registered in the name of the nominee of DTC (together with any
successor depository selected by the Transferor, the "Depository"),
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except as set forth below. Beneficial interests in each Class of Offered
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples of $1,000 in excess thereof in book-entry form only. The
Transferor has been informed by DTC that DTC's nominee will be Cede & Co.
Accordingly, Cede & Co. is expected to be the holder of record of the Offered
Certificates. Unless and until Definitive Certificates are issued under the
limited circumstances described herein, no Certificate Owner acquiring an
interest in any Class of Offered Certificates will be entitled to receive a
certificate representing such Certificate Owner's interest in such
Certificates. Until such time, all references herein to actions by
Certificateholders of any Class of Offered Certificates will refer to actions
taken by the Depository upon instructions from its participating organizations
("DTC Participants" or "Participants") and all references herein to
distributions, notices, reports, and statements to Certificateholders of any
Class of Offered Certificates will refer to distributions, notices, reports,
and statements to the Depository or its nominee, as the registered holder of
the Offered Certificates of such Class, for distribution to Certificate Owners
of such Class in accordance with the Depository's procedures. See "--Book-Entry
Registration" and "--Definitive Certificates."
BOOK-ENTRY REGISTRATION
With respect to each Class of Offered Certificates in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe), if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries") which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for its Participants and facilitates the clearance and
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations.
Indirect access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC in the United States, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants on the other, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Cedel Participants and Euroclear Participants may not deliver instructions
directly to the Depositaries.
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Because of time-zone differences, credits or securities in Cedel or Euroclear
as a result of a transaction with a DTC Participant will be made during the
subsequent securities settlement processing, dated the business day following
the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedel Participant or Euroclear Participant on such business day. Cash received
in Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Purchases of Offered Certificates under the DTC system must be made by or
through Participants, which will receive a credit for the Offered Certificates
on DTC's records. The ownership interest of each actual Certificate Owner is in
turn to be recorded on the Participants' and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchase, but Certificate Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership
interests in the Offered Certificates are to be accomplished by entries made on
the books of Participants acting on behalf of Certificate Owners. Certificate
Owners will not receive certificates representing their ownership interest in
Offered Certificates, except in the event that use of the book-entry system for
the Offered Certificates is discontinued.
To facilitate subsequent transfers, all Offered Certificates deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Offered Certificates with DTC and their registration
in the name of Cede & Co. effects no change in beneficial ownership. DTC has no
knowledge of the actual Certificate Owners; DTC's records reflect only the
identity of the Participants to whose accounts such Offered Certificates are
credited, which may or may not be the Certificate Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Certificate Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Offered
Certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the Offered
Certificates are credited on the record date (identified in a listing attached
thereto).
Principal and interest payments on the Offered Certificates will be made to
DTC. DTC's practice is to credit Participants' accounts on the Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the Distribution
Date. Payments by Participants to Certificate Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, the
Trustee or the Transferor, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal and interest to DTC
is the responsibility of the Trustee, disbursement of such payments to
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Certificate Owners shall be the responsibility of Participants
and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Offered Certificates at any time by giving reasonable notice to
the Transferor or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered. The Transferor may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor
securities depository). In that event, Definitive Certificates will be printed
and delivered.
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Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled by Cedel in any of 28 currencies, including United
States dollars. Cedel provides to its Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulations by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any Series of Certificates. Indirect access to
Cedel is also available to others, such as banks, brokers, dealers and trust
companies that dear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 32 currencies, including United States dollars. The Euroclear
System includes various other services, including securities lending and
borrowing and interfaces with domestic markets in several countries generally
similar to the arrangements for cross-market transfers with DTC described
above. The Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of any Series of Certificates. Indirect access
to the Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants
and has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to Offered Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. Cedel or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Certificateholder under the related
Pooling
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and Servicing Agreement on behalf of a Cedel Participant or a Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Offered Certificates among participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Each Class of Offered Certificates will be issued in such registered,
certificated form to the Certificate Owners of such Class or their nominees
("Definitive Certificates"), rather than to the Depository or its nominee, only
if (i) the Transferor advises the Trustee in writing that the Depository is no
longer willing or able to discharge properly its responsibilities as Depository
with respect to the Offered Certificates of such Class, and the Trustee or the
Transferor is unable to locate a qualified successor, (ii) the Transferor, at
its option, advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository, or (iii) after the occurrence of a
Servicer Default, Certificate Owners representing not less than 50% of the
Invested Amount of such Class advise the Trustee and the Depository through
Participants in writing that the continuation of a book-entry system through
the Depository is no longer in the best interest of the Certificate Owners of
such Class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Depository is required to notify all Participants of
the availability through the Depository of Definitive Certificates. Upon
surrender by the Depository of the definitive certificate representing the
Offered Certificates of the affected Class and instructions for registration,
the Trustee will issue the Offered Certificates of such Class as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as Certificateholders under the Pooling and Servicing
Agreement.
Distribution of principal and interest on the Offered Certificates will be
made by the Trustee directly to Certificateholders in accordance with the
procedures set forth herein and in the Pooling and Servicing Agreement.
Interest payments and any principal payments on each Distribution Date will be
made to Certificateholders in whose names the Definitive Certificates were
registered at the close of business on the related Record Date. Distributions
will be made by check mailed to the address of such Certificateholder as it
appears on the register maintained by the Trustee. The final payment on any
Offered Certificate, however, will be made only upon presentation and surrender
of such Certificate at the office or agency specified in the notice of final
distribution to Certificateholders. The Trustee will provide such notice to
registered Certificateholders mailed not later than the fifth day of the month
of such final distributions.
Definitive Certificates will be transferable and exchangeable at the offices
of the transfer agent and registrar, which initially will be the Trustee (in
such capacity, the "Transfer Agent and Registrar"). No service charge will be
imposed for any registration of transfer or exchange, but the Transfer Agent
and Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith. The Transfer Agent and
Registrar will not be required to register the transfer or exchange of
Definitive Certificates for the period from the Record Date preceding the due
date for any payment to the Distribution Date with respect to such Definitive
Certificates.
INTEREST PAYMENTS
Interest on the respective outstanding balance of each Class of Certificates
(other than the Class D Certificates) will accrue at the applicable Certificate
Rate and will be payable on the 15th day of each month, or if such day is not a
business day, on the next succeeding business day (each a "Distribution Date"),
beginning January 15, 1996. Interest will accrue from and including the
preceding Distribution Date (or,
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in the case of the first Distribution Date, from and including the Closing
Date) to but excluding such Distribution Date and will be calculated on the
basis of the actual number of days in the related Interest Accrual Period
divided by 360 days.
Interest on the outstanding principal balance of the Class A Certificates
will accrue for each Interest Accrual Period at the Class A Certificate Rate,
which shall equal the lesser of (i) LIBOR (calculated as described below)
determined as of the second LIBOR business day prior to such Interest Accrual
Period plus % per annum or (ii) the Net Receivables Rate (described below).
Interest on the outstanding principal balance of the Class B Certificates will
accrue for each Interest Accrual Period at the Class B Certificate Rate, which
shall equal the lesser of (i) LIBOR determined as of the second LIBOR business
day prior to such Interest Accrual Period plus % per annum or (ii) the Net
Receivables Rate (described below).
Interest on the outstanding principal balance of the Class C Certificates
will accrue for each Interest Accrual Period at the Class C Certificate Rate,
which shall equal the lesser of (i) LIBOR determined as of the second LIBOR
business day prior to such Interest Accrual Period plus % per annum or (ii)
the Net Receivables Rate (described below).
The Trustee will determine LIBOR on for the period from
through and will determine LIBOR for each Interest
Accrual Period following the initial Interest Accrual Period on the second
business day prior to the Distribution Date on which such Interest Accrual
Period commences (each, a "LIBOR Determination Date"). For purposes of
calculating LIBOR, a business day is any day on which banks in London and New
York are open for the transaction of international business. The Trustee will
determine LIBOR in accordance with the following provisions:
(i) On each LIBOR Determination Date, the Trustee will determine LIBOR on
the basis of quotations of the offered rates for one-month United States
dollar deposits following the LIBOR Determination Date provided by four
major banks in the London interbank market selected by the Servicer (the
"Reference Banks") as of 11:00 a.m. (London time) as such quotations appear
on the Telerate Page 3875 of the Dow Jones Telerate Service (or such other
page as may replace Telerate Page 3875 on that service for the purpose of
displaying London interbank offered rates of major banks). LIBOR as
determined by the Trustee is the arithmetic mean of such quotations
(rounded, if necessary, to the nearest multiple of 0.0625% per annum).
(ii) If, on any LIBOR Determination Date, at least two but fewer than all
of the Reference Banks provide quotations, LIBOR will be determined in
accordance with clause (i) above on the basis of the offered quotations of
those Reference Banks providing such quotations.
(iii) If, on the LIBOR Determination Date, only one or none of the
Reference Banks provides such offered quotations, LIBOR will be:
(a) the rate per annum (rounded as aforesaid) that the Trustee
determines to be either (x) the arithmetic mean of the offered
quotations that leading banks in The City of New York selected by the
Servicer are quoting on the relevant LIBOR Determination Date for one-
month United States dollar deposits to the principal London office of
each of the Reference Banks or those of them (being at least two in
number) to which such offered quotations are, in the opinion of the
Servicer, being so made or (y) in the event the Trustee can determine
no such arithmetic mean, the arithmetic mean of the offered quotations
that leading banks in The City of New York selected by the Servicer are
quoting on such LIBOR Determination Date to leading European banks for
one-month United States dollar deposits; or
(b) if the banks selected as aforesaid by the Servicer are not
quoting as described in clause (a) above, LIBOR for such Interest
Accrual Period will be LIBOR as determined on the previous LIBOR
Determination Date.
The "Net Receivables Rate" for a Distribution Date is (i) the weighted
average of the interest rates borne by the Receivables during the second
preceding Monthly Period (because interest payments on the
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Receivables at such rates will be due and payable in the Monthly Period
preceding such Distribution Date), plus (ii) the product of (x) the Monthly
Payment Rate for the Monthly Period preceding such Distribution Date, (y) the
Discount Factor, if any, for such Distribution Date and (z) twelve, less 2% per
annum, unless the Servicing Fee has been waived for such Monthly Period. The
"Monthly Payment Rate" for a Monthly Period is the percentage equivalent of a
fraction, the numerator of which is the aggregate of the Receivables balance
(without deducting therefrom the discount portion, if any) collected during
such Monthly Period and the denominator of which is the average daily aggregate
Receivables balance (without deducting therefrom the discount portion, if any)
for such Monthly Period.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Accrual Period may be
obtained by telephoning the Trustee at its Corporate Trust Office at (612) 667-
4959. Following the listing of the Offered Certificates on the Luxembourg Stock
Exchange, the Trustee will cause the Class A Certificate Rate and the Class B
Certificate Rate applicable to an Interest Accrual Period to be provided to the
Luxembourg Stock Exchange as soon as possible after its determination but in no
event later than the first day of such Interest Accrual Period.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on the
day before the earliest of (i) the Initial Principal Payment Date, (ii) the
commencement of the Controlled Accumulation Period or (iii) the commencement of
the Early Amortization Period), no principal payments will be made to the
Certificateholders. During the Controlled Accumulation Period, principal will
be paid to the Principal Account on each business day and such amounts will be
distributed to the Class A Certificateholders on the Class A Scheduled Payment
Date, then to the Class B Certificateholders on the Class B Scheduled Payment
Date, then to the Class C Certificateholders until the Class C Invested Amount
is paid in full, and finally to the Class D Certificateholders until the Class
D Invested Amount is paid in full. The amount of principal deposited in the
Principal Account during each Monthly Period during the Controlled Accumulation
Period will not exceed the Controlled Deposit Amount. See "--Pay Out Events"
for a discussion of events which might lead to the commencement of the Early
Amortization Period prior to the first day of the Controlled Accumulation
Period. See "--Application of Collections" for a discussion of the method by
which Principal Collections are allocated during the Controlled Accumulation
Period.
Principal Collections for any Monthly Period during the Controlled
Accumulation Period allocated to the Class A, Class B and Class C
Certificateholders' Interests will first be used to cover, with respect to such
Monthly Period, required deposits into the Principal Account for the benefit of
the Class A Certificateholders. On and after the Class B Principal Payment
Commencement Date, Principal Collections for any Monthly Period allocated to
the Class A, Class B and Class C Certificateholders' Interests will first be
used to cover required deposits into the Principal Account for the benefit of
the Class B Certificateholders. On and after the Class C Principal Commencement
Date, Principal Collections for any Monthly Period allocated to the Class A,
Class B and Class C Certificateholders' Interests will first be used to cover
required deposits into the Principal Account for the benefit of the Class C
Certificateholders. The Servicer will determine the amount of Principal
Collections for any business day allocated to the Class A, Class B and Class C
Certificateholders' Interests that remain after covering required deposits or
payments of principal to the Certificateholders and any similar amount
remaining with respect to certificates of any other Series (other than amounts
allocated to Transferor Retained Classes) (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections to
cover any scheduled or permitted principal distributions to certificateholders
and deposits to principal funding accounts, if any, for any Series that have
not been covered out of the Principal Collections allocable to such Series and
certain other amounts ("Principal Shortfalls"). Shared Principal Collections
will not be used to cover investor charge-offs for any Series. If Principal
Shortfalls exceed Shared Principal Collections on any business day, Shared
Principal Collections will be allocated pro rata among the applicable Series
based on the relative amounts of Principal Shortfalls. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance will,
subject to certain limitations, be paid to the holder of the Exchangeable
Transferor Certificate.
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EXTENSION OF INITIAL PRINCIPAL PAYMENT DATE
Unless an Pay Out Event has occurred, principal with respect to the Class A
Certificates is expected to be paid on the Class A Scheduled Payment Date and
principal with respect to the Class B Certificates is expected to be paid on
the Class B Scheduled Payment Date, provided that the Certificateholders will
receive payments of principal earlier than such dates if the Servicer elects
not to extend the Initial Principal Payment Date. The Initial Principal Payment
Date will initially be the January 1998 Distribution Date, but will
successively and automatically be extended to the next Distribution Date after
the then-current Initial Principal Payment Date unless the Servicer elects not
to so extend; provided that the Initial Principal Payment Date may not be later
than the Class A Scheduled Payment Date. In the event that the Servicer elects
not to extend the Initial Principal Payment Date, the Revolving Period or the
Controlled Accumulation Period, as applicable, will end, and amounts then on
deposit in the Principal Account and Principal Collections with respect to each
Distribution Date commencing on the Initial Principal Payment Date will be paid
first to the Class A Certificateholders until the earlier of the date on which
the Class A Invested Amount is paid in full or the Series 1995-1 Termination
Date, and then all Principal Collections will be paid to the Class B
Certificateholders until the earlier of the date on which the Class B Invested
Amount is paid in full or the Series 1995-1 Termination Date and then all
Principal Collections will be paid to the Class C Certificateholders until the
earlier of the date on which the Class C Invested Amount is paid in full or the
Series 1995-1 Termination Date.
The Servicer will cause the Trustee to provide written notice to each
Certificateholder, the Transferor, the Rating Agency and the Luxembourg Stock
Exchange of any election by the Servicer not to extend the Initial Principal
Payment Date. The Servicer will cause the Trustee to mail such notice not more
than 60 nor less than 30 days prior to the then-current Initial Principal
Payment Date.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
The Controlled Accumulation Period is currently expected to commence at the
close of business on ; however, the date on which the Controlled
Accumulation Period actually commences may be delayed if the Controlled
Accumulation Period Length (determined as described below) is less than the
number of months remaining between each Period Length Determination Date
(defined below) and the Class A Scheduled Payment Date. On September 15, 1998,
the Servicer will determine the "Accumulation Period Length." The "Accumulation
Period Length" will be one, two, three or four months (a) and will be
calculated as the product, rounded upwards to the nearest integer, of (a) four
and (b) a fraction, the numerator of which is the Invested Amount as of
September 15, 1998 (after giving effect to all changes therein on such date)
and the denominator of which is the sum of such Invested Amount and the
invested amounts as of September 15, 1998 (after giving effect to all changes
therein on such date) of all other outstanding Series whose respective
revolving periods are not scheduled to end before the last day of the January
1999 Monthly Period. Depending on whether the Accumulation Period Length is one
month, two months, three months or four months, the "Accumulation Period
Commencement Date" will be the first day of the January 1999 Collection Period,
the December 1998 Collection Period, the November 1998 Collection Period or the
October 1998 Collection Period, respectively. Notwithstanding the foregoing,
the Accumulation Period Commencement Date will be October 1, 1998 if, prior to
such date, any other outstanding Series has entered into an early amortization
period. The effect of the foregoing calculation is to reduce the Controlled
Accumulation Period Length based on the invested amounts of other Series that
are scheduled to be in their revolving periods and thus scheduled to create
Shared Principal Collections during the Controlled Accumulation Period. In
addition, if the Controlled Accumulation Period Length has been determined to
be less than 12 months and, after the date on which such determination is made,
a Pay Out Event occurs with respect to any such other Series, the Controlled
Accumulation Period will commence on the earlier of (i) the date that such Pay
Out Event occurred with respect to such Series and (ii) the date on which the
Controlled Accumulation Period is then scheduled to commence.
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INTEREST COLLECTIONS; PRINCIPAL COLLECTIONS
The Servicer will allocate the aggregate amount of Collections available in
the Collection Account (or shall instruct the Trustee to so allocate from
amounts on deposit in the Collection Account if all Collections are being
deposited therein as described below under "--Application of Collections;
Allocations") on each business day to Interest Collections and Principal
Collections. "Interest Collections" are calculated as the sum of (A) all
collections of interest and other fees on the Receivables, (B) all Imputed
Yield Collections (if a Discount Factor is then in effect), (C) investment
earnings on amounts on deposit in the Trust Accounts on such business day and
(D) Recoveries on such business day. "Principal Collections" are such
Collections other than Interest Collections.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificates will be subordinated to the extent necessary to fund
certain payments with respect to the Class A Certificates. To the extent the
Class B Invested Amount is reduced, the percentage of Interest Collections
allocated to the Class B Certificateholders will be reduced. Moreover, to the
extent the amount of such reduction in the Class B Invested Amount is not
reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced.
The Class C Certificates will be subordinated to the extent necessary to fund
certain payments with respect to the Class A Certificates and the Class B
Certificates. To the extent the Class C Invested Amount is reduced, the
percentage of Interest Collections allocated to the Class C Certificateholders
will be reduced. Moreover, to the extent the amount of such reduction in the
Class C Invested Amount is not reimbursed, the amount of principal
distributable to the Class C Certificateholders will be reduced.
If, on any Determination Date, the aggregate Investor Default Amount, if any,
for each business day in the preceding Monthly Period exceeds (a) the aggregate
amount of Available Series Interest Collections applied to the payment thereof
as described in clauses (v) and (vi) of "--Application of Collections--Payment
of Fees, Interest, and Other Items," (b) the amount of Excess Interest
Collections allocated thereto as described in "--Reallocation of Cash Flows,"
and (c) the amount of Reallocated Principal Collections allocated with respect
thereto as described in "--Reallocated Principal Collections," the Class D
Invested Amount will be reduced by the amount by which such aggregate Investor
Default Amount exceeds the amount applied with respect thereto during the
preceding Monthly Period. Such reductions of the Class D Invested Amount will
thereafter be reimbursed and the Class D Invested Amount increased on each
business day by the amount, if any, of Available Series Interest Collections
and Excess Interest Collections allocated and available for that purpose. The
Class D Invested Amount will initially be zero and will only be adjusted upward
under the circumstances described under "--The Overconcentration Amounts"
below.
In the event that any such reduction of the Class D Invested Amount would
cause the Class D Invested Amount to be a negative number, the Class D Invested
Amount will remain at or be reduced to zero and the Class C Invested Amount
will be reduced by the amount by which the Class D Invested Amount would have
been reduced below zero, but not more than the remaining aggregate Investor
Default Amount for such preceding Monthly Period. Such reductions of the Class
C Invested Amount will thereafter be reimbursed and the Class C Invested Amount
increased during such Monthly Period by the amount, if any, of such Available
Series Interest Collections and Excess Interest Collections for such business
day allocated and available for that purpose.
In the event that any such reduction of the Class C Invested Amount would
cause the Class C Invested Amount to be a negative number, the Class C Invested
Amount will be reduced to zero and the Class B Invested Amount will be reduced
by the amount by which the Class C Invested Amount would have been reduced
below zero, but not more than the remaining aggregate Investor Default Amount
for such Monthly Period. Such reductions of the Class B Invested Amount will
thereafter be reimbursed and the Class B Invested Amount increased on each
business day by the amount, if any, of Available Series Interest Collections
and Excess Interest Collections for such business day allocated and available
for that purpose. If the Class B Invested Amount is reduced to zero, the Class
A Invested Amount will be reduced by the amount
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by which the Class B Invested Amount would have been reduced below zero, but
not more than the remaining aggregate Investor Default Amount for such Monthly
Period. Such reductions of the Class A Invested Amount will thereafter be
reimbursed and the Class A Invested Amount increased on each business day by
the amount, if any, of Available Series Interest Collections and Excess
Interest Collections allocated and available for that purpose. See "--
Reallocation of Cash Flows," "--Reallocated Principal Collections" and "--
Investor Charge-Offs."
TRANSFER AND ASSIGNMENT OF RECEIVABLES AND COLLATERAL SECURITY
On the Closing Date, the Transferor will transfer and assign to the Trust all
of its right, title, and interest in and to the Receivables and the related
Collateral Security outstanding as of the Closing Date, all of the Receivables
thereafter arising in the Accounts and its interest in the related Collateral
Security and the proceeds of all of the foregoing. Prior to such transfer and
assignment and pursuant to the Purchase Agreement, Green Tree will contribute
and sell to the Transferor all its right, title and interest in and to the
Receivables and the related Collateral Security existing as of the Cut-off Date
and all the Receivables and the related Collateral Security arising in the
Accounts from time to time thereafter. On the Closing Date, and concurrently
with the transfer and assignment of the Receivables and related Collateral
Security to the Trust, the Trustee will authenticate the Certificates and
deliver the Certificates to the Transferor which will in turn deliver the
Offered Certificates to the Underwriters against payment of the net proceeds of
the sale of the Offered Certificates. The Trustee will also authenticate and
deliver the Exchangeable Transferor Certificate to the Transferor.
Green Tree, for itself and as Servicer, will identify in its computer files
that the Receivables have been assigned to the Trust. Green Tree, as Servicer,
will retain and will not deliver to the Trustee any other records or agreements
relating to the Receivables. The records and agreements relating to the
Receivables will not be segregated from those relating to other accounts and
receivables of Green Tree and the physical documentation relating to the
Receivables will not be stamped or marked to reflect the transfer of the
Receivables to the Trust. The Trustee will have reasonable access to such
records and agreements as required by applicable law or to enforce the rights
of the Certificateholders. Green Tree will file one or more UCC-1 financing
statements in accordance with the UCC to perfect the Transferor's interest in
the Receivables and the proceeds thereof, as applicable. The Transferor, in
turn, will file one or more UCC-1 financing statements in accordance with
applicable state law to perfect the Trust's interest in the Receivables and the
proceeds thereof. The UCC-1 financing statements that perfect Green Tree's
security interest in the Collateral Security will not be amended to reflect
such transfers. See "Risk Factors"--"Transfer of the Receivables; Insolvency
Risk Considerations" and "Certain Legal Aspects of the Receivables."
EXCHANGES
The Pooling and Servicing Agreement provides for the Trustee to issue two
types of certificates: (i) one or more Series of certificates, each of which
may have one or more classes, and (ii) the Exchangeable Transferor Certificate.
The Exchangeable Transferor Certificate will evidence the Transferor Interest,
will initially be held by the Transferor, and will be transferable only as
provided in the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement also provides that, pursuant to any one or more Supplements to the
Pooling and Servicing Agreement, the holder of the Exchangeable Transferor
Certificate may tender the Exchangeable Transferor Certificate and the
certificates evidencing any Series of certificates, to the Trustee in exchange
for one or more new Series and a reissued Exchangeable Transferor Certificate.
Under the Pooling and Servicing Agreement, the holder of the Exchangeable
Transferor Certificate may define, with respect to any newly issued Series,
certain terms including: (i) its name or designation; (ii) its initial invested
amount (or method for calculating such amount); (iii) its certificate rate (or
the method of allocating interest payments or other cash flows to such Series);
(iv) the closing date; (v) the rating agency or agencies, if any, rating the
Series; (vi) the interest payment date or dates and the date or dates from
which interest shall accrue; (vii) the name of the clearing agency, if any;
(viii) the method for allocating collections to certificateholders of such
Series with respect to Principal Collections, Interest Collections, and
Defaulted Receivables and the method by which the principal amount of such
Series will amortize or accrue; (ix) the
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names of any accounts to be used by such Series and the terms governing the
operation of any such accounts; (x) the percentage used to calculate monthly
servicing fees; (xi) the Minimum Transferor Interest; (xii) the credit
enhancement provider, if applicable, and the terms of any credit enhancement
with respect to such Series; (xiii) the base rate applicable to such Series;
(xiv) the terms on which the certificates of such Series may be repurchased or
remarketed to other investors; (xv) the termination date of such Series; (xvi)
any deposit into any account provided for such Series; (xvii) the number of
classes of such Series and, if more than one class, the rights and priorities
of each such class; (xviii) the fees, if any, to be included in funds available
to certificateholders in such Series; (xix) the subordination, if any, of such
new Series with respect to any other Series; (xx) the rights, if any, of the
holder of the Exchangeable Transferor Certificate that have been transferred to
the holders of such Series; (xxi) the pool factor (consisting of a seven-digit
decimal expressing the ratio of the invested amount to the initial invested
amount); (xxii) whether such Series will be part of a group or subject to being
paired with any other prefunded Series; (xxiii) whether such Series will be
prefunded; and (xxiv) any other relevant terms, including whether or not such
Series will be pledged as collateral for an issuance of any other securities,
including commercial paper (all such terms, the "Principal Terms" of such
Series). None of the Transferor, the Servicer, the Trustee, or the Trust is
required or intends to obtain the consent of any Certificateholder to issue any
additional Series or in connection with the determination of the Principal
Terms thereof. However, as a condition of an Exchange, the holder of the
Exchangeable Transferor Certificate will deliver to the Trustee written
confirmation that the Exchange will not result in any Rating Agency reducing or
withdrawing its rating of any outstanding Series, including the Offered
Certificates. The Transferor may offer any Series to the public or other
investors in transactions either registered under the Securities Act or exempt
from registration thereunder, directly, through one or more underwriters or
placement agents, in fixed-price offerings, in negotiated transactions, or
otherwise. Any such Series may be issued in fully registered or book-entry form
in minimum denominations determined by the Transferor. The Certificates
represent the Series initially issued by the Trust. The Transferor currently
intends to offer, from time to time, additional Series.
The Pooling and Servicing Agreement provides that the holder of the
Exchangeable Transferor Certificate may perform Exchanges and define the
Principal Terms of each Series, including the period during which amortization
of the principal amount thereof is intended to occur, which period may have a
different length and begin on a different date than such period for any other
Series. Accordingly, one or more Series may be in their amortization periods
while other Series are not. Moreover, any Series may have the benefit of a
credit enhancement that is available only to such Series. Under the Pooling and
Servicing Agreement, the Trustee will hold any such form of credit enhancement
only on behalf of the Series with respect to which it relates. Likewise, with
respect to each such form of credit enhancement, the holder of the Exchangeable
Transferor Certificate may deliver a different form of credit enhancement
agreement. The Pooling and Servicing Agreement also provides that the holder of
the Exchangeable Transferor Certificate may specify different coupon rates and
monthly servicing fees with respect to each Series (or a particular class
within such Series). Collections allocated to Interest Receivables not used to
pay interest on the certificates, the monthly servicing fee, the investor
default amount, or investor charge-offs with respect to any Series will be
allocated as provided in such credit enhancement agreement, if applicable. The
holder of the Exchangeable Transferor Certificate also has the option under the
Pooling and Servicing Agreement to vary between Series the terms upon which a
Series (or a particular class within such Series) may be repurchased by the
Transferor or remarketed to other investors. Additionally, certain Series may
be subordinated to other Series, and classes within a Series may have different
priorities. The Series 1995-1 Supplement does not permit the subordination of
the Certificates to any other Series that may be issued by the Trust (except to
the limited extent described herein with respect to Shared Principal
Collections and Excess Interest Collections). There is no limit to the number
of Exchanges that may be performed under the Pooling and Servicing Agreement.
The Trust will terminate only as provided in the Pooling and Servicing
Agreement.
An Exchange may occur only upon the satisfaction of certain conditions
provided in the Pooling and Servicing Agreement. The holder of the Exchangeable
Transferor Certificate may perform an Exchange by notifying the Trustee at
least five business days in advance of the date upon which the Exchange is to
occur. The notice will state the designation of any Series to be issued on the
date of the Exchange and, with respect
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to each such Series: (i) its initial principal amount (or method for
calculating such amount), (ii) its certificate rate (or the method of
allocating interest payments or other cash flows to such Series), and (iii) the
provider of the credit enhancement, if any, which is expected to provide credit
support with respect to it. The Pooling and Servicing Agreement provides that
on the date of the Exchange the Trustee will authenticate any such Series only
upon delivery to the Trustee of the following: (i) a Supplement to the Pooling
and Servicing Agreement specifying the Principal Terms of such Series, (ii) an
opinion of counsel to the effect that the certificates of such Series will be
characterized as indebtedness or as partnership interests under existing law
for federal and applicable state income tax purposes and that the issuance of
such Series will not materially adversely affect the federal income tax
characterization of any outstanding Series, including Series 1995-1, or result
in the trust being subject to tax at the entity level for federal or applicable
state tax purposes, (iii) if required by such Supplement, the form of credit
enhancement and an appropriate credit enhancement agreement with respect
thereto executed by the Transferor and the issuer of the credit enhancement,
(iv) written confirmation from each Rating Agency that the Exchange will not
result in such Rating Agency's reducing or withdrawing its rating on any then-
outstanding Series rated by it, including Series 1995-1, (v) the existing
Exchangeable Transferor Certificate and, if applicable, the certificates
representing the Series to be exchanged, and (vi) an officer's certificate of
the Transferor stating that, after giving effect to such Exchange, (a) the
Transferor Interest would be at least equal to the Minimum Transferor Interest,
and (b) taking into account the certificates of the newly issued Series, more
than 20% (by Invested Amount and by value) of the outstanding certificates
issued by the Trust with respect to which no opinion of counsel was issued that
the applicable class would be treated as debt for federal income tax purposes
(including the Exchangeable Transferor Certificate and each Transferor Retained
Class) shall, by their terms, be prohibited from being transferred.
Under the Pooling and Servicing Agreement, the Transferor may also exchange
the Exchangeable Transferor Certificate for a newly issued Exchangeable
Transferor Certificate and a second certificate (a "Supplemental Certificate")
the terms of which will be defined in a supplement upon the satisfaction of
certain conditions provided in the Pooling and Servicing Agreement.
REPRESENTATIONS AND WARRANTIES
The Transferor will make representations and warranties to the Trust relating
to the Accounts, the Receivables and the Collateral Security to the effect,
among other things, that (a) as of the Cut-off Date, the Series 1995-1 Closing
Date and the date of issuance of any other Series (a "Series Issuance Date")
(or, in the case of an Additional Account, as of the date of its designation
for inclusion in the Trust and the date the related Receivables are transferred
to the Trust (an "Addition Date")), each Account or Additional Account was or
is an Eligible Account or, if it was or is an Ineligible Account on such date,
such Account is being removed from the Trust in accordance with the
requirements of the Pooling and Servicing Agreement, (b) as of the Cut-off Date
(or as of the Additional Cut-off Date, in the case of any Additional Accounts)
or as of the date any future Receivable is generated (a "Transfer Date"), each
Receivable is an Eligible Receivable or, if such Receivable is not an Eligible
Receivable, such Receivable is conveyed to the Trust as described below under
"Eligible Accounts and Eligible Receivables," (c) each Receivable and all
Collateral Security conveyed to the Trust on the Series 1995-1 Closing Date and
on each Transfer Date or, in the case of Additional Accounts, on the Addition
Date, and all of the Transferor's right, title and interest in the Purchase
Agreement, have been conveyed to the Trust free and clear of any liens, and (d)
all appropriate consents and governmental authorizations required to be
obtained by the Transferor in connection with the conveyance of each such
Receivable have been duly obtained. If the Transferor breaches any
representation and warranty described in this paragraph, such breach remains
uncured for 30 days (or such longer period as may be agreed to by the Trustee)
after the earlier to occur of the discovery of such breach by the Transferor or
the Servicer or receipt of written notice of such breach by the Transferor or
the Servicer, and such breach has a materially adverse effect on the
Certificateholders' Interest or the interests of the holders of other
outstanding Series in any Receivable or Account, the Certificateholders'
Interest and such other certificateholders' interests in such Receivable or, in
the case of a breach relating to an Account, all Receivables in the related
Account ("Ineligible Receivables") will be reassigned to the Transferor on the
terms and conditions set forth below and such Account shall no longer be
included as an Account.
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Each Ineligible Receivable will be reassigned to the Transferor on or before
the end of the Collection Period in which such reassignment obligation arises
by the Transferor directing the Servicer to deduct the balance of such
Receivable (discounted by the Discount Factor, if any, for the Collection
Period preceding such Determination Date) from the Pool Balance. In the event
that such deduction would cause the Transferor Interest to be less than the
Minimum Transferor Interest on the preceding Determination Date (after giving
effect to the allocations, distributions, withdrawals and deposits to be made
on such Distribution Date), on the date on which such reassignment is to occur
the Transferor will be obligated to make a deposit into the Collection Account
in immediately available funds in an amount equal to the amount by which the
Transferor Interest would be less than the Minimum Transferor Interest (the
amount of any such deposit being referred to herein as a "Transfer Deposit
Amount"), provided that if the Transfer Deposit Amount is not so deposited, the
principal balance of the related Receivables will be deducted from the Pool
Balance only to the extent the Transferor Interest is not reduced below the
Minimum Transferor Interest and any principal balance not so deducted will not
be reassigned and will remain part of the Trust. The reassignment of any such
Receivable to the Transferor and the payment of any related Transfer Deposit
Amount will be the sole remedy respecting any breach of the representations and
warranties described in the preceding paragraph with respect to such Receivable
available to Certificateholders or the Trustee on behalf of Certificateholders.
The Transferor will make in the Pooling and Servicing Agreement and related
Series Supplement representations and warranties to the Trust to the effect,
among other things, that as of the Closing Date of such Series (a) the
Transferor is duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has the corporate power and authority to
execute, deliver and perform its obligations under the Pooling and Servicing
Agreement, the Series 1995-1 Supplement, and the Purchase Agreement, (b) the
Transferor is duly qualified to do business and in good standing (or is exempt
from such requirement) in any state required in order to conduct its business
and has obtained all necessary licenses and approvals required under federal,
Minnesota and Delaware law, (c) the execution and delivery of the Pooling and
Servicing Agreement, the Series 1995-1 Supplement, and the Purchase Agreement,
and the consummation of the transactions provided for therein, have been duly
authorized by the Transferor by all necessary corporate action on its part, (d)
the Pooling and Servicing Agreement will constitute a legal, valid and binding
obligation of the Transferor and (e) the transfer of Receivables and the
Collateral Security by it to the Trust under the Pooling and Servicing
Agreement will constitute either a valid transfer and assignment to the Trust
of all right, title and interest of the Transferor in and to the Receivables
and the Collateral Security (other than Receivables in Additional Accounts),
whether then existing or thereafter created and the proceeds thereof (including
amounts in any of the accounts established for the benefit of
Certificateholders) or the grant of a first priority perfected security
interest in such Receivables (except for certain liens permitted pursuant to
the Pooling and Servicing Agreement) and the proceeds thereof (including
amounts in any of the accounts established for the benefit of
Certificateholders), which is effective as to each such Receivable upon the
creation thereof. In the event of a breach of any of the representations and
warranties described in this paragraph, either the Trustee or the Holders of
Certificates evidencing undivided interests in the Trust aggregating more than
50% of the aggregate investor interest of the related Series outstanding may
direct the Transferor to accept reassignment of an amount of Principal
Receivables equal to the invested amount to be reassigned (as described below)
within 60 days of such notice, or within such longer period specified in such
notice. The Transferor will thereupon be obligated to accept reassignment of
such Receivables on a Distribution Date occurring within such applicable
period. Such reassignment will not be required to be made, however, if at any
time during such applicable period, or such longer period, the representations
and warranties shall then be true and correct in all material respects. The
amount to be deposited by the Transferor for distribution to certificateholders
in connection with such reassignment will be equal to the invested amount for
all Series of certificates required to be reassigned on the last day of the
Monthly Period preceding the Distribution Date on which the reassignment is
scheduled to be made, less the amount, if any, previously allocated for payment
of principal to such certificateholders on such Distribution Date, plus an
amount equal to all interest accrued but unpaid on such certificates at the
applicable certificate rate through the last day of the related Interest
Accrual Period, less the amount transferred to the Distribution Account
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from the Interest Funding Account in respect of interest on such certificates
for the month ending on such last day of the Monthly Period. The payment of the
reassignment deposit amount and the transfer of all other amounts deposited for
the preceding month in the Distribution Account will be considered a payment in
full of the investor interest for all Series of certificates required to be
repurchased and will be distributed upon presentation and surrender of the
certificates for each such Series. If the Trustee or certificateholders give a
notice as provided above, the obligation of the Transferor to make any such
deposit will constitute the sole remedy available to the Trustee and the
certificateholders with respect to any breach of the Transferor's
representations and warranties.
An "Eligible Account" will be defined to mean, as of the relevant Cut-off
Date (or, with respect to Additional Accounts, as of their date of designation
for inclusion in the Trust), an arrangement to provide a revolving extension of
credit by Green Tree or one of its subsidiaries to a Dealer (i) in order to
finance the purchase by a Dealer of consumer and commercial product inventory
or (ii) as a line of credit secured by unencumbered assets of such Dealer,
which extension of credit, as of the date of determination thereof, (a) is in
existence and maintained with Green Tree or such subsidiary, (b) is payable in
United States dollars, (c) is with a Dealer whose most recent billing address
is in the United States or its territories or possessions, (d) has been
originated by Green Tree or such subsidiary in the ordinary course of business
or acquired by Green Tree through the acquisition of an Eligible Account from
another lender upon satisfying Green Tree's customary underwriting standards,
(e) in respect of which no amounts have been charged off by Green Tree or such
subsidiary as uncollectible in its customary and usual manner as of the Cut-off
Date (or, with respect to Additional Accounts, as of their date of designation
for inclusion in the Trust), and (f) is with a Dealer that is not involved in
insolvency proceedings. The definition of Eligible Account may be changed by
amendment to the Pooling and Servicing Agreement without the consent of the
Certificateholders if (i) the Transferor delivers to the Trustee a certificate
of an authorized officer to the effect that, in the reasonable belief of the
Transferor, such amendment will not as of the date of such amendment adversely
affect in any material respect the interest of the Certificateholders, and (ii)
such amendment will not result in a withdrawal or reduction of the rating of
any outstanding Series under the Trust.
An "Eligible Receivable" will be defined to mean each Receivable (a) that was
originated by Green Tree or one of its subsidiaries in the ordinary course of
business, (b) that has arisen under an Eligible Account, (c) that was created
in compliance with all requirements of law applicable thereto and pursuant to a
floorplan or asset-based financing agreement that complies with all
requirements of law applicable thereto, (d) with respect to which all consents,
licenses or authorizations of, or registrations with, any governmental
authority required to be obtained or given by Green Tree or the Transferor in
connection with the creation of such Receivable or the transfer thereof to the
Trust or the execution, delivery, creation and performance by Green Tree or
such subsidiary of the related floorplan or asset-based financing agreement
have been duly obtained or given and are in full force and effect as of the
date of the creation of such Receivable, (e) as to which, at the time of its
creation, the Transferor had good and marketable title free and clear of all
liens and security interests (other than certain liens permitted pursuant to
the Pooling and Servicing Agreement), and at all times following the transfer
of such Receivables to the Trust, the Trust will have good and marketable title
free and clear of all liens and security interests (other than certain liens
permitted pursuant to the Pooling and Servicing Agreement) or the grant of a
first priority security interest therein, (f) that is the legal, valid, binding
and assignable payment obligation of the related Dealer, legally enforceable
against such Dealer, in accordance with its terms (with certain bankruptcy
related exceptions), (g) that constitutes "chattel paper", an "account" or a
"general intangible" under Article 9 of the Uniform Commercial Code as then in
effect in the State of Minnesota, (h) if such Receivable has the benefit of a
Floorplan Agreement with a Manufacturer, such Floorplan Agreement provides,
subject to the specific terms thereof and any limitations therein (which may
vary among Floorplan Agreements), that the Manufacturer is obligated to
repurchase the products securing the Receivables upon the Servicer's
repossession thereof upon the related Dealer's default, (i) which has been the
subject of a valid transfer and assignment from the Transferor to the Trust of
all the Transferor's interest therein (including any proceeds thereof), (j)
which at the time of transfer to the Trust is not subject to any right of
rescission, setoff, or any other defense (including defenses arising out of
violations of usury laws) of the Dealer, (k) as to which, at the time of
transfer of such Receivable to the Trust, Green Tree (or such subsidiary) and
the Transferor have satisfied all their respective obligations with respect to
such
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Receivable required to be satisfied at such time, (l) as to which, at the time
of transfer of such Receivable to the Trust, neither Green Tree or such
subsidiary nor the Transferor has taken or failed to take any action which
would impair the rights of the Trust or the certificateholders therein and (m)
which represents the obligation of a Dealer to repay an advance made to or on
behalf of such Dealer to finance products or the accounts receivable arising
from the sale of such products.
It will not be required or anticipated that the Trustee will make any initial
or periodic general examination of the Receivables or any records relating to
the Receivables for the purpose of establishing the presence or absence of
defects, compliance with the Transferor's representations and warranties or for
any other purpose. The Servicer, however, will deliver to the Trustee on or
before March 31 of each year an opinion of counsel with respect to the validity
of the security interest of the Trust in and to the Receivables and certain
other components of the Trust Portfolio.
ADDITION OF ACCOUNTS
Subject to the conditions described below, the Transferor will have the right
to designate, from time to time, Additional Accounts to be included as Accounts
with respect to the Trust. In addition, the Transferor will be required to
designate Additional Accounts if the Transferor Interest on the last day of any
Collection Period is less than the Minimum Transferor Interest. The Transferor
will convey to the Trust its interest in all Receivables in such Additional
Accounts, whether such Receivables are then existing or thereafter created.
Each Additional Account must be an Eligible Account at the time of its
designation. However, Additional Accounts may not be of the same credit quality
as the initial Accounts, and may have been originated by Green Tree using
credit criteria different from those which were applied by Green Tree to the
initial Accounts.
A conveyance by the Transferor to the Trust of Receivables in Additional
Accounts is subject to the following conditions, among others: (i) each such
Additional Account must be an Eligible Account; (ii) the Transferor shall
represent and warrant that the addition of such Additional Accounts shall not,
in the reasonable belief of the Transferor, cause a Pay Out Event to occur;
(iii) the Transferor shall not select such Additional Accounts in a manner that
it believes is adverse to the interests of the certificateholders or any
Enhancement Provider; (iv) the Transferor shall deliver a Tax Opinion, other
than in the case of a required addition, and certain other opinions of counsel
with respect to the addition of such Additional Accounts to the Trustee, each
Rating Agency and any credit enhancement provider and (v) if the Automatic
Addition Condition (as described below) is not satisfied, the applicable Rating
Agencies shall have provided written confirmation that such addition will not
result in a reduction or withdrawal of the rating of the Certificates or any
other rated outstanding Series or class of certificates. If the Automatic
Addition Condition is satisfied and the Account being added will contain
Receivables secured by a security interest in a type of product not previously
financed by Green Tree, then such addition is subject to each Rating Agency
confirming that the addition of such Account would not result in the reduction
or the withdrawal of the rating of the Certificates.
The "Automatic Addition Condition" means, with respect to the addition of
Accounts that (i) during the calendar quarter in which such addition occurs,
the number of new Accounts for Dealers that are financing products of the type
already being financed by Green Tree does not exceed 5% of the number of all
Accounts at the end of the preceding calendar quarter, (ii) during the twelve
months ending at the beginning of such calendar quarter, the number of such new
Accounts does not exceed 20% of the number of all Accounts at the beginning of
such twelve month period, (iii) the average for the three months preceding the
month of such addition of the aggregate balance of Receivables that have been
delinquent for more than 30 days does not exceed 1.25% of the Pool Balance at
the end of the month preceding the month of such addition, and (iv) the
annualized average for such three month period of the net losses incurred in
respect of the Receivables does not exceed 1.75% of the Pool Balance at the end
of the month preceding the month of such addition.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer intends
to file, on behalf of the Trust, a Report on Form 8-K with respect to any
addition to the Trust of Receivables in Additional Accounts that would have a
material effect on the composition of the assets of the Trust.
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REMOVAL OF ACCOUNTS
The Transferor shall have the right at any time to require the removal from
the Trust of Eligible Accounts, including all amounts then held by the Trust or
thereafter received by the Trust in respect of the Eligible Accounts to be
removed. To remove any Eligible Account and such amounts, the Transferor (or
the Servicer on its behalf) shall, among other things, (a) on or before the
fifth business day prior to the date of removal (the "Removal Date"), furnish
to the Trustee, any credit enhancement provider and each Rating Agency a
written notice (the "Removal Notice") specifying the Removal Date; (b) on or
before the fifth business day after the Removal Date, the Transferor shall have
furnished to the Trustee a computer file, microfiche list or other list of the
Accounts (the "Removed Accounts") that were removed on the Removal Date,
specifying for each Removed Account as of the date of the Removal Notice its
number, the aggregate amount outstanding in such Removed Account and the
aggregate amount of Receivables therein; (c) represent and warrant that the
removal of any such Eligible Account on the Removal Date will not, in the
reasonable belief of the Transferor, cause a Pay Out Event to occur or cause
the Transferor Interest to be less than the Minimum Transferor Interest amount
as of such date; (d) represent and warrant that no selection procedures
believed by the Transferor to be adverse to the interest of the
certificateholders were utilized in selecting the Removed Accounts; (e) obtain
a statement from each Rating Agency that such removal will not result in a
reduction or withdrawal of the rating of the Class A, Class B or Class C
Certificates or any other outstanding Series or class of certificates; and (f)
on or before the related Removal Date, deliver to the Trustee and any credit
enhancement provider an Officer's certificate confirming the items set forth in
clauses (c), (d) and (e) above and a Tax Opinion with respect to such removal.
All Receivables existing in the Removed Accounts will be reassigned to the
Transferor as of the Removal Date. On any date on which an Account becomes an
Ineligible Account (which date will be deemed the Removal Date for such
Account), the Transferor will commence the removal of such Account from the
Trust. However, all Receivables existing in any such Account (other than an
Account that was an Ineligible Account at the time it was originally designated
as an Account) as of the Removal Date will continue to be a Trust asset.
Accounts that are terminated by their Dealers after they have paid the
related Receivables in full will be deemed to be removed from the Trust without
having to follow the procedures described above.
TRUST ACCOUNTS
The Trustee will establish and maintain with a Qualified Institution in the
name of the Trust, for the benefit of the Certificateholders, two separate
accounts, each in a segregated trust account (which need not be a deposit
account), consisting of an "Interest Funding Account" and a "Principal
Account." The Trustee will also establish a "Distribution Account" for the
benefit of the certificateholders of each Series which will be a non-interest
bearing segregated demand deposit account established with a Qualified
Institution. The Servicer will establish and maintain, in the name of the
Trust, for the benefit of certificateholders of all Series, a "Collection
Account," which will be a segregated account established by and maintained by
the Servicer with a Qualified Institution. A "Qualified Institution" is a
depository institution or trust company, which may include the Trustee,
organized under the laws of the United States or any one of the states thereof,
which at all times has a certificate of deposit rating of P-1 by Moody's and of
A-1+ by Standard & Poor's or long-term unsecured debt obligation (other than
such obligation the rating of which is based on collateral or on the credit of
a person other than such institution or trust company) rating of by Moody's
and of by Standard & Poor's and deposit insurance provided by the FDIC, or
a depository institution, which may include the Trustee, which is acceptable to
the Rating Agencies; provided, however, that no such rating shall be required
of an institution which shall have corporate trust powers and which maintains
the Collection Account, any principal account, any interest funding account or
any other account maintained for the benefit of Certificateholders as a fully
segregated trust account with the trust department of such institution which is
rated at least Baa3 by Moody's. Funds in the Principal Account and the Interest
Funding Account will be invested, at the direction of the Transferor, in (i)
obligations fully guaranteed by the United States of America,
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(ii) time deposits, promissory notes, or certificates of deposit of depository
institutions or trust companies, the certificates of deposit of which are rated
P-1 by Moody's and A-1+ by Standard & Poor's, (iii) commercial paper having, at
the time of the Trust' investment, a rating of P-1 by Moody's and of A-1+ by
Standard & Poor's, (iv) bankers' acceptances issued by any depository
institution or trust company described in clause (ii) above, (v) money market
funds which have the highest rating from, or have otherwise been approved in
writing by, Moody's and Standard & Poor's, (vi) certain open end diversified
investment companies, (vii) Eurodollar time deposits that have been rated P-1
by Moody's and A-1+ by Standard & Poor's, and (viii) any other investment that
each Rating Agency confirms in writing will not adversely affect its then
current rating of any outstanding Certificates (such investments, "Cash
Equivalents"). Any earnings (net of losses and investment expenses) on funds in
the Interest Funding Account and the Principal Account will be deposited in the
Collection Account as part of Available Series Interest Collections. The
Servicer has the revocable power to withdraw funds from the Collection Account,
and to instruct the Trustee to make withdrawals and payments from the Interest
Funding Account and the Principal Account, for the purpose of carrying out the
Servicer' duties under the Pooling and Servicing Agreement. The agent making
payments to the Certificateholders (the "Paying Agent") has the revocable power
to withdraw funds from the Distribution Account for the purpose of making
distributions to Certificateholders. The Paying Agent initially will be the
Trustee.
On the Closing Date the Transferor will make an initial deposit to the
Interest Funding Account in an amount equal to the sum of the Class A Monthly
Interest, the Class B Monthly Interest and the Class C Monthly Interest for the
initial Interest Accrual Period.
EXCESS FUNDING ACCOUNT
The Trustee will establish and maintain in the name of the Trust, for the
benefit of the certificateholders of all Series, an "Excess Funding Account"
which will be a segregated account established by and maintained by the
Servicer with a Qualified Institution. At any time during which the Transferor
Interest does not exceed the Minimum Transferor Interest, funds (to the extent
available therefor as described herein) otherwise payable to the Transferor
will be deposited in the Excess Funding Account on any business day until the
Transferor Interest is at least equal to the Minimum Transferor Interest. Funds
on deposit in the Excess Funding Account will be withdrawn and paid to the
Transferor to the extent that on any day the Transferor Interest exceeds the
Minimum Transferor Interest as a result of the addition of new Receivables to
the Trust. Such deposits in and withdrawals from the Excess Funding Account may
be made on a daily basis. No funds will be deposited in the Excess Funding
Account, however, if any Series is in an amortization or accumulation period
(including any early amortization period), unless the principal account for
such Series has been fully funded for such Monthly Period.
Any funds on deposit in the Excess Funding Account at the beginning of the
Controlled Accumulation Period will be deposited in the Principal Account as
part of Class A Principal, Class B Principal, or Class C Principal, as
applicable, for any Distribution Date. In the event that more than one Series
begins its amortization or accumulation period at the same time, amounts on
deposit in the Excess Funding Account will be paid out to each such Series pro
rata based on the aggregate invested amount of each such Series. A Pay Out
Event will occur if the sum of all Cash Equivalents and other amounts on
deposit in the Excess Funding Account as a percentage of the sum of the
aggregate amount of Principal Receivables plus the amount on deposit in the
Excess Funding Account shall equal or exceed 50% on the last day of six
consecutive Monthly Periods.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee at the direction of the Transferor in Cash Equivalents. On each
Distribution Date, all net investment income earned on amounts in the Excess
Funding Account since the preceding Distribution Date will be withdrawn from
the Excess Funding Account and treated as Interest Collections. Amounts, if
any, in the Excess Funding Account may be expected to earn interest at a rate
that is less than the Base Rate. The difference between the amount of interest
actually earned on investments in the Excess Funding Account on any day and the
amount of interest that would have been earned on such investments at the Base
Rate is the "Negative Carry Amount" for such day. See "--Coverage of Certain
Interest Shortfalls" below.
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ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, during each Monthly Period,
the Servicer will allocate among the Class A Certificateholders' Interest, the
Class B Certificateholders' Interest, the Class C Certificateholders' Interest,
the Class D Certificateholders' Interest, the Transferor Interest, and the
holders of the other Series issued and outstanding from time to time pursuant
to the Pooling and Servicing Agreement and applicable Supplements all Interest
Collections and all Principal Collections and the amount of all Defaulted
Receivables. Interest Collections and the amount of Defaulted Receivables will
be allocated at all times, and Principal Collections will be allocated during
the Revolving Period, to the Class A Certificateholders' Interest, the Class B
Certificateholders' Interest, the Class C Certificateholders' Interest and the
Class D Certificateholders' Interest, based on the percentage equivalent of a
fraction, the numerator of which is the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount, or the Class D Invested Amount,
respectively, at the end of the preceding business day and the denominator of
which is the greater of (a) the Pool Balance (plus amounts, if any, on deposit
in the Excess Funding Account) as of the end of the preceding business day and
(b) with respect to Principal Collections only, the sum of the numerator for
all classes of all Series then outstanding used to calculate the applicable
allocation percentage (the "Class A Floating Allocation Percentage," the "Class
B Floating Allocation Percentage," the "Class C Floating Allocation
Percentage," and the "Class D Floating Allocation Percentage," respectively;
the sum of all such percentages, the "Floating Allocation Percentage"). During
the Revolving Period, all Principal Collections allocable to the Certificates
will be allocated and paid to the Transferor (except for collections applied as
Reallocated Principal Collections and Shared Principal Collections paid to the
holders of certificates of other Series, if any, and except for any funds
deposited in the Excess Funding Account). On any business day on or after the
Controlled Accumulation Period Commencement Date, Principal Collections will be
allocated to the Certificateholders' Interest based on the percentage
equivalent of a fraction, the numerator of which is the Class A Invested
Amount, the Class B Invested Amount, the Class C Invested Amount or the Class D
Invested Amount, respectively, at the end of the last day of the Revolving
Period and the denominator of which is the greater of (a) the Pool Balance
(plus amounts, if any, on deposit in the Excess Funding Account) at the end of
the preceding business day and (b) the sum of the numerators used to calculate
the allocation percentages with respect to Principal Collections for all Series
(the "Class A Fixed/Floating Allocation Percentage," the "Class B
Fixed/Floating Allocation Percentage," the "Class C Fixed/Floating Allocation
Percentage," and the "Class D Fixed/Floating Allocation Percentage,"
respectively; the sum of all such percentages the "Fixed/Floating Allocation
Percentage"). On any business day when Principal Collections are being
allocated for payment to the Class A, Class B or Class C Certificates,
Principal Collections will be allocated to the Class A, Class B or Class C
Certificateholders' Interest based on the percentage equivalent of a fraction,
the numerator of which is the sum of the Class A Invested Amount, the Class B
Invested Amount and the Class C Invested Amount at the end of the last day of
the Revolving Period and the denominator of which is the greater of (a) the sum
of the Pool Balance and the amount on deposit in the Excess Funding Account at
the end of the preceding business day and (b) the sum of the numerators used to
calculate the allocation percentages with respect to Principal Receivables for
all Series (the "ABC Fixed/Floating Allocation Percentage").
"Pool Balance" means, as of the time of determination thereof, the product of
(i) the total amount of Principal Receivables at such time multiplied by (ii)
one minus the Discount Factor, if any.
"Class A Invested Amount" means an amount equal to (a) the initial principal
balance of the Class A Certificates, minus (b) the aggregate amount of
principal payments made to Class A Certificateholders prior to such date, and
minus (c) the aggregate amount of Class A Investor Charge-Offs for all prior
Distribution Dates, equal to the amount by which the Class A Invested Amount
has been reduced to fund the Investor Default Amount on all prior Distribution
Dates as described under "--Investor Charge-Offs," and plus
(d) the aggregate amount of Available Series Interest Collections, Excess
Interest Collections and Reallocated Principal Collections applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clause (c).
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"Class B Invested Amount" for any date means an amount equal to (a) the
initial principal balance of the Class B Certificates, minus (b) the aggregate
amount of principal payments made to Class B Certificateholders prior to such
date, minus (c) the aggregate amount of Class B Investor Charge-Offs for all
prior Distribution Dates, equal to the amount by which the Class B Invested
Amount has been reduced to fund the Investor Default Amount on all prior
Distribution Dates as described under "--Investor Charge-Offs," minus (d) the
aggregate amount of Reallocated Class B Principal Collections for which neither
the Class D Invested Amount nor the Class C Invested Amount has been reduced
for all prior Distribution Dates, and plus (e) the aggregate amount of
Available Series Interest Collections, Excess Interest Collections and
Reallocated Class C Principal Collections and Reallocated Class D Principal
Collections applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d).
"Class C Invested Amount" for any date means an amount equal to (a) the
initial principal balance of the Class C Certificates, minus (b) the aggregate
amount of principal payments made to Class C Certificateholders prior to such
date, minus (c) the aggregate amount of Class C Investor Charge-Offs for all
prior Distribution Dates, equal to the amount by which the Class C Invested
Amount has been reduced to fund the Investor Default Amount on all prior
Distribution Dates as described under "--Investor Charge-Offs," minus (d) the
aggregate amount of Reallocated Class C Principal Collections for which the
Class D Invested Amount has not been reduced for all prior Distribution Dates,
and plus (e) the aggregate amount of Available Series Interest Collections,
Excess Interest Collections, Reallocated Class D Principal Collections and
certain other amounts as may be available applied on all prior Distribution
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d).
"Class D Invested Amount" means an amount equal to (a) the initial principal
balance of the Class D Certificates (which will be zero), plus (b) the Class D
Incremental Invested Amount (described below under "--The Overconcentration
Amounts") for the related Monthly Period, plus (c) any Additional Class D
Invested Amount, minus (d) the aggregate amount of principal payments made to
Class D Certificateholders prior to such date, minus (e) the aggregate amount
of Class D Investor Charge-Offs for all prior Distribution Dates, equal to the
amount by which the Class D Invested Amount has been reduced to fund the
Investor Default Amount on all prior Distribution Dates as described under "--
Investor Charge-Offs," minus (f) the aggregate amount of Reallocated Principal
Collections for all prior Distribution Dates, plus (g) the aggregate amount of
Interest Collections and Excess Interest Collections applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (d) and (e).
"Invested Amount" means the sum of the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount and the Class D Invested Amount.
"Transferor's Percentage" means (a) when used with respect to Principal
Collections during the Revolving Period and Interest Collections and the amount
of Defaulted Receivables at all times, 100% minus the sum of the Floating
Allocation Percentage and the floating allocation percentages for all other
Series and (b) when used with respect to Principal Collections during the
Controlled Accumulation Period or Early Amortization Period, 100% minus the sum
of the Fixed/Floating Allocation Percentage and the allocation percentages used
with respect to Principal Collections for all other Series.
As a result of the Floating Allocation Percentage, Interest Collections and
the portion of Defaulted Receivables allocated to the Certificateholders will
change each business day based on the relationship of the Class A Invested
Amount, the Class B Invested Amount, the Class C Invested Amount, and Class D
Invested Amount to the Pool Balance and amounts on deposit in the Excess
Funding Account on the preceding business day.
THE OVERCONCENTRATION AMOUNTS
The Class D Invested Amount will be adjusted to reflect, on each Distribution
Date, the aggregate principal amount of Receivables in the Trust on such
Distribution Date which are Asset-Based Receivable Overconcentrations, Dealer
Overconcentrations, Manufacturer Overconcentrations and Product Line
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Overconcentrations (the "Overconcentration Amount") allocable to the
Certificateholders' Interest. The Overconcentration Amount is intended to
provide additional protection to Class A, Class B and Class C
Certificateholders against the risk of a decrease in credit diversification of
the Receivables caused by such Overconcentrations. There can be no assurance,
however, that the adjustment to the Class D Invested Amount (as described
below) will provide sufficient protection against losses on the Receivables.
Moreover, if Green Tree is unable to continue to generate new Receivables that
satisfy these diversification requirements, the resulting increase in the Class
D Invested Amount (as described below) due to the Overconcentration Amount,
resulting in a corresponding decrease in the Transferor Interest, could cause a
Pay Out Event to occur.
"Asset-Based Receivable Overconcentration" on any Distribution Date means
the excess of (a) the aggregate of all amounts of Principal Receivables in
Accounts for Asset-Based Receivables on the last day of the Monthly Period
immediately preceding such Distribution Date over (b) the Asset-Based
Percentage of the Pool Balance on the last day of such immediately
preceding Monthly Period. Subject to adjustment as described below, the
"Asset-Based Percentage" will be 10% until the date six months after the
Closing Date; thereafter, once certain performance tests are met, 15% until
the date one year after the Closing Date; and thereafter, once certain
performance tests are met, 20%.
"Dealer Overconcentration" on any Distribution Date means, with respect
to any Account with a Dealer, the excess of (a) the aggregate amount of
Principal Receivables in such Account on the last day of the Monthly Period
immediately preceding such Distribution Date over (b) 2% of the Pool
Balance on the last day of such immediately preceding Monthly Period.
Certain Dealers may be subject to a higher percentage limit with Rating
Agency approval, but in no case higher than 3%.
"Manufacturer Overconcentration" on any Distribution Date means the
excess of (a) the aggregate of all amounts of Principal Receivables in
Accounts created pursuant to Floorplan Agreements with a single
Manufacturer on the last day of the Monthly Period immediately preceding
such Distribution Date over (b) 15% of the Pool Balance on the last day of
such immediately preceding Monthly Period.
"Product Line Overconcentration" on any Distribution Date means, the
excess of (a) the aggregate of all amounts of Principal Receivables in the
Accounts that represent financing for a single product line (other than
Asset-Based Receivables and Receivables that represent financing for
manufactured housing) on the last day of the Monthly Period immediately
preceding such Distribution Date over (b) 5% for marine products, 5% for
recreational vehicles, and 5% for any other products in total, of the Pool
Balance on the last day of such immediately preceding Monthly Period. If
Receivables are transferred to the Trust in the future and such Receivables
are secured by products in a product line that is new to the Trust, the
Rating Agencies may create a separate category of product line
overconcentration with its own overconcentration limits, and such new
product line overconcentration will become part of the Overconcentration.
The Class D Invested Amount, which will be the Class D Incremental Invested
Amount on the Closing Date, will be adjusted to reflect changes in the Class D
Incremental Invested Amount, as described under "Allocation Percentages" above.
The "Class D Incremental Invested Amount" for any Monthly Period will equal the
product of (a) a fraction, the numerator of which is the sum of the Invested
Amount (exclusive of the Class D Incremental Invested Amount) on the last day
of the immediately preceding Monthly Period, and the denominator of which is
the Pool Balance on such last day, times (b) the Overconcentration Amount for
such Monthly Period.
Notwithstanding the above, in the case of each such Overconcentration, the
percentage in clause (b) for such Overconcentration may be increased by the
Transferor, without the consent of any Certificateholder, to a level acceptable
to each Rating Agency without any reduction or withdrawal of its rating of the
Class A, Class B or Class C Certificates. Any such increase in such a
percentage may involve an adjustment, upward or downward, of the Class D
Invested Amount (if upward, an "Additional Class D Invested Amount").
REALLOCATION OF CASH FLOWS
On the first business day following the end of each Monthly Period, the
Servicer will determine the Required Amount, if any. Commencing on such first
business day, the Servicer will apply all or a portion of the Excess Interest
Collections of other Series with respect to such business day allocable to the
Series 1995-1
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Certificates in an amount equal to the remaining Required Amount. Excess
Interest Collections from other Series allocable to the Series 1995-1
Certificates for any business day will be equal to the product of (x) Excess
Interest Collections available from all other Series for such business day and
(y) a fraction, the numerator of which is the Required Amount for such business
day (as reduced by amounts applied pursuant to the preceding paragraph) and the
denominator of which is the aggregate amount of shortfalls in required amounts
or other amounts to be paid from available Interest Collections for all Series
for such business day.
REALLOCATED PRINCIPAL COLLECTIONS
On the first business day following the end of each Monthly Period, the
Servicer will apply or cause the Trustee to apply an amount, not to exceed the
Class D Invested Amount (which will equal the Class D Incremental Invested
Amount as of the Closing Date), equal to the product of (a)(i) during the
Revolving Period, the Class D Floating Allocation Percentage or (ii) during the
Controlled Accumulation Period, the Class D Fixed/Floating Allocation
Percentage and (b) the amount of Principal Collections with respect to such
business day to the following amounts in the following priority (such
collections applied in accordance with clause (a) below are called "Reallocated
Class D Principal Collections"):
(a) an amount equal to the sum of (i) the remaining Class A Required
Amount, if any, with respect to the prior Monthly Period, (ii) the
remaining Class B Required Amount, if any, with respect to the prior
Monthly Period and (iii) the remaining Class C Required Amount, if any,
with respect to the prior Monthly Period will be applied first to the
components of the Class A Required Amount, then to the components of the
Class B Required Amount and then to the components of the Class C Required
Amount in the same priority in which Available Series Interest Collections
are applied to such components as described in "--Application of
Collections--Payment of Fees, Interest and Other Items"; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated Class D Principal Collections) (i)
on business days with respect to the Revolving Period and the Controlled
Accumulation Period or Early Amortization Period prior to the payment in
full of the Class C Invested Amount will be paid to the Transferor in order
to maintain the Class D Invested Amount and (ii) on business days during
the Controlled Accumulation Period or Early Amortization Period following
payment in full of the Class C Invested Amount will be included in the
funds available to make principal payments to the Class D
Certificateholders until the Class D Invested Amount is paid in full.
On each business day, the Servicer will apply or cause the Trustee to apply
an amount, not to exceed the Class C Invested Amount, equal to the product of
(a)(i) during the Revolving Period, the Class C Floating Allocation Percentage
or (ii) during the Controlled Accumulation Period or Early Amortization Period,
the Class C Fixed/Floating Allocation Percentage and (b) the amount of
Principal Collections with respect to such business day to the following
amounts in the following priority (such collections applied in accordance with
clause (a) below are called "Reallocated Class C Principal Collections"):
(a) an amount equal to the sum of (i) the remaining Class A Required
Amount, if any, with respect to the prior Monthly Period over the amount of
Reallocated Class D Principal Collections applied with respect thereto for
such Monthly Period and (ii) the remaining Class B Required Amount, if any,
with respect to the prior Monthly Period over the amount of Reallocated
Class D Principal Collections applied with respect thereto for such Monthly
Period, will be applied first to the remaining components of the Class A
Required Amount and then to the remaining components of the Class B
Required Amount in the same priority in which Available Series Interest
Collections are applied to such components as described in "--Application
of Collections--Payment of Fees, Interest and Other Items"; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated Class C Principal Collections) will,
on business days with respect to the Revolving Period, be applied as Shared
Principal Collections and on business days with respect to the Controlled
Accumulation Period or Early Amortization Period will be included in the
funds available to make principal payments to the Class A
Certificateholders until the Class A Invested Amount is paid in full and
then to the Class B Certificateholders until the Class B Invested Amount is
paid in full and then to the Class C Certificateholders until the Class C
Invested Amount is paid in full.
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On each business day, the Servicer will apply or cause the Trustee to apply
an amount, not to exceed the Class B Invested Amount, equal to the product of
(a)(i) during the Revolving Period, the Class B Floating Allocation Percentage
or (ii) during the Controlled Accumulation Period or the Early Amortization
Period, the Class B Fixed/Floating Allocation Percentage and (b) the amount of
Principal Collections with respect to such business day to the following
amounts in the following priority (such collections applied in accordance with
clause (a) below are called "Reallocated Class B Principal Collections" and the
sum of Reallocated Class D Principal Collections, Reallocated Class C Principal
Collections and Reallocated Class B Collections is called "Reallocated
Principal Collections"):
(a) an amount equal to the excess, if any, of the remaining Class A
Required Amount, if any, with respect to the prior Monthly Period over the
sum of the amount of Reallocated Class D Principal Collections and
Reallocated Class C Principal Collections applied with respect thereto for
the prior Monthly Period will be applied to the remaining components of the
Class A Required Amount in the same priority in which Available Series
Interest Collections are applied to such components as described in "--
Application of Collections--Payment of Fees, Interest and Other Items"; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated Class B Principal Collections) will,
on business days with respect to the Revolving Period, be applied as Shared
Principal Collections and on business days with respect to the Controlled
Accumulation Period or the Early Amortization Period will be included in
the funds available to make principal payments to the Class A
Certificateholders until the Class A Invested Amount is paid in full and
then to the Class B Certificateholders until the Class B Invested Amount is
paid in full.
On each Distribution Date, the Class D Invested Amount will be reduced by the
amount of Reallocated Principal Collections for the related Monthly Period. In
the event that such reduction would cause the Class D Invested Amount to be a
negative number, the Class D Invested Amount will be maintained at or reduced
to zero and the Class C Invested Amount will be reduced by the amount by which
the Class D Invested Amount would have been reduced below zero. In the event
that the amount of Reallocated Principal Collections for such Distribution Date
would cause the Class C Invested Amount to be a negative number, the Class C
Invested Amount will be reduced to zero and the Class B Invested Amount will be
reduced by the amount by which the Class C Invested Amount would have been
reduced below zero. In the event that the reallocation of Principal Collections
would cause the Class B Invested Amount to be a negative number on any
Distribution Date, the amount of Class B Reallocated Principal Collections on
such Distribution Date will be an amount not to exceed the amount which would
cause the Class B Invested Amount to be reduced to zero.
APPLICATION OF COLLECTIONS
Allocations. Payments on the Receivables will be made to the Servicer, who
will deposit all such payments in the Collection Account no later than the
second business day following the date of processing. On the day on which any
deposit to the Collection Account is available, the Servicer will make the
deposits and payments to the accounts and parties as indicated below; provided,
however, that for as long as Green Tree or any affiliate of Green Tree remains
the Servicer under the Pooling and Servicing Agreement, then the Servicer may
make such deposits and payments on the business day immediately prior to the
Distribution Date (the "Transfer Date") in an aggregate amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied if (a)(i) the Servicer provides to the
Trustee a letter of credit or other form of credit enhancement rated in the
highest rating category by the Rating Agency covering the risk of collection of
the Servicer and (ii) the Transferor shall not have received a notice from the
Rating Agency that making payments monthly rather than daily would result in
the lowering of such Rating Agency's then-existing rating of any Series of
certificates then outstanding or (b) the Servicer has and maintains a short-
term credit rating of P-1 by Moody's and A-1 by Standard & Poor's.
If clause (a) or clause (b) set forth in the proviso to the immediately
preceding paragraph is satisfied, payments on the Receivables collected by the
Servicer will not be segregated from the assets of the Servicer. Until such
payments on the Receivables collected by the Servicer are deposited into the
Collection Account,
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such funds may be used by the Servicer for its own benefit, and the proceeds of
any short-term investment of such funds will accrue to the Servicer. During
such times as the Servicer holds funds representing payments on the Receivables
collected by the Servicer and is permitted to use such funds for its own
benefit, the Certificateholders are subject to risk of loss, including risk
resulting from the bankruptcy or insolvency of the Servicer. The Servicer will
pay no fee to the Trust or any Certificateholder for any use by the Servicer of
funds representing collections on the Receivables.
The Servicer will withdraw the following amounts from the Collection Account
for application on each business day as indicated:
(i) an amount equal to the Transferor Percentage plus, prior to the Class
D Principal Payment Commencement Date, the Class D Floating Allocation
Percentage or the Class D Fixed/Floating Allocation Percentage, as
applicable, of the aggregate amount of Principal Collections (less the
amount thereof which may be applied as Reallocated Class D Principal
Collections) and any amounts to be paid in respect of the Class D Investor
Default Amount will be paid to the Transferor to maintain the Class D
Invested Amount;
(ii) an amount equal to the Transferor Percentage of the aggregate amount
of Interest Collections will be paid to the holder of the Exchangeable
Transferor Certificate to the extent such funds are not applied to cover
Negative Carry Amounts or Principal Funding Investment Shortfalls, or
allocated to any Series as set forth in the applicable Supplement;
(iii) an amount equal to the sum of (a) the Floating Allocation
Percentage of the aggregate amount of Interest Collections, (b) investment
earnings on amounts on deposit in the Trust Accounts and
(c) Excess Interest Collections of other Series allocable to such Series,
will be allocated and paid as described below in "--Payment of Fees,
Interest, and Other Items;"
(iv) during the Revolving Period, an amount equal to the sum of the Class
A Floating Allocation Percentage, the Class B Floating Allocation
Percentage and the Class C Floating Allocation Percentage of Principal
Collections (less the amount thereof which may be applied as Reallocated
Class B Principal Collections and Reallocated Class C Principal
Collections) will be applied as Shared Principal Collections;
(v) during the Controlled Accumulation Period or Early Amortization
Period and prior to the Class B Principal Commencement Date, an amount
equal to the ABC Fixed/Floating Allocation Percentage of Principal
Collections (less the amount thereof which may be applied as Reallocated
Class B Principal Collections or Reallocated Class C Principal
Collections), any amount on deposit in the Excess Funding Account, any
amounts to be paid in respect of the ABC Investor Default Amount, Class A
Investor Charge-Offs, Class B Investor Charge-Offs and Class C Investor
Charge-Offs and any amount of Shared Principal Collections allocated to the
Certificates on such business day up to (a) during the Controlled
Accumulation Period, the Controlled Deposit Amount or (b) during the Early
Amortization Period, the Class A Invested Amount, will be deposited in the
Principal Account;
(vi) during the Controlled Accumulation Period or Early Amortization
Period and on or after the Class B Principal Commencement Date, an amount
equal to the ABC Fixed/Floating Allocation Percentage of such Principal
Collections (less the amount thereof which may be applied as Reallocated
Class B Principal Collections or Reallocated Class C Principal
Collections), any remaining amount on deposit in the Excess Funding
Account, any amounts to be paid in respect of the ABC Investor Default
Amount, Class B Investor Charge-Offs and Class C Investor Charge-Offs and
any amount of Shared Principal Collections allocated to the Certificates on
such business day, up to (a) during the Controlled Accumulation Period, the
Controlled Deposit Amount or (b) during the Early Amortization Period, the
Class B Invested Amount, will be deposited in the Principal Account;
(vii) during the Controlled Accumulation Period or Early Amortization
Period and on or after the Class C Principal Commencement Date, an amount
equal to the ABC Fixed/Floating Allocation Percentage of such Principal
Collections (less the amount thereof which may be applied as Reallocated
Class C Principal Collections), any remaining amount on deposit in the
Excess Funding Account, any
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amounts to be paid in respect of the ABC Investor Default Amount, and Class
C Investor Charge-Offs and any amount of Shared Principal Collections
allocated to the Certificates on such business day, up to the Class C
Invested Amount, will be deposited into the Principal Account;
(viii) Shared Principal Collections will be allocated to each outstanding
Series pro rata based on any Principal Shortfalls with respect to any
Series which is in its amortization period. The Servicer will pay any
remaining Shared Principal Collections on such business day to the holder
of the Exchangeable Transferor Certificate; and
(ix) Excess Interest Collections will be allocated as set forth below in
paragraph (xiv) to "--Payment of Fees, Interest, and Other Items."
Any Shared Principal Collections and other amounts described above as being
payable to the Transferor will not be paid to the Transferor if the Transferor
Interest on any date, after giving effect to the inclusion in the Trust of all
Receivables on or prior to such date and the application of all prior payments
to the Transferor, does not exceed the Minimum Transferor Interest. Any such
amounts otherwise payable to the Transferor will be deposited into and held in
the Excess Funding Account, and on the commencement of the accumulation period
or amortization period with respect to any Series, such amounts will be
deposited in the principal account of such Series to the extent specified in
the related Supplement until the applicable principal account of such Series
has been funded in full or the holders of certificates of such Series have been
paid in full. See "--Excess Funding Account."
Payment of Fees, Interest and Other Items. On each business day during a
Monthly Period, the Servicer will determine the sum of (i) the Floating
Allocation Percentage of Interest Collections and (ii) investment earnings on
amounts on deposit in the Trust Accounts (the "Available Series Interest
Collections") and will distribute from the Collection Account the following
amounts in the following priority (in each case, subject to the limit of the
Available Series Interest Collections less all amounts distributed pursuant to
a higher priority):
(i) an amount equal to the excess of
(A) the sum of (1) the Class A Monthly Interest, (2) the amount of
any Class A Monthly Interest previously due but not deposited in the
Interest Funding Account in prior Monthly Periods, and (3) any
additional interest (to the extent permitted by applicable law) at
the Class A Certificate Rate with respect to interest amounts that
were due but not paid in a prior Monthly Period over
(B) the amount which has already been deposited in the Interest
Funding Account with respect thereto in the current Monthly Period,
will be deposited in the Interest Funding Account for distribution on the
next succeeding Distribution Date to the Class A Certificateholders;
(ii) an amount equal to the excess of
(A) the sum of (1) the Class B Monthly Interest, (2) the amount of
any Class B Monthly Interest previously due but not deposited in the
Interest Funding Account in prior Monthly Periods, and (3) any
additional interest (to the extent permitted by applicable law) at
the Class B Certificate Rate with respect to Class B Monthly
Interest amounts that were due but not paid in a prior Monthly
Period over
(B) the amount which has already been deposited in the Interest
Funding Account with respect thereto in the current Monthly Period,
will be deposited in the Interest Funding Account for distribution on the
next succeeding Distribution Date to the Class B Certificateholders;
(iii) an amount equal to the excess of
(A) the sum of (1) the Class C Monthly Interest, (2) the amount of
any Class C Monthly Interest previously due but not deposited in the
Interest Funding Account in prior Monthly Periods, and (3) any
additional interest (to the extent permitted by applicable law) at
the Class
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C Certificate Rate with respect to Class C Monthly Interest amounts
that were due but not paid in a prior Monthly Period over
(B) the amount which has already been deposited in the Interest
Funding Account with respect thereto in the current Monthly Period,
will be deposited in the Interest Funding Account for distribution on the
next succeeding Distribution Date to the Class C Certificateholders;
(iv) if Green Tree or an affiliate of Green Tree is not the Servicer, an
amount equal to the portion of the Monthly Servicing Fee for the current
month that has not been previously paid to the Servicer plus any prior
Monthly Servicing Fee that was due but not previously paid to the Servicer,
will be distributed to the Servicer;
(v) an amount equal to the sum of (1) the aggregate ABC Investor Default
Amount for such business day and (2) the unpaid ABC Investor Default Amount
for any prior business day during the then-current Monthly Period, will (w)
during the Revolving Period, be treated as Shared Principal Collections,
(x) during the Controlled Accumulation Period or Early Amortization Period
on and prior to the Class B Principal Commencement Date, be deposited in
the Principal Account for payment to the Class A Certificateholders, (y) on
and after the Class B Principal Commencement Date, be deposited in the
Principal Account for payment to the Class B Certificateholders and (z) on
and after the Class C Principal Commencement Date, be deposited in the
Principal Account for payment to the Class C Certificateholders;
(vi) an amount equal to the sum of (1) the aggregate Class D Investor
Default Amount for such business day and (2) the unpaid Class D Investor
Default Amount for any prior business day during the then-current Monthly
Period, will (x) during the Revolving Period and the Controlled
Accumulation Period or Early Amortization Period prior to the payment in
full of the Class C Invested Amount, be paid to the Transferor in order to
maintain the Class D Invested Amount and (y) during the Controlled
Accumulation Period or Early Amortization Period following the payment in
full of the Class C Invested Amount, be deposited in the Principal Account
for payment to the Class D Certificateholders;
(vii) an amount equal to unreimbursed Class A Investor Charge-Offs, if
any, will be applied to reimburse Class A Investor Charge-Offs and (w)
during the Revolving Period, be treated as Shared Principal Collections,
(x) during the Controlled Accumulation Period or Early Amortization Period
but on and prior to the Class B Principal Commencement Date, be deposited
in the Principal Account for payment to the Class A Certificateholders, (y)
on and after the Class B Principal Commencement Date, be deposited in the
Principal Account for payment to the Class B Certificateholders and (z) on
and after the Class C Principal Commencement Date, be deposited in the
Principal Account for payment to the Class C Certificateholders;
(viii) an amount equal to the sum of (1) the amount of interest which has
accrued with respect to the outstanding aggregate principal amount of the
Class B Certificates at the Class B Certificate Rate but has not been
deposited in the Interest Funding Account with respect to the Class B
Certificateholders either on such business day or on a prior business day,
and (2) any additional interest (to the extent permitted by applicable law)
at the Class B Certificate Rate with respect to such interest amounts that
were due but not paid to Class B Certificateholders in any previous Monthly
Period, will be deposited in the Interest Funding Account for distribution
on the next succeeding Distribution Date to the Class B Certificateholders;
(ix) an amount equal to the sum of (1) the amount of interest which has
accrued with respect to the outstanding aggregate principal amount of the
Class C Certificates at the Class C Certificate Rate but has not been
deposited in the Interest Funding Account with respect to the Class C
Certificateholders either on such business day or on a prior business day
and (2) any additional interest (to the extent permitted by applicable law)
at the Class C Certificate Rate with respect to such interest amounts that
were due but not paid to Class C Certificateholders in any previous Monthly
Period, will be deposited in the Interest Funding Account for distribution
on the next succeeding Distribution Date to the Class C Certificateholders;
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(x) an amount equal to unreimbursed Class B Investor Charge-Offs, if any,
will be applied to reimburse Class B Investor Charge-Offs and (w) during
the Revolving Period, be treated as Shared Principal Collections, (x)
during the Controlled Accumulation Period or Early Amortization Period but
on and prior to the Class B Principal Commencement Date, be deposited in
the Principal Account for payment to the Class A Certificateholders, (y) on
and after the Class B Principal Commencement Date, be deposited in the
Principal Account for payment to the Class B Certificateholders and (z) on
and after the Class C Principal Commencement Date, be deposited in the
Principal Account for payment to the Class C Certificateholders;
(xi) an amount equal to unreimbursed Class C Investor Charge-Offs, if
any, will be applied to reimburse Class C Investor Charge-Offs and (w)
during the Revolving Period, be treated as Shared Principal Collections,
(x) during the Controlled Accumulation Period or Early Amortization Period
but on and prior to the Class B Principal Commencement Date, be deposited
in the Principal Account for payment to the Class A Certificateholders, (y)
on and after the Class B Principal Commencement Date, be deposited in the
Principal Account for payment to the Class B Certificateholders and (z) on
and after the Class C Principal Commencement Date, be deposited in the
Principal Account for payment to the Class C Certificateholders;
(xii) an amount equal to unreimbursed Class D Investor Charge-Offs, if
any, will (x) during the Revolving Period and during the Controlled
Accumulation Period or Early Amortization Period prior to the payment in
full of the Class C Invested Amount, be paid to the Transferor and (y)
during the Controlled Accumulation Period following payment in full of the
Class C Invested Amount, be deposited in the Principal Account for payment
to the Class D Certificateholders;
(xiii) if Green Tree or an affiliate of Green Tree is the Servicer, an
amount equal to the portion of the Monthly Servicing Fee for the current
month that has not been previously paid to the Servicer plus any prior
Monthly Servicing Fee that was due but not previously paid to the Servicer
will be distributed to the Servicer; and
(xiv) any Available Series Interest Collections remaining after making
the above described distributions will be treated as Excess Interest
Collections which will be available to cover shortfalls, if any, in amounts
payable from Interest Collections to certificateholders of other Series and
then to pay any unpaid commercially reasonable costs and expenses of a
successor Servicer, if any. Excess Interest Collections which are not so
used will be paid to the Transferor.
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class A Certificate Rate for the related Interest
Accrual Period, (ii) the actual number of days in such Interest Accrual Period
divided by 360 and (iii) the outstanding principal balance of the Class A
Certificates on the related Record Date or, with respect to the first
Distribution Date, the initial outstanding principal balance of the Class A
Certificates.
"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class B Certificate Rate for the related Interest
Accrual Period, (ii) the actual number of days in such Interest Accrual Period
divided by 360 and (iii) the Class B Invested Amount on the related Record Date
or, with respect to the first Distribution Date, the initial outstanding
principal balance of the Class B Certificates.
"Class C Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class C Certificate Rate for the related Interest
Accrual Period, (ii) the actual number of days in such Interest Accrual Period
divided by 360 and (iii) the Class C Invested Amount on the related Record Date
or, with respect to the first Distribution Date, the initial outstanding
principal balance of the Class C Certificates.
"Required Amount" means on the first business day following a Monthly Period
the amount, if any, by which the full amount to be paid pursuant to clauses
(i)-(xiii) above in "--Payments of Fees, Interest, and
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Other Items" for such prior Monthly Period exceeds the portion of the Available
Series Interest Collections applied to the payment of the amounts described in
such clauses for such prior Monthly Period.
Payment of Principal. On each business day during the Revolving Period, the
Trustee, acting in accordance with instructions from the Servicer, will treat
the amount described in clause (iv) of "--Allocations" as Shared Principal
Collections which will be applied as described in clause (viii) of "--
Allocations." On the Transfer Date preceding the Class A Scheduled Payment
Date, the Trustee, acting in accordance with instructions from the Servicer,
will withdraw the amount on deposit in the Principal Account and deposit such
amount in the Distribution Account for distribution to the Class A
Certificateholders on the Class A Scheduled Payment Date. If the amount so
distributed on the Class A Scheduled Payment Date is less than the Class A
Invested Amount, the Class A Certificateholders will be entitled on each
subsequent Distribution Date to receive principal payments to the extent of
Class A Principal until the Class A Invested Amount is paid in full. The Class
B Certificateholders will be entitled to receive payment of the Class B
Invested Amount on the Class B Scheduled Payment Date, but only after the Class
A Invested Amount has been paid in full. The Class C Certificateholders will be
entitled to receive principal payments to the extent of Class C Principal until
the Class C Invested Amount is paid in full only after the Class A Invested
Amount and the Class B Invested Amount have been paid in full. The Class D
Certificateholders will be entitled to receive principal payments only after
the Class A Invested Amount, the Class B Invested Amount, and the Class C
Invested Amount have been paid in full.
"Class A Principal" with respect to any Distribution Date during the
Controlled Accumulation Period or Early Amortization Period will equal the sum
of (i) an amount equal to the ABC Fixed/Floating Allocation Percentage of all
Principal Collections (less the amount of Reallocated Class B Principal
Collections and Reallocated Class C Principal Collections) received during the
Monthly Period immediately preceding such Distribution Date, (ii) any amount on
deposit in the Excess Funding Account allocated to the Class A Certificates
with respect to the preceding Monthly Period, (iii) the aggregate ABC Investor
Default Amount paid from Available Series Interest Collections, Excess Interest
Collections or Reallocated Principal Collections with respect to the preceding
Monthly Period and any reimbursements from Available Series Interest
Collections, Excess Interest Collections or Reallocated Principal Collections
of unreimbursed Class A Investor Charge-Offs, Class B Investor Charge-Offs,
Class C Investor Charge-Offs and Class D Investor Charge-Offs and (iv) Shared
Principal Collections allocated to the Class A Certificates; provided, however,
that with respect to any Distribution Date during the Controlled Accumulation
Period, Class A Principal will not exceed the lesser of (i) the Controlled
Deposit Amount and (ii) the Class A Invested Amount; provided, further that
with respect to the Series 1995-1 Termination Date, Class A Principal will be
an amount equal to the Class A Invested Amount.
"Class B Principal" with respect to any Distribution Date on or after the
Class A Scheduled Payment Date will equal the sum of (i) an amount equal to the
ABC Fixed/Floating Allocation Percentage of all Principal Collections (less the
amount of Reallocated Class B Principal Collections and Reallocated Class C
Principal Collections) received during the Monthly Period immediately preceding
such Distribution Date (or, in the case of the first Distribution Date
following the date on which an amount equal to the Class A Invested Amount is
deposited in the Principal Account to be applied to the payment of Class A
Principal, the ABC Fixed/Floating Allocation Percentage of Principal
Collections from the date on which such deposit is made), (ii) any amount on
deposit in the Excess Funding Account allocated to the Class B Certificates
with respect to the preceding Monthly Period, and (iii) the aggregate ABC
Investor Default Amount paid from Available Series Interest Collections, Excess
Interest Collections or Reallocated Principal Collections with respect to the
preceding Monthly Period and any reimbursements from Available Series Interest
Collections, Excess Interest Collections or Reallocated Principal Collections
of unreimbursed Class B Investor Charge-Offs, Class C Investor Charge-Offs and
Class D Investor Charge-Offs and (iv) Shared Principal Collections allocated to
the Class B Certificates; provided, however, that with respect to any
Distribution Date during the Controlled Accumulation Period, Class B Principal
will not exceed the lesser of (i) the Controlled Deposit Amount and (ii) the
Class B Invested Amount; provided, further, that with respect to the Series
1995-1 Termination Date, Class B Principal will be an amount equal to the Class
B Invested Amount.
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"Class C Principal" with respect to any Distribution Date on or after the
Class C Principal Commencement Date will equal the sum of (i) an amount equal
to the ABC Fixed/Floating Allocation Percentage of all Principal Collections
(less the amount of Reallocated Class C Principal Collections) received during
the Monthly Period immediately preceding such Distribution Date (or, in the
case of the first Distribution Date following the date on which an amount equal
to the Class B Invested Amount is deposited in the Principal Account to be
applied to the payment of Class B Principal, the ABC Fixed/Floating Allocation
Percentage of Principal Collections from the date on which such deposit is
made), (ii) any amount on deposit in the Excess Funding Account allocated to
the Class C Certificates with respect to the preceding Monthly Period, (iii)
the aggregate ABC Investor Default Amount paid from Available Series Interest
Collections, Excess Interest Collections or Reallocated Principal Collections
with respect to the preceding Monthly Period and any reimbursements from
Available Series Interest Collections, Excess Interest Collections or
Reallocated Principal Collections of unreimbursed Class C Investor Charge-Offs
and Class D Investor Charge-Offs and (iv) Shared Principal Collections
allocated to the Class C Certificates; provided, that with respect to the
Series 1995-1 Termination Date, Class C Principal will be an amount equal to
the Class C Invested Amount.
On the Transfer Date preceding the Class D Principal Commencement Date, and
on each Transfer Date thereafter until the Trust is terminated or until the
Class D Invested Amount is paid in full, the Trustee, acting in accordance with
instructions from the Servicer, will withdraw amounts deposited into the
Principal Account in respect of Principal Collections processed during the
related Monthly Period and, to the extent of the Class D Invested Amount,
deposit such amounts in the Distribution Account for distribution to the Class
D Certificateholders on the next succeeding Distribution Date (the "Class D
Principal"). The Class D Certificateholders will be entitled to receive
principal payments to the extent of Class D Principal until the Class D
Invested Amount is paid in full.
COVERAGE OF CERTAIN INTEREST SHORTFALLS
To the extent of any shortfall in the amount of Available Series Interest
Collections due to the accumulation of principal in the Excess Funding Account
or the Principal Account, the Transferor Interest Collections will be made
available to cover such Negative Carry Amount and such Principal Funding
Investment Shortfall.
Interest Collections allocable to any Series in excess of the amounts
necessary to make required payments with respect to such Series ("Excess
Interest Collections") will be applied to cover any shortfalls with respect to
amounts payable from Interest Collections allocable to any other Series, pro
rata based upon the amounts of the shortfalls, if any, with respect to such
other Series. Any Excess Interest Collections remaining after covering
shortfalls with respect to all outstanding Series during a Monthly Period will
be paid to the successor Servicer, if any, to cover certain costs and expenses
and then to the holder of the Exchangeable Transferor Certificate.
DEFAULTED RECEIVABLES
Receivables will be charged off as uncollectible in accordance with the
Servicer's customary and usual policies (a "Defaulted Receivable"). See "The
Accounts--Loss Experience." On each business day, the Servicer will allocate to
the Certificateholders a portion of all Defaulted Receivables in an amount (the
"Investor Default Amount") equal to the product of (a) the Floating Allocation
Percentage applicable on such business day and (b) the aggregate principal
amount of Defaulted Receivables identified since the prior reporting date. On
each business day, the Servicer will allocate to the Class A, Class B and Class
C Certificateholders a portion of all Defaulted Receivables in an amount (the
"ABC Investor Default Amount") equal to the product of (a) the sum of the Class
A Floating Allocation Percentage, the Class B Floating Allocation Percentage
and the Class C Floating Allocation Percentage applicable on such business day
and (b) the aggregate principal amount of Defaulted Receivables identified
since the prior reporting date. On each business day, the Servicer will
allocate to the Class D Certificateholders a portion of all Defaulted
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Receivables in an amount (the "Class D Investor Default Amount") equal to the
product of (a) the Class D Floating Allocation Percentage and (b) the aggregate
principal amount of Defaulted Receivables identified since the prior reporting
date.
INVESTOR CHARGE-OFFS
If on the third business day preceding each Distribution Date (the
"Determination Date"), the aggregate Investor Default Amount, if any, for all
business days in the preceding Monthly Period exceeded the aggregate amount of
the Available Series Interest Collections, Excess Interest Collections and
Reallocated Principal Collections allocated with respect thereto during such
Monthly Period, then the Class D Invested Amount will be reduced by the
aggregate amount of such excess, but not more than the remaining aggregate
Investor Default Amount for such Monthly Period (a "Class D Investor Charge-
Off"). The Class D Invested Amount thereafter will be increased (but not in
excess of the aggregate of such reductions in the Class D Invested Amount
previously made that have not been previously reimbursed as described in this
sentence) on any business day by the amounts allocated and available for that
purpose as described under clause (xii) of "--Application of Collections--
Payment of Fees, Interest, and Other Items."
In the event that any such reduction of the Class D Invested Amount would
cause the Class D Invested Amount to be a negative number, the Class D Invested
Amount will be maintained at or reduced to zero, and the Class C Invested
Amount will be reduced by the aggregate amount of such excess, but not more
than the remaining aggregate Investor Default Amount for such Monthly Period (a
"Class C Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal to the Class C Certificateholders. The Class C
Invested Amount will thereafter be increased (but not in excess of the unpaid
principal balance of the Class C Certificates) on any Monthly Period by the
amounts allocated and available for that purpose as described under clause (xi)
of "--Application of Collections--Payment of Fees, Interest, and Other Items."
In the event that any such reduction of the Class C Invested Amount would
cause the Class C Invested Amount to be a negative number, the Class C Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the aggregate amount of such excess, but not more than the remaining
aggregate Investor Default Amount for such Monthly Period (a "Class B Investor
Charge-Off"), which will have the effect of slowing or reducing the return of
principal to the Class B Certificateholders. The Class B Invested Amount will
thereafter be increased (but not in excess of the unpaid principal balance of
the Class B Certificates) on any Monthly Period by the amounts allocated and
available for that purpose as described under clause (x) of "--Application of
Collections--Payment of Fees, Interest, and Other Items."
In the event that any such reduction of the Class B Invested Amount would
cause the Class B Invested Amount to be a negative number, the Class B Invested
Amount will be reduced to zero, and the Class A Invested Amount will be reduced
by the amount by which the Class B Invested Amount would have been reduced
below zero, but not more than the remaining aggregate Investor Default Amount
for such Monthly Period (a "Class A Investor Charge-Off"). The Class A Invested
Amount will thereafter be increased (but not in excess of the unpaid principal
balance of the Class A Certificates) on any Monthly Period by the amounts
allocated and available for that purpose as described under clause (vii) of "--
Application of Collections--Payment of Fees, Interest, and Other Items."
COMPANION SERIES
The Series 1995-1 Certificates may be paired with one or more other Series
(each a "Companion Series"). Each Companion Series either will be prefunded
with an initial deposit to a prefunding account in an amount up to the initial
principal balance of such Companion Series, funded primarily from the proceeds
for the sale of such Companion Series, or will have a variable principal
amount. Any such prefunding account will be held for the benefit of such
Companion Series and not for the benefit of Series 1995-1 Certificateholders.
As principal is paid with respect to the Series 1995-1 Certificates, either (i)
in the case of a prefunded Companion
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Series, an equal amount of funds on deposit in any prefunding account for such
prefunded Companion Series will be released (which funds will be distributed to
the Transferor) or (ii) in the case of a Companion Series having a variable
principal amount, an interest in such variable Companion Series in an equal or
lesser amount may be sold by the Trust (and the proceeds thereof will be
distributed to the Transferor) and, in either case, the invested amount in the
Trust of such Companion Series will increase by up to the corresponding amount.
Upon payment in full of the Series 1995-1 Certificates, assuming that there
have been no unreimbursed charge-offs with respect to any related Companion
Series, the aggregate invested amount of such related Companion Series will
have been increased by an amount up to an aggregate amount equal to the Series
1995-1 Investor Interest paid to the Series 1995-1 Certificateholders since the
issuance of such Companion Series. The issuance of a Companion Series will be
subject to the conditions described under "Description of the Certificates--
Exchanges". Green Tree does not expect that the terms of any Companion Series
would have an impact on the timing or amount of payments received by a Series
1995-1 Certificateholder.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
The Class A Certificates, the Class B Certificates, and the Class C
Certificates will each be subject to optional repurchase by the Transferor on
any Distribution Date after the sum of the Class A Invested Amount, the Class B
Invested Amount and the Class C Invested Amount is reduced to an amount less
than or equal to $ (10% of the initial outstanding principal amount of
the Class A Certificates, the Class B Certificates and the Class C
Certificates), if certain conditions set forth in the Pooling and Servicing
Agreement are satisfied. The repurchase price will be equal to (i) the unpaid
Class A Invested Amount plus accrued and unpaid interest on the Class A
Certificates, (ii) the unpaid Class B Invested Amount plus accrued and unpaid
interest on the Class B Certificates, (iii) the unpaid Class C Invested Amount
plus accrued and unpaid interest on the Class C Certificates and (iv) the
unpaid Class D Invested Amount. In each case interest will accrue through the
day preceding the Distribution Date on which the repurchase occurs.
The Certificates will be retired on the day following the Distribution Date
on which the final payment of principal is scheduled to be made to the
Certificateholders, whether as a result of optional reassignment to the
Transferor or otherwise. Subject to prior termination as provided above, the
Pooling and Servicing Agreement provides that the final distribution of
principal and interest on the Certificates will be made on the earlier of (i)
the Distribution Date on which the Invested Amount is paid in full and (ii) the
, Distribution Date (the "Series 1995-1 Termination Date"),
except to the extent provided below. In the event that the Invested Amount is
greater than zero, exclusive of any Class held by the Transferor, on the Series
1995-1 Termination Date, the Trustee will sell or cause to be sold (and apply
the proceeds first to the Class A Certificates until paid in full, then to the
Class B Certificates until paid in full, then to the Class C Certificates until
paid in full, and finally to the Class D Certificates to the extent necessary
to pay such remaining amounts to all Certificateholders pro rata within each
Class as final payment of the Certificates) interests in the Receivables or
certain Receivables, as specified in the Pooling and Servicing Agreement and
the Series 1995-1 Supplement, in an amount up to 110% of the Invested Amount at
the close of business on such date (but not more than the total amount of
Receivables allocable to the Certificates in accordance with the Pooling and
Servicing Agreement). If the sale contemplated by the preceding sentence has
not occurred by the Series 1995-1 Termination Date, the affected
Certificateholders shall remain entitled to receive proceeds of such sale when
it occurs. The net proceeds of such sale and any collections on the
Receivables, up to an amount equal to the Invested Amount plus accrued interest
due on the Certificates, will be paid on the Series 1995-1 Termination Date
first to Class A Certificateholders until the Class A Invested Amount is paid
in full, then to the Class B Certificateholders until the Class B Invested
Amount is paid in full, then to the Class C Certificateholders until the Class
C Invested Amount is paid in full, and then to the Class D Certificateholders
until the Class D Invested Amount is paid in full.
Unless the Servicer and the holder of the Exchangeable Transferor Certificate
instruct the Trustee otherwise, the Trust will terminate on the earlier of (a)
the day after the Distribution Date following the date
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on which funds shall have been deposited in the Distribution Account for the
payment to certificateholders outstanding sufficient to pay in full the
aggregate investor interest of all Series outstanding plus interest thereon at
the applicable certificate rates to the next Distribution Date and (b) a date
which shall not be later than , , or (c) if the Receivables are
sold, disposed of or liquidated following the occurrence of an Insolvency
Event, immediately following such sale, disposition or liquidation (such date,
the "Trust Termination Date"). Upon the termination of the Trust and the
surrender of the Exchangeable Transferor Certificate, the Trustee will convey
to the holder of the Exchangeable Transferor Certificate all right, title, and
interest of the Trust in and to the Receivables and other funds of the Trust
(other than funds on deposit in the Distribution Account and other similar bank
accounts of the Trust with respect to any Series).
PAY OUT EVENTS
As described above, the Revolving Period is expected to continue through the
end of the Monthly Period, unless a Pay Out Event occurs prior to
such date or the Initial Principal Payment Date is not extended by the
Servicer. A "Pay Out Event" refers to any of the following events:
(i) failure by the Transferor to convey Receivables in Additional
Accounts to the Trust within five business days after the day on which it
is required to convey such Receivables pursuant to the Pooling and
Servicing Agreement;
(ii) failure on the part of the Transferor, the Servicer or Green Tree,
as applicable, (a) to make any payment or deposit required by the Pooling
and Servicing Agreement or the Purchase Agreement, on or before the date
such payment or deposit is required to be made therein, which failure is
not cured within five business days after written notice from the Trustee
of such failure; or (b) to deliver a Distribution Date Statement on the
date required under the Pooling and Servicing Agreement (or within ten
business days after written notice from the Trustee of such failure); or
(c) to comply with its covenant not to create any lien on a Receivable
which failure has a material adverse effect on the holders of the
Certificates and which continues unremedied for a period of 60 days after
written notice to it; provided, however, that any Pay Out Event shall not
be deemed to have occurred if the Transferor shall have repurchased the
related Receivables or, if applicable, all the Receivables during such
period in accordance with the provisions of the Pooling and Servicing
Agreement; or (d) to observe or perform in any material respect any other
covenants or agreements set forth in the Pooling and Servicing Agreement or
the Purchase Agreement, which failure has a materially adverse effect on
the Certificateholders and which continues unremedied for a period of 45
days after written notice of such failure;
(iii) any representation or warranty made by Green Tree in the Purchase
Agreement or by the Transferor in the Pooling and Servicing Agreement or
any information required to be given by the Transferor to the Trustee to
identify the Accounts proves to have been incorrect in any material respect
when made and continues to be incorrect in any material respect for a
period of 60 days after written notice and as a result the interests of the
Certificateholders are materially and adversely affected (excluding,
however, any representation or warranty made by the Transferor that the
Pooling and Servicing Agreement constitutes, or the transfer of the
Receivables to the Trust is, a valid sale, transfer and assignment to the
Trust or all right, title and interest of the Transferor in the Receivables
and the Collateral Security if the Pooling and Servicing Agreement
constitutes the grant of a security interest in the Receivables and
Collateral Security); provided, however, that any Pay Out Event shall not
be deemed to occur thereunder if the Transferor has repurchased the related
Receivables or all such Receivables, if applicable, during such period in
accordance with the provisions of the Pooling and Servicing Agreement;
(iv) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to Green Tree or the Transferor;
(v) the Trust or the Transferor becomes an investment company within the
meaning of the Investment Company Act of 1940, as amended;
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(vi) on any Determination Date, the Transferor Interest for the next
Distribution Date will be reduced to an amount less than the Minimum
Transferor Interest on such Determination Date after giving effect to the
distributions to be made on the next Distribution Date;
(vii) any Servicer Default occurs;
(viii) on any Determination Date, the average of the Monthly Payment
Rates for the three preceding Monthly Periods, where the Monthly Payment
Rate for a Monthly Period is the percentage obtained by dividing the
aggregate of the Receivables balance (without deducting therefrom any
discount portion) collected during such Monthly Period by the average daily
aggregate Receivables balance (without deducting therefrom any discount
portion) for such Monthly Period, is less than 15%;
(ix) the failure to pay the outstanding principal amount of the Class A,
Class B or Class C Certificates by the Class A Scheduled Payment Date,
Class B Scheduled Payment Date or the Class C Expected Final Payment Date,
as applicable;
(x) the ratio (expressed as a percentage) of (a) the average for each
month of the net losses on the Receivables (exclusive of the Ineligible
Receivables) owned by the Trust (i.e., gross losses less recoveries on any
such Receivables (including, without limitation, recoveries from collateral
security in addition to recoveries from the products, recoveries from
Manufacturers and insurance proceeds)) during any three consecutive
calendar months to (b) the average of the month-end aggregate balances of
such Receivables (without deducting therefrom the discount portion) for
such three-month period, exceeds 5% on an annualized basis; provided, that
this clause (x) may be amended or waived with the consent of the Transferor
and each Rating Agency and without the consent of any Certificateholder;
and
(xi) the sum of all Cash Equivalents and other amounts on deposit in the
Excess Funding Account represents more than 50% of the sum of the aggregate
amount of Principal Receivables (without deducting therefrom any discount
portion).
In the case of any event described in clause (i), (ii), (iii) or (vii) above,
a Pay Out Event will be deemed to have occurred with respect to the
Certificates only if, after any applicable grace period, the Certificateholders
evidencing undivided interests aggregating more than 50% of the Invested
Amount, by written notice to the Transferor and the Servicer, declare that a
Pay Out Event has occurred with respect to the Certificates as of the date of
such notice. In the case of any event described in clause (iv) or (v) above, a
Pay Out Event with respect to all Series then outstanding, and in the case of
any event described in clause (vi), (viii) (ix), (x) and (xi), a Pay Out Event
with respect only to the Certificates, will be deemed to have occurred without
any notice or other action on the part of the Trustee or the Certificateholders
or all certificateholders, as appropriate, immediately upon the occurrence of
such event. On the date on which a Pay Out Event is deemed to have occurred,
the Early Amortization Period will commence. In such event, distributions of
principal to the Certificateholders will begin on the first Distribution Date
following the month in which such Pay Out Event occurred. If, because of the
occurrence of a Pay Out Event, the Early Amortization Period begins,
Certificateholders will begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates.
In addition to the consequences of a Pay Out Event discussed above, if, (i)
pursuant to certain provisions of federal law, the Transferor voluntarily
enters liquidation or a trustee in bankruptcy is appointed for the Transferor,
or (ii) the Retained Percentage is equal to or less than 2% on the day of such
event (an "Insolvency Event") the Transferor will immediately cease to transfer
Receivables to the Trust and promptly give notice to the Trustee of such event.
Within 15 days, the Trustee will publish a notice of the liquidation or the
appointment stating that the Trustee intends to sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner. With respect to
each Series outstanding at such time (or, if any such Series has more than one
class, of each class of such Series excluding any class or portion thereof held
by the Transferor), unless otherwise instructed within a specified period by
certificateholders representing undivided interests aggregating more than 50%
of the invested amount of such Series (or class excluding any class or
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portion thereof held by the Transferor) and the holders (other than the
Transferor) of any Supplemental Certificates or any other interest in the
Exchangeable Transferor Certificate, the Trustee will sell, dispose of, or
otherwise liquidate the portion of the Receivables allocable to the Series that
did not vote to continue the Trust in accordance with the Pooling and Servicing
Agreement in a commercially reasonable manner and on commercially reasonable
terms. The proceeds from the sale, disposition, or liquidation of the
Receivables will be treated as collections of the Receivables allocable to such
Certificateholders and will be distributed to the applicable Certificateholders
as provided above in "--Application of Collections."
If the only Pay Out Event to occur is either the bankruptcy or insolvency of
the Transferor or the appointment of a bankruptcy trustee or receiver for the
Transferor, the bankruptcy trustee or receiver may have the power to prevent
the early sale, liquidation, or disposition of the Receivables and the
commencement of the Early Amortization Period. In addition, a bankruptcy
trustee or receiver may have the power to cause the early sale of the
Receivables and the early retirement of the Certificates.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses will take the form of the payment to it of a servicing fee in
an amount for any Monthly Period equal to the sum of (i) with respect to each
Series, one-twelfth of the product of (x) the applicable servicing fee
percentage with respect to such Series and (y) the Invested Amount of such
Series on the first day of such Monthly Period and (z) one-twelfth of the
product of the weighted average servicing fee percentage for all Series and the
average Transferor Interest for such Monthly Period. The monthly servicing fee
will be allocated between the Transferor Interest, the Certificateholders'
Interest, and the investor interest for all other Series. The portion of the
servicing fee allocable to the Certificateholders' Interest during each Monthly
Period (the "Monthly Servicing Fee") will be equal to one-twelfth of the
product of (x) the Servicing Fee Rate per annum and
(y) the Invested Amount on the preceding Record Date or, in the case of the
first Distribution Date, the initial principal amount of the Certificates. The
Monthly Servicing Fee will be funded from Interest Collections allocated to the
Certificateholders' Interest, and will be paid each month from the amount so
allocated and on deposit in the Collection Account. See "--Application of
Collections--Payment of Fees, Interest, and Other Items" above. The remainder
of the servicing fee will be allocable to the Transferor Interest and the
investor interests of other Series. Neither the Trust nor the
Certificateholders will have any obligation to pay such portion of the
servicing fee.
The Servicer will be permitted to waive its right to receive the Servicing
Fee on any Distribution Date, so long as it believes that sufficient Interest
Collections will be available on a future Distribution Date to pay the Monthly
Servicing Fee relating to such waived Servicing Fee, in which case the
Servicing Fee and the Monthly Servicing Fee for such Distribution Date shall be
deemed to be zero.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables, including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not expressly
stated in the Pooling and Servicing Agreement to be payable by the Trust or the
Certificateholders other than federal, state, and local income and franchise
taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The Servicer may not resign from its obligations and duties under the Pooling
and Servicing Agreement, except upon determination that performance of its
duties is no longer permissible under applicable law. No such resignation will
become effective until the Trustee or a successor to the Servicer has assumed
the Servicer's responsibilities and obligations under the Pooling and Servicing
Agreement. The Servicer may
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delegate some or all of its servicing duties; provided, however, such
delegation will not relieve the Servicer of its obligation to perform such
duties in accordance with the Pooling and Servicing Agreement. In addition, any
affiliate of Green Tree may be substituted in all respects for Green Tree as
Servicer, provided that Green Tree will remain jointly and severally liable
with such affiliate.
The Pooling and Servicing Agreement provides that the Servicer will indemnify
the Trust and the Trustee from and against any reasonable loss, liability,
expense, damage, or injury suffered or sustained by reason of any acts or
omissions or alleged acts or omissions of the Servicer with respect to the
activities of the Trust or the Trustee; provided, however, that the Servicer
will not indemnify (a) the Trustee for liabilities imposed by reason of fraud,
negligence, or willful misconduct by the Trustee in the performance of its
duties under the Pooling and Servicing Agreement, (b) the Trust, the
Certificateholders, or the Certificate Owners for liabilities arising from
actions taken by the Trustee at the request of Certificateholders, (c) the
Trust, the Certificateholders, or the Certificate Owners for any losses,
claims, damages, or liabilities incurred by any of them in their capacities as
investors, including without limitation, losses incurred as a result of
Defaulted Receivables, or (d) the Trust, the Certificateholders, or the
Certificate Owners for any liabilities, costs, or expenses of the Trust, the
Certificateholders, or the Certificate Owners arising under any tax law,
including without limitation, any federal, state, or local income or franchise
tax or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith)
required to be paid by the Trust, the Certificateholders, or the Certificate
Owners in connection with the Pooling and Servicing Agreement to any taxing
authority.
In addition, the Pooling and Servicing Agreement provides that, subject to
certain exceptions, the Transferor will indemnify the Trust and the Trustee
from and against any reasonable loss, liability, expense, damage, or injury
(other than to the extent that any of the foregoing relate to any tax law or
any failure to comply therewith) suffered or sustained by reason of any acts or
omissions or alleged acts or omissions arising out of or based upon the
arrangement created by the Pooling and Servicing Agreement as though the
Pooling and Servicing Agreement created a partnership under the Minnesota
Uniform Partnership Act in which the Transferor is a general partner.
The Pooling and Servicing Agreement provides that, except for the foregoing
indemnities, neither the Transferor nor the Servicer nor any of their
respective directors, officers, employees, or agents will be under any
liability to the Trust, the Trustee, the Certificateholders, or any other
person for any action taken, or for refraining from taking any action pursuant
to the Pooling and Servicing Agreement. Neither the Transferor nor the Servicer
nor any of their respective directors, officers, employees, or agents will be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith, or gross negligence of the Transferor, the
Servicer, or any such person in the performance of its duties thereunder or by
reason of reckless disregard of obligations and duties thereunder. In addition,
the Pooling and Servicing Agreement provides that the Servicer is not under any
obligation to appear in, prosecute, or defend any legal action that is not
incidental to its servicing responsibilities under the Pooling and Servicing
Agreement and which in its opinion may expose it to any expense or liability.
Under the Pooling and Servicing Agreement, the Transferor will be liable
directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Certificateholder in the
capacity of an investor in the Certificates) arising out of or based on the
arrangement created by the Pooling and Servicing Agreement or the actions of
the Servicer taken pursuant to the Pooling and Servicing Agreement as though
the Pooling and Servicing Agreement created a partnership under the Minnesota
Uniform Partnership Act in which the Transferor is a general partner. The
Transferor will also pay, indemnify and hold harmless each Certificateholder
for any such losses, claims, damages or liabilities (other than those incurred
by a Certificateholder in the capacity of an investor in the Certificates)
except to the extent that they lapse from any action by any Certificateholder.
In the event of a Service Transfer, the successor Servicer will indemnify the
Transferor for any losses, claims, damages and liabilities of the Transferor as
described in this paragraph arising from the actions or omissions of such
successor.
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SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or certificateholders representing undivided interests aggregating more than
50% of the aggregate investor interests for all outstanding Series, by written
notice to the Servicer (and to the Trustee if given by the certificateholders),
may terminate all of the rights and obligations of the Servicer as servicer
under the Pooling and Servicing Agreement and in and to the Receivables and the
proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor under the Pooling and
Servicing Agreement and in the Transferor Interest will not be affected by such
termination. Upon such termination, the Trustee will as promptly as possible
appoint a successor Servicer. If no such Servicer has been appointed and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all authority, power, and obligations of the Servicer under the Pooling and
Servicing Agreement will pass to and be vested in the Trustee. If the Trustee
is unable to obtain any bids from eligible servicers and the Servicer delivers
an Officer's certificate to the effect that it cannot in good faith cure the
applicable Servicer Default, and if the Trustee is legally unable to act as a
successor Servicer, then the Trustee will give the Transferor the right to
accept reassignment of all of the Receivables on terms equivalent to the best
purchase offer as determined by the Trustee.
A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer, or deposit, or
to give instructions to the Trustee to make certain payments, transfers, or
deposits within five business days after the date the Servicer is required
to do so under the Pooling and Servicing Agreement or any Supplement;
provided, however, that any such failure caused by a nonwillful act of the
Servicer shall not constitute a Servicer Default if the Servicer promptly
remedies such failure within five Business Days after receiving notice of
such failure or otherwise becoming aware of such failure;
(ii) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the certificateholders of any Series then
outstanding and which continues unremedied for a period of 60 days after
written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by holders of Certificates evidencing undivided interests
aggregating not less than 50% of the Invested Amount of any Series
materially adversely affected thereby and continues to have a material
adverse effect on the certificateholders of any Series then outstanding for
such period; or the delegation by the Servicer of its duties under the
Pooling and Servicing Agreement, except as specifically permitted
thereunder;
(iii) any representation, warranty, or certification made by the Servicer
in the Pooling and Servicing Agreement, or in any certificate delivered
pursuant to the Pooling and Servicing Agreement, proves to have been
incorrect when made which has a material adverse effect on the
certificateholders of any Series then outstanding, and which continues to
be incorrect in any material respect for a period of 60 days after written
notice of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Trustee, or to the Servicer and Trustee by the
holders of Certificates evidencing undivided interests aggregating not less
than 50% of the Invested Amount of any Series materially adversely affected
thereby and continues to have a material adverse effect on such
certificateholders for such period; or
(iv) the occurrence of certain events of bankruptcy, insolvency, or
receivership of the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred
to in clause (i) above for a period of five business days, or referred to under
clause (ii) or (iii) for a period of 60 business days, will not constitute a
Servicer Default if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or other similar occurrence. Upon the occurrence of any
such event, the Servicer will not be relieved from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of the
Pooling and Servicing Agreement, and
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the Servicer will provide the Trustee, any provider of credit enhancement, the
Transferor, and the holders of certificates of all Series outstanding prompt
notice of such failure or delay by it, together with a description of the cause
of such failure or delay and its efforts to perform its obligations.
In the event of a Servicer Default, due to the bankruptcy of the Servicer, if
no Servicer Default other than such bankruptcy or the insolvency of the
Servicer exists, the bankruptcy trustee or the Servicer itself as debtor-in-
possession may have the power to prevent either the Trustee or the majority of
the certificateholders from effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Paying Agent will forward to each
Certificateholder of record (which is expected to be Cede & Co., as nominee for
DTC, unless Definitive Certificates are issued) a statement prepared by the
Servicer setting forth, among other things, with respect to such Series: (a)
the total amount distributed, (b) the amount of the distribution allocable to
principal on the Class A Certificates, the Class B Certificates, the Class C
Certificates and the Class D Certificates, (c) the amount of such distribution
allocable to interest on the Class A Certificates, the Class B Certificates,
the Class C Certificates and the Class D Certificates,
(d) the amount of Principal Collections processed during the related Monthly
Period and allocated in respect of the Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D Certificates,
respectively, (e) the amount of Interest Collections processed during the
preceding Monthly Period and allocated in respect of the Class A Certificates,
the Class B Certificates, the Class C Certificates and the Class D
Certificates, respectively, (f) the aggregate amount of Principal Receivables,
the Invested Amount, the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount, the Class D Invested Amount, the Floating
Allocation Percentage, and during the Controlled Accumulation Period or Early
Amortization Period, the ABC Fixed/Floating Allocation Percentage with respect
to the Principal Receivables in the Trust as of the close of business on the
Record Date, (g) the aggregate outstanding balance of Receivables which are
current, 30-59, 60-89 and 90 or more days delinquent as of the end of the day
on the Record Date, (h) the Aggregate Investor Default Amount for the related
Monthly Period, (i) the aggregate amount of Class A Investor Charge-Offs, Class
B Investor Charge-Offs, Class C Investor Charge-Offs and Class D Investor
Charge-Offs for the preceding Monthly Period, (j) the amount of the Monthly
Servicing Fee for the preceding Monthly Period, and (k) the aggregate amount of
funds in the Excess Funding Account as of the last day of the Monthly Period
immediately preceding the Distribution Date. Unless and until Definitive
Certificates are issued, such reports with respect to the 1995-1 Series will be
sent to Cede & Co., as registered holder of the Certificates and the nominee of
DTC. Certificate Owners may receive copies of such reports upon written
request, together with a certification that they are Certificate Owners and
payment of reproduction and postage expenses associated with the distribution
of such reports, from the Trustee. See "Reports to Certificateholders."
The Paying Agent will furnish to each person who at any time during the
preceding calendar year was a Certificateholder of record (which is expected to
be Cede & Co., as nominee for DTC, unless Definitive Certificates are issued) a
statement prepared by the Servicer containing the information required to be
contained in the regular monthly report to Certificateholders, as set forth in
clauses (a), (b), and (c) above aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder,
together with, on or before March 31 of each year, beginning in 1996, such
customary information (consistent with the treatment of the Certificates as
debt) as the Servicer or Trustee deems necessary or desirable for tax reporting
purposes. Moreover, as long as the Certificateholder of record is Cede & Co.,
as nominee for DTC, Certificate Owners will receive tax and other information
from Participants and Indirect Participant rather than from the Trustee.
REPORTS; NOTICES
Following the listing of the Offered Certificates on the Luxembourg Stock
Exchange, the Trustee will publish or will cause to be published following each
Distribution Date in a daily newspaper in Luxembourg
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(expected to be the Luxemburger Wort) a notice to the effect that the
information set forth in the foregoing paragraph will be available for review
at the main office of the Listing Agent of the Trust in Luxembourg, Luxembourg.
Following the listing of the Offered Certificates on the Luxembourg Stock
Exchange, notices to Certificateholders will be given by publication in a daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. In the
event that Definitive Certificates are issued, notices to Certificateholders
will also be given by mail to the addresses of such holders as they appear in
the certificate register.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement will provide that on or before March 31
of each calendar year (beginning in 1997), the Servicer will cause a firm of
independent public accountants which is a member of the American Institute of
Certified Public Accountants to furnish a report to the effect that such
accounting firm has examined selected documents and records relating to the
servicing of the Accounts in accordance with the Mortgage Bankers Association
of America's Uniform Single Attestation Program for Mortgage Bankers, or any
successor uniform program or other program, and that, on the basis of such
examination, such firm is of the opinion that such servicing was conducted in
compliance with the Pooling and Servicing Agreement during the period covered
by such report except for such significant exceptions or errors in records
that, in the opinion of such firm, generally accepted auditing standards
requires it to report.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be amended by the
Transferor, the Servicer, and the Trustee, without the consent of
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Pooling and Servicing
Agreement and Supplements or of modifying in any manner the rights of such
Certificateholders; provided that (i) the Transferor delivers an opinion of
counsel acceptable to the trustee to the effect that such amendment will not
adversely affect in any material respect the interest of the
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding series.
The Pooling and Servicing Agreement and the Supplement may be amended by the
Transferor, the Servicer, and the Trustee with the consent of the holders of
certificates evidencing undivided interests aggregating not less than 66 2/3%
of the investor interests of each and every Series adversely affected (and with
respect to Series 1995-1, the holders of not less than 66 2/3% of the Invested
Amount of each Class of Certificates adversely affected), for the purpose of
adding any provisions to, changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement, or any Supplement or of
modifying in any manner the rights of certificateholders of any then
outstanding Series. No such amendment, however, may (a) reduce in any manner
the amount of, or delay the timing of, distributions required to be made on any
such Series, (b) change the definition of or the manner of calculating the
interest of any certificateholder of such Series, or (c) reduce the aforesaid
percentage of investor interests the holders of which are required to consent
to any such amendment, in each case without the consent of all
certificateholders of all Series adversely affected. Promptly following the
execution of any amendment to the Pooling and Servicing Agreement, the Trustee
will furnish written notice of the substance of such amendment to each
Certificateholder. Any Supplement and any amendments regarding the addition or
removal of Receivables from the Trust will not be considered an amendment
requiring certificateholder consent under the provisions of the Pooling and
Servicing Agreement and any Supplement.
LIST OF CERTIFICATEHOLDERS
Upon written request of Certificateholders representing undivided interests
in the Trust aggregating not less than 10% of the Invested Amount, the Trustee
after having been adequately indemnified by such
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Certificateholders for its costs and expenses, and having given the Servicer
notice that such request has been made, will afford such Certificateholders
access during business hours to the current list of Certificateholders of the
Trust for purposes of communicating with other Certificateholders with respect
to their rights under the Pooling and Servicing Agreement. See "--Book-Entry
Registration" and "--Definitive Certificates."
THE TRUSTEE
The Transferor, the Servicer, and their respective affiliates may from time
to time enter into normal banking, lending and trustee relationships with the
Trustee and its affiliates. The Trustee, the Transferor, the Servicer, and any
of their respective affiliates may hold Certificates in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties, and obligations conferred or imposed
upon the Trustee by the Pooling and Servicing Agreement will be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, or,
in any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who will
exercise and perform such rights, powers, duties, and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will be
obligated to appoint a successor Trustee. The Transferor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Transferor will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee does not become effective until acceptance of the appointment by the
successor Trustee.
If the Trustee fails to perform any of its obligations under the Pooling and
Servicing Agreement, and a certificateholder delivers written notice of such
failure to the Trustee, and the Trustee shall not have corrected such failure
for 60 days thereafter, then the holders of investor certificates representing
more than 50% of the aggregate invested amount of all Series (including related
commitments) shall have the right to remove the Trustee and (with the consent
of the Transferor, which shall not be unreasonably withheld) promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
DESCRIPTION OF THE PURCHASE AGREEMENT
The following summary describes certain terms of the Receivables Purchase
Agreement (the "Purchase Agreement") and is qualified in its entirety by
reference to the Purchase Agreement.
TRANSFER OF RECEIVABLES
Pursuant to the Purchase Agreement, Green Tree will sell and transfer to the
Transferor all of its right, title and interest in and to all of the
Receivables and the Collateral Security as of the Cut-off Date and all of the
Receivables thereafter created. As described herein, pursuant to the Pooling
and Servicing Agreement and the related Series Supplement, the Transferor will
transfer to the Trust all of its right, title and interest in and to the
Purchase Agreement.
In connection with each such sale or transfer of Receivables to the
Transferor, Green Tree will indicate in its computer files that such
Receivables have been sold or transferred to the Transferor, and that such
Receivables have been transferred by the Transferor to the Trust. In addition,
Green Tree will provide to the Transferor a computer file or microfiche or
written list containing a true and complete list of all such Receivables,
identifying the balances of the Receivables as of the Cut-off Date. The records
and agreements
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relating to such Accounts and Receivables will not be segregated by Green Tree
from other documents and agreements relating to other accounts and receivables
and will not be stamped or marked to reflect the sale or transfer of such
Receivables to the Transferor, but the computer records of Green Tree will be
marked to evidence such sale or transfer. Green Tree will file UCC financing
statements with respect to the Receivables meeting the requirements of
Minnesota state law. See "Risk Factors--Transfer of the Receivables; Insolvency
Risk Considerations" and "Certain Legal Aspects of the Receivables--Transfer of
Receivables."
REPRESENTATIONS AND WARRANTIES
Pursuant to the Purchase Agreement, Green Tree will make certain
representations and warranties to the Transferor that, among other things, (a)
it has been duly incorporated and is in good standing and that it has the
authority to consummate the transactions contemplated by the Purchase Agreement
and (b) as of the Cut-off Date (or, in the case of an Additional Account, as of
the Additional Cut-off Date and Addition Date), each Account or Additional
Account was an Eligible Account.
Pursuant to the Purchase Agreement, Green Tree will make certain
representations and warranties to the Transferor relating to the Receivables
that, among other things, (a) as of the Cut-off Date and each Closing Date,
each of the Accounts was an Eligible Account or, if it was or is an Ineligible
Account on such date, such Account is being removed from the Trust in
accordance with the requirements of the Pooling and Servicing Agreement, (b)
the amount of Receivables that are reported as Ineligible Receivables
transferred to the Transferor on the Cut-off Date or any Additional Cut-off
Date for the purpose of facilitating the administration and reporting
obligations of the Servicer is true and correct and there are no other
Receivables that are Ineligible Receivables except as so reported and (c) as of
the date any new Receivable is created, such Receivable is an Eligible
Receivable. In the event of a breach of any representation and warranty set
forth in this paragraph which results in an Ineligible Receivable and the
requirement that the Transferor accept retransfer of such Ineligible Receivable
pursuant to the Pooling and Servicing Agreement, then Green Tree will be
obligated to repurchase such Ineligible Receivable from the Transferor on the
date of such retransfer. The purchase price for such Ineligible Receivable will
be the face amount thereof plus any accrued and unpaid interest thereon, of
which at least the amount of any cash deposit required to be made by the
Transferor under the Pooling and Servicing Agreement in respect of the
retransfer of such Ineligible Receivable must be paid in cash.
Pursuant to the Purchase Agreement, Green Tree will also make representations
and warranties to the Transferor that, among other things, as of the Closing
Date, (a) the Purchase Agreement constitutes a legal, valid and binding
obligation of Green Tree and (b) the Purchase Agreement constitutes a valid
sale or transfer to the Transferor of all right, title and interest of Green
Tree in and to the Receivables, whether then existing or thereafter created in
the Accounts, the Collateral Security, all related security interests and other
related rights and the proceeds thereof, which is effective as to each
Receivable upon the creation thereof. If the breach of any of the
representations and warranties described in this paragraph results in the
obligation of the Transferor under the Pooling and Servicing Agreement to
accept retransfer of the Receivables, Green Tree will be obligated to
repurchase the Receivables retransferred to Green Tree for an amount of cash
equal to the amount of cash the Transferor is required to deposit under the
Pooling and Servicing Agreement in connection with such retransfer.
Green Tree will agree to indemnify the Transferor and to hold the Transferor
harmless from and against any and all losses, damages and expenses (including
reasonable attorneys' fees) suffered or incurred by the Transferor if the
foregoing representations and warranties are materially false.
CERTAIN COVENANTS
Pursuant to the Purchase Agreement, Green Tree covenants that it will perform
its obligations under the agreements relating to the Receivables and the
Accounts in conformity with its then-current policies and procedures relating
to the Receivables and Accounts.
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Green Tree further covenants that, except for the sale and conveyance under
the Purchase Agreement and the interests created under the Pooling and
Servicing Agreement and the Series Supplement, Green Tree will not sell,
pledge, assign or transfer any interest in the Receivables to any other person.
Green Tree also covenants to defend and indemnify the Transferor for any loss,
liability or expense incurred by the Transferor in connection with a breach by
Green Tree of any of its representations, warranties or covenants contained in
the Purchase Agreement.
In addition, Green Tree expressly acknowledges and consents to the
Transferor's assignment of its rights relating to the Receivables under the
Purchase Agreement to the Trustee.
TERMINATION
The Purchase Agreement will terminate immediately after the Trust terminates.
In addition, if Green Tree becomes party to any bankruptcy or similar
proceeding (other than as a claimant) and, if such proceeding is not voluntary
and is not dismissed within 60 days of its institution, Green Tree will
immediately cease to sell or transfer Receivables to the Transferor and will
promptly give notice of such event to the Transferor and to the Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
On the Closing Date, Green Tree will sell and assign the Receivables to the
Transferor pursuant to the Purchase Agreement, and the Transferor will
immediately sell and assign the Receivables to the Trust pursuant to the Series
1995-1 Supplement. The Transferor represents and warrants on the Closing Date
that such sale to the Trust constitutes a valid transfer and assignment to the
Trust of all right, title and interest of the Transferor in and to the
Receivables, except for the interest of any investor certificate of any Series
then held by it, or the grant to the Trust of a security interest in the
Receivables. The Transferor has also represented and warranted in the Pooling
and Servicing Agreement that, in the event the transfer of the Receivables by
the Transferor to the Trust is deemed to create a security interest under the
UCC, there will exist a valid, subsisting, and enforceable first priority
perfected security interest in such Receivables created thereafter in favor of
the Trust on and after their creation, subject to certain tax liens. For a
discussion of the Trust's rights arising from these representations and
warranties not being satisfied, see "Description of the Offered Certificates--
Representations and Warranties."
Each of Green Tree and the Transferor has represented that the Receivables
are "general intangibles," "chattel paper" or "accounts" for purposes of the
UCC as in effect in Minnesota. If the Receivables are deemed to be general
intangibles and the transfer thereof by either Green Tree to the Transferor or
by the Transferor to the Trust is deemed to be a sale, Minnesota common law
applies and neither possession nor a financing statement is required. If the
Receivables are deemed to be general intangibles and the transfer thereof by
either Green Tree to the Transferor or by the Transferor to the Trust is deemed
to create a security interest, the UCC as in effect in Minnesota applies and
the transferee must file an appropriate financing statement or statements in
order to perfect its interest therein. If the Receivables are deemed to be
chattel paper and the transfer thereof by either Green Tree to the Transferor
or by the Transferor to the Trust is deemed either to be a sale or to create a
security interest, the UCC as in effect in Minnesota applies and the transferee
must either take possession of the chattel paper or file an appropriate
financing statement or statements in order to perfect its interest therein. If
the Receivables are treated as accounts and the transfer thereof by either by
Green Tree to the Transferor or the Transferor to the Trust is deemed either to
be a sale or create a security interest, the transferee must file an
appropriate financing statement or statements in order to perfect its interest
therein under the UCC as in effect in Minnesota. Financing statements covering
the Receivables will be filed under the UCC as in effect in Minnesota by both
the Transferor and the Trust to
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perfect their respective interests in the Receivables and continuation
statements will be filed as required to continue the perfection of such
interests. The Receivables will not be stamped to indicate the interest of the
Transferor or the Trustee.
There are certain limited circumstances under the UCC and other applicable
law in which prior or subsequent transferees of Receivables could have an
interest in such Receivables with priority over the Trust's interest. A
purchaser of the Receivables that are chattel paper who gives new value and
takes possession of the instruments that evidence the Receivables (i.e., the
chattel paper) in the ordinary course of such purchaser's business may, under
certain circumstances, have priority over the interest of the Trust in such
Receivable. Under the Purchase Agreement, Green Tree warrants to the
Transferor, and under the Agreement and Series 1995-1 Supplement the Transferor
warrants to the Trust, that the Receivables have been transferred free and
clear of the lien of any third party. Each of Green Tree and the Transferor
will also covenant that it will not sell, pledge, assign, transfer or grant any
lien on any Receivable or, except as described under "Description of the
Offered Certificates--Exchanges," the Exchangeable Transferor's Certificate (or
any interest therein) other than to the Trust. A tax or other government lien
on property of Green Tree or the Transferor arising prior to the time a
Receivable comes into existence may also have priority over the interest of the
Trust in such Receivable. In addition, while Green Tree is the Servicer, cash
collections on the Receivables may, under certain circumstances, be commingled
with the funds of Green Tree prior to each Distribution Date and, in the event
of bankruptcy of Green Tree, the Trust may not have a perfected interest in
such collections.
CERTAIN MATTERS RELATING TO BANKRUPTCY
Green Tree warrants to the Transferor in the Purchase Agreement that the sale
of the Receivables by it to the Transferor is a valid sale of the Receivables
to the Transferor. In addition, pursuant to the Purchase Agreement, Green Tree
and the Transferor will agree to treat the transactions described herein as a
sale of such Receivables to the Transferor, and Green Tree will take all
actions that are required under Minnesota law to perfect the Transferor's
ownership interest in the Receivables. Notwithstanding the foregoing, if Green
Tree were to become a debtor in a bankruptcy case and a creditor or trustee-in-
bankruptcy of Green Tree or Green Tree itself as debtor-in-possession were to
take the position that the sale of Receivables from Green Tree to the
Transferor should be recharacterized as a pledge of such Receivables to secure
a borrowing from Green Tree, then delays in payments of collections of
Receivables to the Transferor could occur or (should the court rule in favor of
any such trustee, debtor-in-possession or creditor) reductions in the amount of
such payments could result.
In addition, if Green Tree were to become a debtor in a bankruptcy case and a
creditor or trustee-in-bankruptcy of such debtor or Green Tree itself were to
request a court to order that Green Tree should be substantively consolidated
with the Transferor, delays in payments on the Certificates could result.
Should the bankruptcy court rule in favor of any such creditor, trustee-in-
bankruptcy or Green Tree, reductions in such payments could result.
The Transferor will warrant to the Trust that the transfer of the Receivables
to the Trust is a sale of the Receivables to the Trust or the grant of a
security interest in the Receivables to the Trust. The Transferor is required
to take all actions that are required under Minnesota law to perfect the
Trust's ownership interest or security interest in the Receivables and the
Transferor will warrant to the Trust that the Trust will at all times have a
first priority perfected ownership interest or security interest therein and,
with certain exceptions, the proceeds thereof. Nevertheless, a tax or
government lien on property of Green Tree or the Transferor arising prior to
the time a Receivable is conveyed to the Trust may have priority over the
interest of the Trust in such Receivable. The Transferor's certificate of
incorporation provides that, under certain circumstances, the Transferor is
required to have two independent directors (as defined therein) in which event
it shall not file a voluntary application for relief under Title 11 of the
United States Code (the "Bankruptcy Code") without the affirmative vote of its
two independent directors. Pursuant to the Pooling and Servicing Agreement, the
Trustee, all certificateholders and any credit enhancement provider with
respect to any other series will covenant that they will not at any time
institute against the Transferor any
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bankruptcy, reorganization or other proceedings under any federal or state
bankruptcy or similar law. Notwithstanding such steps, if the Transferor were
to become a debtor in a bankruptcy case, and a bankruptcy trustee for the
Transferor or the Transferor as debtor in possession or a creditor of the
Transferor were to take the position that the transfer of the Receivables from
the Transferor to the Trust should be recharacterized as a pledge of such
Receivables, then delays in payments on the Certificates or (should the court
rule in favor of any such trustee, debtor in possession or creditor) reductions
in the amount of such payments could result.
The Transferor does not intend to file, and Green Tree will agree that it
will not cause the Transferor to file, a voluntary application for relief under
the Bankruptcy Code or any similar applicable state law with respect to the
Transferor so long as the Transferor is solvent and does not foresee becoming
insolvent.
If Green Tree or the Transferor were to become a debtor in a bankruptcy case
causing a Pay Out Event to occur, then, pursuant to the Purchase Agreement, new
Receivables would no longer be transferred to the Transferor and, pursuant to
the Pooling and Servicing Agreement, only collections on Receivables
theretofore sold to the Transferor and transferred to the related Trust would
be available to be applied to pay interest accruing on the Certificates and to
pay the principal amount of the Certificates. Under such circumstances, the
Servicer is obligated to allocate all Principal Collections to the oldest
principal balance first. If such allocation method were to be altered by the
bankruptcy court, the rate of payment on the Certificates might be adversely
affected. In addition, distributions of principal on each Certificate would not
be subject to the applicable Controlled Accumulation Amount. If the only Pay
Out Event to occur is either the insolvency of the Transferor or the
appointment of a bankruptcy trustee or receiver for the Transferor, the
receiver or bankruptcy trustee for the Transferor may have the power to
continue to require the Transferor to transfer new Principal Receivables to the
Trust and to prevent the early sale, liquidation, or disposition of the
Receivables and the commencement of the Early Amortization Period. See
"Description of the Offered Certificates--Pay Out Events."
The occurrence of certain events of bankruptcy, insolvency or receivership
with respect to the Servicer will result in a Servicer Default, which Servicer
Default, in turn, will result in a Pay Out Event. If no other Servicer Default
other than the commencement of such bankruptcy or similar event exists, a
trustee-in-bankruptcy of the Servicer may have the power to prevent either the
Trustee or the Certificateholders from appointing a successor Servicer.
Payments made in respect of repurchases of Receivables by Green Tree or the
Transferor pursuant to the Pooling and Servicing Agreement and the Series 1995-
1 Supplement may be recoverable by Green Tree or the Transferor, as debtor in
possession, or by a creditor or a trustee-in-bankruptcy of Green Tree or the
Transferor as a preferential transfer from Green Tree or the Transferor if such
payments are made within one year prior to the filing of a bankruptcy case in
respect of Green Tree.
In a recent decision, Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th
Cir. 1993), the United States Court of Appeals for the 10th Circuit suggested
that even where a transfer of accounts from a seller to a buyer constitutes a
"true sale," the accounts would nevertheless constitute property of the
seller's bankruptcy estate in a bankruptcy of the seller. If Green Tree or the
Transferor were to become subject to a bankruptcy proceeding and a court were
to follow the Octagon court's reasoning, Certificateholders might experience
delays in payment or possibly losses in their investment in the Certificates.
Counsel has advised the seller that the reasoning of the Octagon case appears
to be inconsistent with established precedent and the UCC. In addition, because
Green Tree, the Transferor, the Trust and the transaction governed by the
Pooling and Servicing Agreement do not have any particular link to the 10th
Circuit, it is unlikely that Green Tree or the Transferor would be subject to a
receivership proceeding in the 10th Circuit. Accordingly, the Octagon case
should not be binding precedent on a court in a receivership proceeding.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of the material federal income tax
consequences to Offered Certificate Owners. This discussion is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial or ruling
authority, all of which are subject to change (which may be retroactive).
Dorsey & Whitney, P.L.L.P., counsel to Green Tree and the Transferor
("Counsel"), is delivering its opinion regarding certain federal income tax
matters discussed below. The opinion of Counsel specifically addresses only
those issues specifically identified below as being covered by such opinion;
however, the opinion of Counsel also states that the additional discussion set
forth below accurately sets forth Counsel's advice with respect to material tax
issues. No ruling on any of the issues discussed below will be sought from the
Internal Revenue Service (the "IRS"). This discussion does not deal with all
aspects of federal income taxation that may be relevant to Offered Certificate
Owners in light of their personal investment circumstances, nor to certain
types of owners subject to special treatment under the federal income tax laws
(e.g., banks, life insurance companies and tax-exempt organizations).
Prospective investors are encouraged to consult their own tax advisors with
regard to the federal income tax consequences of owning and disposing of the
Certificates, as well as the tax consequences arising under the laws of any
applicable state, foreign country or other jurisdiction.
Treatment of the Certificates as Indebtedness of the Transferor. The
Transferor and the holders of Certificates will express in the Pooling and
Servicing Agreement the intent that, for federal, state and local income and
franchise tax purposes, the Offered Certificates will be indebtedness secured
by the Receivables and any other Trust assets allocable to the Offered
Certificates. The Transferor, by entering into the Pooling and Servicing
Agreement, and each Offered Certificate Owner, by the acceptance of an interest
in an Offered Certificate, will agree to treat the Offered Certificates as
indebtedness for federal, state and local income and franchise tax purposes.
The Pooling and Servicing Agreement generally will refer to the transfer of the
related Receivables as a "sale," however, and since different criteria are used
in determining the nontax accounting treatment of the transaction, the
Transferor will treat the Pooling and Servicing Agreement, for certain nontax
purposes, as effecting a transfer of an ownership interest in the Receivables
and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of a
transaction generally determines the tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its
economic substance. In appropriate circumstances, the courts have allowed
taxpayers, as well as the IRS, to treat a transaction in accordance with its
economic substance, as determined under federal income tax law, even though the
participants in the transaction have characterized it differently for nontax
purposes.
The determination of whether the economic substance of a property transfer is
a sale or a loan secured by the transferred property has been made by the IRS
and the courts on the basis of numerous factors designed to determine whether
the transferor has relinquished (and the transferee has obtained) substantial
incidents of ownership in the property. Among those factors, the primary
factors examined are whether the transferee has the opportunity to gain if the
property increases in value and bears the risk of loss if the property
decreases in value. Based upon an analysis of such factors, Counsel's opinion
provides that for federal income tax purposes the Offered Certificates will be
characterized as indebtedness secured by the Receivables and any other Trust
assets, and the Trust will not be characterized as an "association," "publicly
traded partnership" or "taxable mortgage pool" taxable as a corporation.
Interest Income to Certificate Owners. Assuming the Offered Certificates are
debt obligations for federal income tax purposes, interest on the Offered
Certificates will be taxable as ordinary interest income when received by
Certificate Owners utilizing the cash-basis method of accounting and when
accrued by Certificate Owners utilizing the accrual method of accounting. Under
the applicable regulations, the Offered Certificates would be considered issued
with original issue discount ("OID") if the "stated redemption price at
maturity" of an Offered Certificate (generally equal to its principal amount as
of the date of issuance plus all interest other than "qualified stated
interest" payable prior to or at maturity) exceeds the original issue price (in
this case, the initial offering price at which a substantial amount of the
Offered Certificates are sold to the public).
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Any OID would be considered de minimis under the regulation if it does not
exceed 1/4% of the stated redemption price at maturity of an Offered
Certificate multiplied by the number of full years until its maturity date. It
is anticipated that the Offered Certificates will not be considered issued with
more than de minimis OID. Under the OID regulations, an owner of an Offered
Certificate issued with a de minimis amount of OID must include such OID in
income, on a pro rata basis, as principal payments are made on the Offered
Certificate.
While it is not anticipated that the Offered Certificates will be issued with
more than de minimis OID, it is possible that they will be so issued or will be
deemed to be issued with OID. This deemed OID could arise, for example, if
interest payments on the Offered Certificates are not deemed to be "qualified
stated interest" because the Offered Certificates do not provide for default
remedies ordinarily available to holders of debt instruments or because no
penalties are imposed as a result of any failure to make interest payments on
the Offered Certificates. In addition, under the OID regulations, certain
variable interest rates, including rates based upon the weighted average
interest rate of the Receivables, may not be treated as qualified stated
interest. Based upon existing authority, however, the Transferor and the
Trustee will treat interest payments on the Offered Certificates as qualified
stated interest under the OID regulations. If the Offered Certificates are
issued or are deemed to be issued with OID, all or a portion of the taxable
income to be recognized with respect to the Offered Certificates would be
includible in the income of Certificate Owners as OID. Any amount treated as
OID would not, however, be includible again when the amount is actually
received. If the yield on a class of Offered Certificates were not materially
different from its coupon, this treatment would have no significant effect on
Certificate Owners using the accrual method of accounting. However, cash method
Certificate Owners may be required to report income with respect to the Offered
Certificates in advance of the receipt of cash attributable to such income.
A Certificate Owner must include OID in income as interest over the term of
the Offered Certificate under a constant yield method. In general, OID must be
included in income in advance of the receipt of cash representing that income.
Each Certificate Owner should consult its own tax advisor regarding the impact
of the OID rules if the Offered Certificates are issued with OID.
A Certificate Owner who purchases an Offered Certificate at a discount may be
subject to the "market discount" rules of the Code. These rules provide, in
part, for the treatment of gain attributable to accrued market discount as
ordinary income upon the receipt of partial principal payments or on the sale
or other disposition of the Offered Certificate, and for the deferral of
interest deductions with respect to debt incurred to acquire or carry the
market discount Offered Certificate. A Certificate Owner who purchases an
Offered Certificate at a premium may elect to amortize and deduct this premium
over the remaining term of the Offered Certificate in accordance with rules set
forth in Section 171 of the Code.
As an alternative to the above treatments, accrual method Certificate Owners
may elect to include in gross income all interest with respect to an Offered
Certificate, including stated interest, acquisition discount, OID, de minimis
OID, market discount, de minimis market discount, and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium, using the
constant yield method.
Disposition of Offered Certificates. Generally, gain or loss will be
recognized on a sale or other taxable disposition of Offered Certificates in an
amount equal to the difference between the amount realized and the seller's tax
basis in the Offered Certificates. A Certificate Owner's tax basis in an
Offered Certificate will generally equal the cost thereof increased by any OID,
market discount and gain previously included by such Certificate Owner in
income with respect to the Offered Certificate and decreased by any bond
premium previously amortized and any principal payments previously received by
such Certificate Owner with respect to the Offered Certificate. Any such gain
or loss will be capital gain or loss if the Offered Certificate was held as a
capital asset, except for gain representing accrued interest and accrued market
discount not previously included in income. Capital gain or loss will be long-
term if the Offered Certificate was held by the holder for more than one year
and otherwise will be short-term. Any capital losses realized generally may be
used by a corporate taxpayer only to offset capital gains, and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
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Information Reporting and Backup Withholding. The Trustee will be required to
report annually to the IRS, and to each Offered Certificateholder of record,
the amount of interest paid on the Offered Certificates (and the amount of
interest withheld for federal income taxes, if any) for each calendar year,
except as to exempt holders (generally, holders that are corporations, tax-
exempt organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification of their
status as nonresidents). As long as the only "Certificateholder" of record is
Cede, as nominee for DTC, Certificate Owners and the IRS will receive tax and
other information only from Participants and Indirect Participants rather than
from the Trustee. Each nonexempt Offered Certificate Owner will be required to
provide, under penalties of perjury, a certificate on IRS Form W-9 containing
the Owner's name, address, federal taxpayer identification number and a
statement that such Owner is not subject to backup withholding. Should a
nonexempt Offered Certificate Owner fail to provide the required certification,
the Trustee (or the Participants or Indirect Participants) will be required to
withhold (or cause to be withheld) 31% of the interest (and principal)
otherwise payable to the Owner, and remit the withheld amounts to the IRS as a
credit against the Owner's federal income tax liability.
Possible Classification of the Trust as a Partnership or Association. As
described above, it is the opinion of Counsel that for federal income tax
purposes the Offered Certificates will be characterized as debt and the Trust
will not be characterized as an association, publicly traded partnership or
taxable mortgage pool taxable as a corporation. However, this opinion is not
binding on the IRS and no assurance can be given that this characterization
will be sustained.
If the IRS were to contend successfully that any class of Certificates is not
debt for federal income tax purposes, the Trust might be classified for federal
income tax purposes as a partnership, an association taxable as a corporation,
or a publicly traded partnership taxable as a corporation. In the opinion of
Counsel, if the IRS were to contend successfully that the Class C Certificates
were not debt for federal income tax purposes (assuming that neither the Class
A or Class B Certificates, nor certificates of any other outstanding series,
were also recharacterized) the arrangement among the Transferor and the Class C
Certificateholders would be classified as a partnership for federal income tax
purposes and would not be treated as a publicly traded partnership because of
an exception for (i) an entity whose income is interest income that is not
derived in the conduct of a financial business or (ii) partnership interests
that are privately placed. In such case, the partnership would not be subject
to federal income tax. If the Class A or Class B Certificates are treated as
equity interests in a partnership, the partnership would in all likelihood be
treated as a publicly traded partnership. A publicly traded partnership is, in
general, taxable as a corporation. If the partnership were nevertheless not
taxable as a corporation because of an exception for an entity whose income is
interest income that is not derived in the conduct of a financial business, it
would not be subject to federal income tax. Rather, each item of income, gain,
loss, deduction and credit generated through the ownership of the Receivables
by the partnership would be passed through to the partners in the partnership
(including the Certificate Owners) according to their respective interests
therein.
The income reportable by the Offered Certificate Owners as partners in such a
partnership could differ from the income reportable by them as holders of debt.
However, except as provided below, it is not expected that such differences
would be material. If the Offered Certificate Owners were treated as partners,
a cash-basis Certificate Owner might be required to report income when it
accrues to the partnership rather than when it is received by the Certificate
Owner. Moreover, if the Offered Certificates are interests in a partnership, an
individual Certificate Owner's share of expenses of the partnership would be
miscellaneous itemized deductions that might not be deductible in whole or in
part, causing the Certificate Owner to be taxable on a greater amount of income
than the stated interest on the Offered Certificates. Finally, if any class of
Certificates is treated as equity in a partnership in which other Certificates
are debt, all or part of a tax-exempt Certificate Owner's share of income from
Certificates treated as equity would be treated as unrelated debt-financed
income taxable to the Certificate Owner.
Alternatively, if the Trust were treated as either an association taxable as
a corporation, a publicly traded partnership or taxable mortgage pool taxable
as a corporation, the resulting entity would be subject to federal
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<PAGE>
income taxes at corporate tax rates on its taxable income generated by
ownership of the Receivables. Distributions by the entity (other than interest
distributions on classes of Certificates properly characterized as debt) would
probably not be deductible in computing the entity's taxable income. Such an
entity-level tax could result in reduced distributions to Offered Certificate
Owners, and the Offered Certificate Owners could be liable for a share of such
a tax. Moreover, all or part of the distributions on Certificates treated as
equity would probably be treated as dividend income to the recipients, although
such dividends might, under certain circumstances, be eligible for the
dividends received deduction under the Code.
Since the Transferor will treat the Offered Certificates as indebtedness for
federal income tax purposes, the Trustee (and Participants and Indirect
Participants) will not comply with the tax reporting requirements that would
apply under these alternative characterizations of the Offered Certificates.
Foreign Investors. If, in accordance with the opinion of Counsel, the Offered
Certificates are classified as debt for federal income tax purposes, the
following information describes the federal income tax treatment of investors
that are not U.S. persons (each a "Foreign Person"). The term "Foreign Person"
means any person other than (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof or (iii) an estate or
trust the income of which is includible in gross income for U.S. federal income
tax purposes, regardless of its source.
(a) Interest paid or accrued to a Foreign Person would be exempt from
U.S. withholding taxes (including backup withholding taxes); provided that
the Foreign Person complies with applicable identification requirements
(and does not actually or constructively own 10% or more of the voting
stock of Green Tree and is not a controlled foreign corporation with
respect to Green Tree). Applicable identification requirements will be
satisfied if there is delivered to a securities clearing organization (or
bank or other financial institution that holds the Offered Certificates on
behalf of the customer in the ordinary course of its trade or business) (i)
IRS Form W-8 signed under penalties of perjury by the beneficial owner of
the Offered Certificates stating that the owner is not a U.S. person and
providing the owner's name and address, (ii) IRS Form 1001 signed by the
beneficial owner of the Offered Certificates or the owner's agent claiming
exemption from withholding under an applicable tax treaty, or (iii) IRS
Form 4224 signed by the beneficial owner of the Offered Certificates or the
owner's agent claiming exemption from withholding of tax on income
connected with the conduct of a trade or business in the United States;
provided that in any such case (x) the applicable form is delivered
pursuant to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the
entities receiving the form has actual knowledge that the owner is a U.S.
person or that any certification on the form is false.
(b) An owner of an Offered Certificate who is a Foreign Person will not
be subject to United States federal income tax on gain realized on the
sale, exchange or redemption of the Offered Certificate, provided that (i)
the gain is not effectively connected to a trade or business carried on by
the owner in the United States, (ii) in the case of an owner who is an
individual, the owner is not present in the United States for 183 days or
more during the taxable year in which the sale, exchange or redemption
occurs, (iii) in the case of gain representing accrued interest, the
conditions described in clause (a) are satisfied, and (iv) the Offered
Certificate was held as a capital asset.
(c) If the interest, gain or income on an Offered Certificate held by a
Foreign Person is effectively connected with the conduct of a trade or
business in the United States by the Foreign Person, the holder (although
exempt from the withholding tax previously discussed if an appropriate
statement is furnished) generally will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax
rates. In addition, if the Foreign Person is a foreign corporation, it may
be subject to a branch profits tax equal to 30 percent of its "effectively
connected earnings and profits" within the meaning of the Code for the
taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable tax treaty.
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<PAGE>
(d) An Offered Certificate owned by an individual who at the time of
death is a nonresident alien will not be subject to United States federal
estate tax as a result of the owner's death if, immediately before his
death, (i) the decedent did not actually or constructively own 10% or more
of the voting stock of Green Tree Financial Corporation and (ii) the
ownership of the Offered Certificate was not effectively connected with the
conduct by the decedent of a trade or business in the United States.
If the IRS were to contend successfully that the Offered Certificates are
equity interests in a partnership (not taxable as a corporation), an Offered
Certificate Owner that is a Foreign Person might be required to file a U.S.
income tax return and pay tax on its share of partnership income at regular
U.S. rates, including, in the case of a corporation, the branch profits tax
(and would be subject to withholding tax on its share of partnership income).
If the Offered Certificates are recharacterized as equity interests in an
association taxable as a corporation or a publicly traded partnership taxable
as a corporation, an owner who is a Foreign Person would generally be taxed
(and be subject to withholding) on the gross amount of the distributions on the
Offered Certificates, to the extent they are treated as dividends, at the rate
of 30% (unless the rate is reduced by applicable treaty).
STATE AND LOCAL TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in Minnesota. The State of Minnesota imposes an
income tax on individuals, trusts and estates and a franchise tax measured by
net income on corporations. This discussion of Minnesota taxation is based upon
current statutory provisions and the regulations promulgated thereunder, and
applicable judicial or ruling authority, all of which are subject to change
(which may be retroactive). No ruling on any of the issues discussed below will
be sought from the Minnesota Department of Revenue.
If the Offered Certificates are treated as debt of the Transferor for federal
income tax purposes, in the opinion of Counsel this treatment will also apply
for Minnesota tax purposes, and the Trust will not be characterized as an
association, publicly traded partnership or taxable mortgage pool taxable as a
corporation for Minnesota tax purposes. Certificate Owners not otherwise
subject to Minnesota income or franchise taxation would not become subject to
such a tax solely because of their ownership of the Offered Certificates.
Certificate Owners already subject to income or franchise taxation in Minnesota
could, however, be required to pay such a tax on all or a portion of the income
generated from ownership of the Offered Certificates.
If the Trust is treated as a partnership (not taxable as a corporation) for
federal income tax purposes, in the opinion of Counsel the Trust would also be
treated as such a partnership for Minnesota income tax purposes. The
partnership therefore would not be subject to Minnesota taxation. Certificate
Owners that are not otherwise subject to Minnesota income or franchise taxation
would not become subject to such a tax solely because of their interests in the
constructive partnership. Certificate Owners already subject to income or
franchise taxation in Minnesota could, however, be required to pay such a tax
on all or a portion of the income from the constructive partnership.
If the Offered Certificates are treated as ownership interests in an
association or publicly traded partnership taxable as a corporation, in the
opinion of Counsel this treatment would also apply for Minnesota income and
franchise tax purposes. Pursuant to this treatment, the Trust would be subject
to the Minnesota franchise tax measured by net income (which could result in
reduced distributions to Certificate Owners). Certificate Owners that are not
otherwise subject to Minnesota income or franchise taxation would not become
subject to such a tax solely because of their interests in the constructive
corporation. Certificate Owners already subject to income or franchise taxation
in Minnesota could, however, be required to pay such a tax on all or a portion
of the income from the constructive corporation.
Because state tax laws vary, it is not possible to describe the tax
consequences to the Certificate Owners in all of the states. Certificate Owners
are therefore urged to consult their own tax advisors with respect to the state
tax treatment of the Offered Certificates and income derived therefrom.
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EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan that is subject to such provisions from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code with
respect to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under ERISA,
any person who exercises any authority or control respecting the management or
disposition of the assets of a plan is considered to be a fiduciary of such
plan (subject to certain exceptions not here relevant). A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding of the
Offered Certificates and the operations of the Trust would result in direct or
indirect prohibited transactions under ERISA and the Code. The operations of
the Trust could result in prohibited transactions if Benefit Plans that
purchase the Offered Certificates are deemed to own an interest in the
underlying assets of the Trust. There may also be an improper delegation of the
responsibility to manage Benefit Plan assets if Benefit Plans that purchase the
Offered Certificates are deemed to own an interest in the underlying assets of
the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor (the "DOL") concerning the definition of what constitutes
the "plan assets" of an employee benefit plan subject to Title I of ERISA or
Section 4975 of the Code, or an individual retirement account ("IRA")
(collectively referred to as "Benefit Plans"), the assets and properties of
certain entities in which a Benefit Plan makes an equity investment could be
deemed to be assets of the Benefit Plan in certain circumstances. Accordingly,
if Benefit Plans purchase Offered Certificates, the Trust could be deemed to
hold plan assets unless one of the exceptions under the Final Regulation is
applicable to the Trust.
The Final Regulation applies to the purchase by a Benefit Plan of an "equity
interest" in an entity. Assuming that interests in Offered Certificates are
equity interests, the Final Regulation contains an exception that provides that
if a Benefit Plan acquires a "publicly offered security," the issuer of the
security is not deemed to hold plan assets. A publicly offered security is a
security that is (i) freely transferable, (ii) part of a class of securities
that is owned by 100 or more investors independent of the issuer and of one
another and (iii) either is (A) part of a class of securities registered under
Section 12(b) or 12(g) of the Exchange Act or (B) sold to the plan as part of
an offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or
such later time as may be allowed by the Commission) after the end of the
fiscal year of the issuer during which the offering of such securities to the
public occurred. In addition, the Final Regulation provides that if at all
times less that 25% of the value of all classes of equity interests in
Certificates are held by benefit plan investors (which is defined as including
plans subject to ERISA, government plans and IRA's), the investing plan's
assets will not include any of the underlying assets of the Trust.
It is anticipated that interests in the Class A Certificates will meet the
criteria of publicly offered securities as set forth above. The Underwriters
expect, although no assurances can be given, that interests in the Class A
Certificates will be held by at least 100 independent investors at the
conclusion of the offering; there are no restrictions imposed on the transfer
of interests in the Class A Certificates; and interests in the Class A
Certificates will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act and thereafter will be timely
registered under the Exchange Act.
The Underwriter of the Class B Certificates expects that the Class B
Certificates will not be held by at least 100 persons. Consequently, the
publicly offered security exception contained in the regulations will not be
met with respect to the Class B Certificates. Consequently, no transfer of a
Class B Certificate will be permitted to be made to a Benefit Plan unless such
Benefit Plan, at its expense, delivers to the Trustee and
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the Transferor an opinion of counsel satisfactory to them to the effect that
the purchase or holding of a Class B Certificate by such Benefit Plan will not
result in the assets of the Trust being deemed to be "assets of the Benefit
Plan" or subject to the prohibited transaction provisions of ERISA and the Code
and will not subject the Trustee, the Transferor or the Servicer to any
obligation in addition to those undertaken in the Pooling and Servicing
Agreement. Unless such opinion is delivered, each person acquiring a Class B
Certificate or the beneficial ownership of a Class B Certificate will be deemed
to represent to the Trustee, the Transferor and the Servicer that such person
is not a Benefit Plan subject to ERISA or Section 4975 of the Code.
If interests in a Class of the Offered Certificates fail to meet the criteria
of publicly offered securities, the Trust's assets may be deemed to include
assets of Benefit Plans that are holders of the Certificates of such Class, and
transactions involving the Trust and "parties in interest" or "disqualified
persons" with respect to such Benefit Plans might be prohibited under Section
406 of ERISA and Section 4975 of the Code unless an exemption is applicable. In
addition, the Transferor or any of the Underwriters may be considered to be a
party in interest, disqualified person or fiduciary with respect to an
investing Benefit Plan. Accordingly, an investment by a Benefit Plan in Offered
Certificates may be a prohibited transaction under ERISA and the Code unless
such investment is subject to a statutory or administrative exemption. Thus,
for example, if a participant in any Benefit Plan is an Obligor, under DOL
interpretations the purchase of interests in Offered Certificates by such plan
could constitute a prohibited transaction. Three class exemptions issued by the
DOL that could apply in such event are DOL Prohibited Transaction Exemption 84-
14 (Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds) and 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts). There is no assurance that these exemptions even if all of the
conditions specified therein are satisfied, or any other exemption will apply
to all transactions involving the Trust's assets.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of interests in Offered Certificates should consult their own counsel
as to whether the assets of the Trust which are represented by such interests
would be considered plan assets, and whether, under the general fiduciary
standards of investment prudence and diversification, an investment in Offered
Certificates is appropriate for the Benefit Plan taking into account the
overall investment policy of the Benefit Plan and the composition of the
Benefit Plan's investment portfolio. In addition, fiduciaries should consider
the consequences that would apply if the Trust's assets were considered plan
assets, the applicability of exemptive relief from the prohibited transaction
rules, and, whether all conditions for such exemptive relief would be
satisfied. In this regard, purchasers that are insurance companies should
consult with their counsel with respect to the recent United States Supreme
Court case interpreting the fiduciary responsibility rules of ERISA, John
Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 144 S.Ct.
517 (1993). In John Hancock, the Supreme Court ruled that assets held in an
insurance company's general account may be deemed to be "plan assets" for ERISA
purposes under certain circumstances. Prospective purchasers should determine
whether the decision affects their ability to make purchases of the Offered
Certificates.
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UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
dated , 1995 (the "Underwriting Agreement"), among the Transferor and the
underwriters named below (the "Underwriters"), the Transferor has agreed to
sell to each of the Underwriters, and each of the Underwriters has severally
agreed to purchase from the Transferor, the principal amount of the Offered
Certificates set forth opposite its name below.
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
CLASS A CLASS B
UNDERWRITER CERTIFICATES CERTIFICATES
----------- ------------ ------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................... $ $
Bear, Stearns & Co. Inc........................
---------- ----------
Total...................................... $ $
========== ==========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Offered
Certificates offered hereby if any Offered Certificates are purchased. In the
event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of the nondefaulting
Underwriter may be increased or the Underwriting Agreement may be terminated.
The Transferor has been advised by the Underwriters that the Underwriters
propose initially to offer the Class A Certificates to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of % of the principal
amount of the Class A Certificates. The Underwriters may allow, and such
dealers may reallow, a discount with respect to the Class A Certificates not in
excess of % of such principal amount to certain other dealers. The Transferor
has been advised by the Underwriter of the Class B Certificates that the
Underwriter of the Class B Certificates proposes initially to offer the Class B
Certificates to the public at the public offering price set forth on the cover
page of this Prospectus, and to certain dealers at such price less a concession
not in excess of % of the principal amount of the Class B Certificates. The
Underwriter of the Class B Certificates may allow, and such dealers may
reallow, a discount with respect to the Class B Certificates not in excess of
% of such principal amount to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Underwriting Agreement provides that the Transferor and Green Tree will
indemnify the Underwriters against certain liabilities, including liabilities
under applicable securities laws, or contribute to payments the Underwriters
may be required to make in respect thereof.
Each Underwriter has represented and agreed that (a) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986
with respect to anything done by it in relation to the Certificates in, from or
otherwise involving the United Kingdom; (b) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Certificates to a person who is of a kind
described in Article 9(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1988 or who is a person to whom the document
may otherwise lawfully be issued or passed on; (c) if that Underwriter is an
authorized person under Chapter III of the Financial Services Act of 1986, it
has only promoted and will only promote (as that term is defined in Regulation
1.02 of the Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described in this
Prospectus if that person is of a kind described either in Section 76(2) of the
Financial Services Act of 1986 or in Regulation 1.04 of the Financial Services
(Promotion of Unregulated Schemes) Regulation 1991; and (d) it is a person of a
kind described in Article 9(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1988.
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LISTING AND GENERAL INFORMATION
Application has been made to list the Offered Certificates on the Luxembourg
Stock Exchange. In connection with the listing application, the Certificate of
Incorporation and Bylaws of the Transferor, as well as legal notice relating to
the issuance of the Offered Certificates will be deposited prior to listing
with the Chief Registrar of the District Court of Luxembourg, where copies
thereof may be obtained upon request. Once the Certificates have been so
listed, trading of the Offered Certificates may be effected on the Luxembourg
Stock Exchange. The Class A Certificates and the Class B Certificates have been
accepted for clearance through the facilities of DTC, Cedel and Euroclear (ISIN
number for the Class A Certificates and for the Class B
Certificates, ).
The transactions contemplated in this Prospectus were authorized by
resolutions adopted by the Transferor on September 13, 1995.
Copies of the Pooling and Servicing Agreement, the Series 1995-1 Supplement,
the annual report of independent public accountants described in "Description
of the Offered Certificates--Evidence as to Compliance" in the Prospectus, the
documents listed under "Available Information" and the reports to
Certificateholders referred to under "Reports to Certificateholders" and
"Description of the Offered Certificates--Reports to Certificateholders" in the
Prospectus will be available at the office of the Listing Agent of the Trust in
Luxembourg, whose address is 80, place de la Gare 1616, Luxembourg. Financial
information regarding the Transferor will be included in the consolidated
financial statements of Green Tree Financial Corporation in its Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, which will be
available at the office of the Listing Agent in Luxembourg.
The Certificates, the Pooling and Servicing Agreement and the Series 1995-1
Supplement are governed by the laws of the State of Minnesota.
LEGAL MATTERS
The legality of the Offered Certificates will be passed upon for the
Transferor and Green Tree by Dorsey & Whitney P.L.L.P., Minneapolis, Minnesota.
The material federal income tax consequences of the Certificates will be passed
upon for the Transferor by Dorsey & Whitney P.L.L.P. Certain legal matters
relating to the Offered Certificates will be passed upon for the Underwriters
by Brown & Wood.
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GLOSSARY OF TERMS
There follows abbreviated definitions of certain capitalized terms used in
the Prospectus. The Pooling and Servicing Agreement and the 1995-1 Series
Supplement may contain a more complete definition of certain of the terms
defined herein and reference should be made to the Pooling and Servicing
Agreement and the 1995-1 Series Supplement for a more complete definition of
all such terms.
"ABC Fixed/Floating Allocation Percentage" means, for any business day, the
percentage equivalent of a fraction, the numerator of which is the sum of the
Class A Invested Amount, the Class B Invested Amount and the Class C Invested
Amount at the end of the last day of the Revolving Period and the denominator
of which is the greater of (a) the sum of the aggregate amount of Principal
Receivables and the amount on deposit in the Excess Funding Account at the end
of the preceding business day and (b) the sum of the numerators used to
calculate the allocation percentages with respect to Principal Receivables for
all Series.
"ABC Investor Default Amount" means an amount equal to the product of (a) the
sum of the Class A Floating Allocation Percentage, the Class B Floating
Allocation Percentage and the Class C Floating Allocation Percentage applicable
on such business day and (b) the aggregate principal amount of Defaulted
Receivables identified since the prior reporting date.
"Accounts" means the revolving credit agreements entered into with Green Tree
by dealers located in the United States to finance their consumer and
commercial product inventory or by manufacturers or distributors located in the
United States to finance their inventory, finished parts or other assets.
"Accumulation Period Commencement Date" means the first day of the
Monthly Period, provided, however, if the Accumulation Period Length has been
determined to be less than four months and, after such determination, any
outstanding Series enters into an early amortization period, the Accumulation
Period Commencement Date shall be the earlier of (i) the date that such
outstanding Series entered into its early amortization period and (ii) the
Accumulation Period Commencement Date, as previously determined.
"Accumulation Period Length" means the one, two, three or four month(s)
period, determined on 15, 19 , and shall be calculated as the
product, rounded upwards to the nearest integer, of (a) four and (b) a
fraction, the numerator of which is the Invested Amount as of 15, 19
(after giving effect to all changes therein on such date) and the denominator
of which is the sum of such Invested Amount and the invested amounts as of
15, 19 (after giving effect to all changes therein on such date) of
all other outstanding Series whose respective revolving periods are not
scheduled to end before the last day of the , 19 Monthly Period.
"Accumulation Shortfall" means, for the succeeding Monthly Period, the amount
by which the Controlled Deposit Amount exceeds the amount deposited in the
Principal Account for any Monthly Period.
"Addition Date" means in the case of an Additional Account, the date of its
designation for inclusion in the Trust and the date the related Receivables are
transferred to the Trust.
"Additional Accounts" means the additional Eligible Accounts which the
Transferor and Green Tree have the right (subject to certain limitations and
conditions), and in some circumstances are obligated, to designate from time to
time to be included as Accounts and to convey to the Trust the Receivables of
such Additional Accounts.
"Additional Cut-off Date" means with respect to Additional Accounts, the date
specified in the Addition Notice delivered with respect to such Additional
Accounts pursuant to Section 2.6(c) of the Pooling and Servicing Agreement.
"Additional Class D Invested Amount" means any increase in the Class D
Invested Amount agreed to in connection with an increase by the Transferor in
any of the Overconcentration Amounts.
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"Affiliate" means, with respect to a particular Person, any Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person.
"Asset-Based Receivable Overconcentration" on any Distribution Date means the
excess of (a) the aggregate of all amounts of Principal Receivables in Accounts
for Assets Based Receivables on the last day of the Monthly Period immediately
preceding such Distribution Date over (b) 20% of the Pool Balance on the last
day of such immediately preceding Monthly Period. Notwithstanding the above, in
the case of such Overconcentration, the percentage in clause (b) may be
increased by the Transferor, without the consent of any Certificateholder, to a
level acceptable to each Rating Agency without any reduction or withdrawal of
its rating of the Class A, Class B or Class C Certificates (but which may
involve an adjustment, upward or downward, of the Class D Invested Amount).
"Asset-Based Receivables" means revolving credit agreements entered into with
Green Tree by manufacturers or distributors of certain consumer and commercial
products located in the United States to finance their inventory of such
products and to finance their accounts receivable arising from sales of such
inventory.
"Automatic Addition Condition" means, with respect to the addition of
Accounts, that (i) during the calendar quarter in which such addition occurs,
the number of new Accounts for Dealers that are financing products of the type
already being financed by Green Tree does not exceed 5% of the number of all
Accounts at the end of the preceding calendar quarter, (ii) during the twelve
months ending at the beginning of such calendar quarter, the number of such new
Accounts does not exceed 20% of the number of all Accounts at the beginning of
such twelve month period, (iii) the average for the three months preceding the
month of such addition of the aggregate balance of Receivables that have been
delinquent for more than 30 days does not exceed 1.25% of the Pool Balance at
the end of the month preceding the month of such addition, and (iv) the
annualized average for such three month period of the net losses incurred in
respect of the Receivables does not exceed 1.75% of the Pool Balance at the end
of the month preceding the month of such addition.
"Available Series Interest Collections" means investment earnings (net of
investment losses and expenses) on amounts on deposit in the Trust Accounts.
"Bankruptcy Code" means Title 11 of the United States Code.
"Base Rate" means the sum of (i) the average of the Class A Certificate Rate,
the Class B Certificate Rate and the Class C Certificate Rate weighted by the
unpaid principal amount of each respective class of Certificates plus (ii) 2%
per annum.
"Benefit Plans" means an employee benefit plan subject to Title I of ERISA or
Section 4975 of the Code, or an individual retirement account (an "IRA").
"Cash Equivalents" mean, unless otherwise provided in the Supplement with
respect to any Series, (a) negotiable instruments or securities represented by
instruments in bearer or registered form which evidence (i) obligations of or
fully guaranteed by the United States of America; (ii) time deposits,
promissory notes, or certificates of deposit of any depositary institution or
trust company; provided, however, that at the time of the Trust's investment or
contractual commitment to invest therein, the certificates of deposit or short-
term deposits of such depositary institution or trust company shall have a
credit rating from Standard & Poor's of A-1+ and from Moody's of P-1; (iii)
commercial paper having, at the time of the Trust's investment or contractual
commitment to invest therein, a rating from Standard & Poor's of A-1+ and from
Moody's of P-1; (iv) banker's acceptances issued by any depositary institution
or trust company described in clause (a)(ii) above; and (v) investments in
money market funds rated AAA-m or AAA-mg by Standard & Poor's and Aaa by
Moody's or otherwise approved in writing by Moody's and Standard & Poor's; (b)
time deposits and demand deposits in the name of the Trust or the Trustee in
any depositary institution or trust company referred to in clause (a)(ii)
above; (c) securities not represented by an instrument that are registered in
the
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name of the Trustee or its nominee (which may not be Green Tree or an
Affiliate) upon books maintained for that purpose by or on behalf of the issuer
thereof and identified on books maintained for that purpose by the Trustee as
held for the benefit of the Trust or the Certificateholders, and consisting of
(x) shares of an open end diversified investment company which is registered
under the Investment Company Act which (i) invests its assets exclusively in
obligations of or guaranteed by the United States of America or any
instrumentality or agency thereof having in each instance a final maturity date
of less than one year from their date of purchase or other Cash Equivalents,
(ii) seeks to maintain a constant net asset value per share, (iii) has
aggregate net assets of not less than $100,000,000 on the date of purchase of
such shares and (iv) which the Rating Agency designates in writing will not
result in a withdrawal or downgrading of its then current rating of any Series
rated by it or (y) Eurodollar time deposits of a depository institution or
trust company that are rated A-1+ by Standard & Poor's and P-1 by Moody's;
provided, however, that at the time of the Trust's investment or contractual
commitment to invest therein, the Eurodollar deposits of such depositary
institution or trust company shall have a credit rating from Standard & Poor's
of A-1+ and P-1 by Moody's; and (d) any other investment if the Rating Agency
confirms in writing that such investment will not adversely affect its then
current rating of the Investor Certificates.
"Cede & Co." means DTC's nominee. Cede & Co. is expected to be the holder of
record of the Offered Certificates.
"Cedel" means Cedel Bank, societe anonyme, the professional depository,
incorporated under the laws of Luxembourg, which holds securities for its
participating organizations and facilitates the clearance and settlement of
securities transactions between Cedel Participants through electronic book-
entry changes in the accounts of such Cedel Participants.
"Cedel Participants" means the participating organizations for which Cedel
holds securities.
"Certificate Owners" means the owners of the beneficial interests in the
Offered Certificates.
"Certificateholders" means the holders of record of the Class A, Class B,
Class C and Class D Certificates.
"Certificateholders' Interest" means the interest in the assets of the Trust
allocated to the Certificateholders.
"Certificate Rates" means the Class A Certificate Rate and the Class B
Certificate Rate.
"Certificates" means each of the Offered Certificates, the Floorplan
Receivable Trust Certificates, Series 1995-1, Class C and the Floorplan
Receivable Trust Certificates, Series 1995-1, Class D.
"CFD" means Green Tree's Commercial Finance Division.
"Class" means, with respect to any Series, any one of the classes of
Certificates of that Series as specified in the related Series Supplement.
"Class A Certificate Rate" means the rate at which interest on the
outstanding principal balance of the Class A Certificates will accrue, which
will be at a rate per annum equal to the lesser of (i) the applicable one-month
LIBOR (calculated and determined as described under "Description of the Offered
Certificates--Interest Payments") plus % per annum or (ii) the Net
Receivables Rate (as defined under "Description of the Offered Certificates--
Interest").
"Class A Certificateholders" means the Person in whose name a Class A
Certificate is registered in the Certificate Register.
"Class A Certificates" means each of the Floating Rate Floorplan Receivable
Trust Certificates, Series 1995-1, Class A.
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"Class A Certificateholders' Interest" means the portion of the
Certificateholders' Interest evidenced by the Class A Certificates.
"Class A Fixed/Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of a fraction, the numerator of which
is the Class A Invested Amount at the end of the last day of the Revolving
Period and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on deposit in the
Excess Funding Account at the end of the preceding business day and (b) the sum
of the numerators used to calculate the allocation percentages with respect to
Principal Collections for all Series.
"Class A Floating Allocation Percentage" means, with respect to any business
day, the percentage equivalent of a fraction, the numerator of which is the
Class A Invested Amount as of the end of the preceding business day and the
denominator of which is the greater of (a) the total amount of Principal
Receivables in
the Trust and the amounts on deposit in the Excess Funding Account as of the
end of the preceding business day and (b) when used with respect to Principal
Collections only, the sum of the numerators with respect to all Classes of all
Series then outstanding used to calculate the applicable allocation percentage.
"Class A Invested Amount" means an amount equal to (a) the initial principal
balance of the Class A Certificates minus (b) the aggregate amount of principal
payments made to Class A Certificateholders prior to such date, and minus (c)
the aggregate amount of Class A Investor Charge-Offs for all prior Distribution
Dates, equal to the amount by which the Class A Invested Amount has been
reduced to fund the Investor Default Amount on all prior Distribution Dates as
described under "--Investor Charge-Offs," and plus (d) the aggregate amount of
Available Series Interest Collections, Excess Interest Collections and
Reallocated Principal Collections applied on all prior Distribution Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing clause
(c).
"Class A Investor Charge-Off" means, if the Class B Invested Amount is
reduced to zero, the portion of the Class A Invested Amount equal to the amount
by which such insufficiency would have caused the Class B Invested Amount to be
reduced below zero (but not in excess of the remaining aggregate Investor
Default Amount for such Monthly Period) that will be deducted from the Class A
Invested Amount.
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class A Certificate Rate for the related Interest
Accrual Period, (ii) the actual number of days in such Interest Accrual Period
divided by 360 and (iii) the outstanding principal balance of the Class A
Certificates on the related Record Date or, with respect to the first
Distribution Date, the initial outstanding principal balance of the Class A
Certificates.
"Class A Principal" with respect to any Distribution Date during the
Controlled Accumulation Period will equal the sum of (i) an amount equal to the
ABC Fixed/Floating Allocation Percentage of all Principal Collections (less the
amount of Reallocated Class B Principal Collections and Reallocated Class C
Principal Collections) received during the Monthly Period immediately preceding
such Distribution Date, (ii) any amount on deposit in the Excess Funding
Account allocated to the Class A Certificates with respect to the preceding
Monthly Period, (iii) the aggregate ABC Investor Default Amount paid from
Available Series Interest Collections, Excess Interest Collections or
Reallocated Principal Collections of unreimbursed Class A Investor Charge-Offs,
Class B Investor Charge-Offs, Class C Investor Charge-Offs and Class D Investor
Charge-Offs and (iv) Shared Principal Collections allocated to the Class A
Certificates; provided, however, that with respect to any Distribution Date
during the Controlled Accumulation Period, Class A Principal will not exceed
the lesser of (i) the Controlled Deposit Amount and (ii) the Class A Invested
Amount; provided, further, that with respect to the Series 1995-1 Termination
Date, Class A Principal will be an amount equal to the Class A Invested Amount.
"Class A Required Amount" means the amount determined by the Servicer on each
business day equal to the excess, if any, of (x) the sum of (i) Class A
Interest for the prior Monthly Period, (ii) any Class A
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Interest due but not paid on any previous Distribution Date plus any Class A
Additional Interest previously due but not paid to the Class A
Certificateholders on a prior Distribution Date, (iii) if Green Tree or an
Affiliate of Green Tree is no longer the Servicer, the Class A Floating
Allocation Percentage of the Servicing Fee for the prior Monthly Period and
(iv) the Class A Floating Allocation Percentage of the Default Amount, to the
extent not previously paid, for any business day in the prior Monthly Period
over (y) the Available Series 1995-1 Interest Collections plus any Excess
Interest Collections from other Series allocated with respect to the amounts
described in clauses (x)(i) through (iv).
"Class A Scheduled Payment Date" means the Distribution Date in ,
.
"Class B Certificate Rate" means the rate at which interest on the
outstanding principal balance of the Class B Certificates will accrue which
shall be at a rate per annum equal to the lesser of (i) the applicable one-
month LIBOR (calculated and determined as described under "Description of the
Offered Certificates--
Interest Payments") plus % per annum or (ii) the Net Receivables Rate (as
defined under "Description of the Offered Certificates--Interest").
"Class B Certificateholders" means the Person in whose name a Class B
Certificate is registered in the Certificate Register.
"Class B Certificates" means each of the Floating Rate Floorplan Receivable
Trust Certificates, Series 1995-1, Class B.
"Class B Certificateholders' Interest" means the portion of the
Certificateholders' Interest evidenced by the Class B Certificates.
"Class B Fixed/Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of a fraction, the numerator of which
is the Class B Invested Amount at the end of the last day of the Revolving
Period and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on deposit in the
Excess Funding Account at the end of the preceding business day and (b) the sum
of the numerators used to calculate the allocation percentages with respect to
Principal Collections for all Series.
"Class B Floating Allocation Percentage" means, with respect to any business
day, the percentage equivalent of a fraction, the numerator of which is the
Class B Invested Amount as of the end of the preceding business day and the
denominator of which is the greater of (a) the total amount of Principal
Receivables in the Trust and the amount on deposit in the Excess Funding
Account as of the end of the preceding business day and (b) when used with
respect to Principal Collections only, the sum of the numerators with respect
to all Classes of all Series then outstanding used to calculate the applicable
allocation percentage.
"Class B Invested Amount" for any date means an amount equal to (a) the
initial principal balance of the Class B Certificates minus (b) the aggregate
amount of principal payments made to Class B Certificateholders prior to such
date, minus (c) the aggregate amount of Class B Investor Charge-Offs for all
prior Distribution Dates, equal to the amount by which the Class B Invested
Amount has been reduced to fund the Investor Default Amount on all prior
Distribution Dates as described under "--Investor Charge-Offs," minus (d) the
aggregate amount of Reallocated Class B Principal Collections for which neither
the Class D Invested Amount nor the Class C Invested Amount has been reduced
for all prior Distribution Dates, and plus (e) the aggregate amount of
Available Series Interest Collections, Excess Interest Collections and
Reallocated Class C Principal Collections and Reallocated Class D Principal
Collections applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d).
"Class B Investor Charge-Off" means, if the Class C Invested Amount is
reduced to zero, the portion of the Class B Invested Amount equal to the amount
by which such insufficiency would have caused the Class C Invested Amount to be
reduced below zero (but not in excess of the remaining aggregate Investor
Default Amount for such Monthly Period) that will be deducted from the Class B
Invested Amount.
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"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class B Certificate Rate for the related Interest
Accrual Period, (ii) the actual number of days in such Interest Accrual Period
divided by 360 and (iii) the Class B Invested Amount on the related Record Date
or, with respect to the first Distribution Date, the initial outstanding
principal balance of the Class B Certificates.
"Class B Principal" with respect to any Distribution Date on or after the
Class A Scheduled Payment Date will equal the sum of (i) an amount equal to the
ABC Fixed/Floating Allocation Percentage of all Principal Collections (less the
amount of Reallocated Class B Principal Collections and Reallocated Class C
Principal Collections) received during the Monthly Period immediately preceding
such Distribution Date (or, in the case of the first Distribution Date
following the date on which an amount equal to the Class A Invested
Amount is deposited in the Principal Amount to be applied to the payment of
Class A Principal, the ABC Fixed/Floating Allocation Percentage of Principal
Collections from the date on which such deposit is made), (ii) any amount on
deposit in the Excess Funding Account allocated to the Class B Certificates
with respect to the preceding Monthly Period, and (iii) the aggregate ABC
Investor Default Amount paid from Available Series Interest Collections, Excess
interest Collections or Reallocated Principal Collections of unreimbursed Class
B Investor Charge-Offs, Class C Investor Charge-Offs and Class D Investor
Charge-Offs and (iv) Shared Principal Collections allocated to the Class B
Certificates; provided, however, that with respect to any Distribution Date
during the Controlled Accumulation Period, Class B Principal will not exceed
the lesser of (i) the Controlled Deposit Amount and (ii) the Class B Invested
Amount; provided, further that with respect to the Series 1995-1 Termination
Date, Class B Principal will be an amount equal to the Class B Invested Amount.
"Class B Required Amount" means the amount determined by the Servicer on each
business day equal to the excess, if any, of (x) the sum of (i) Class B
Interest for the prior Monthly Period, (ii) any Class B Interest due but not
paid on any previous Distribution Date plus any Class B Additional Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, (iii) if Green Tree or an Affiliate of Green Tree is no
longer the Servicer, the Class B Floating Allocation Percentage of the
Servicing Fee for the prior Monthly Period and (iv) the Class B Floating
Allocation Percentage of the Default Amount, to the extent not previously paid,
for any business day in the prior Monthly Period over (y) the Available Series
1995-1 Interest Collections plus any Excess Interest Collections from other
Series allocated with respect to the amounts described in clauses (x)(i)
through (iv).
"Class B Scheduled Payment Date" means .
"Class C Certificate Rate" means % per annum from November , 1995
through December 14, 1995, and with respect to each Interest Accrual Period
thereafter, a per annum rate % in excess of LIBOR as determined on the
related LIBOR Determination Date.
"Class C Certificates" means each of the Floating Rate Floorplan Receivable
Trust Certificates, Series 1995-1, Class C.
"Class C Certificateholder" means the Person in whose name a Class C
Certificate is registered in the Certificate Register.
"Class C Certificateholders' Interest" means the portion of the
Certificateholders' Interest evidenced by the Class B Certificates.
"Class C Expected Final Payment Date" means .
"Class C Fixed/Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of a fraction, the numerator of which
is the Class C Invested Amount at the end of the last day of the Revolving
Period and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on deposit in the
Excess Funding Account at the end of the preceding business day and (b) the sum
of the numerators used to calculate the allocation percentages with respect to
Principal Collections for all Series.
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"Class C Floating Allocation Percentage" means, with respect to any business
day, the percentage equivalent of a fraction, the numerator of which is the
Class C Invested Amount as of the end of the preceding business day and the
denominator of which is the greater of (a) the total amount of Principal
Receivables in the Trust and the amount on deposit in the Excess Funding
Account as of the end of the preceding business day and (b) when used with
respect to Principal Collections only, the sum of the numerators with respect
to all Classes of all Series then outstanding used to calculate the applicable
allocation percentage.
"Class C Invested Amount" for any date means an amount equal to (a) the
initial principal balance of the Class C Certificates minus (b) the aggregate
amount of principal payments made to Class C Certificateholders prior to such
date, minus (c) the aggregate amount of Class C Investor Charge-Offs for all
prior Distribution Dates, equal to the amount by which the Class C Invested
Amount has been reduced to fund the Investor Default Amount on all prior
Distribution Dates as described under "--Investor Charge-Offs," minus (d) the
aggregate amount of Reallocated Class C Principal Collections for which the
Class D Invested Amount has not been reduced for all prior Distribution Dates,
and plus (e) the aggregate amount of Available Series Interest Collections,
Excess Interest Collections, Reallocated Class D Principal Collections and
certain other amounts as may be available applied on all prior Distribution
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d).
"Class C Investor Charge-Off" means, if the Class D Invested Amount is
reduced to zero, the portion of the Class C Invested Amount equal to the amount
by which such insufficiency would have caused the Class D Invested Amount to be
reduced below zero (but not in excess of the remaining aggregate Investor
Default Amount for such Monthly Period) that will be deducted from the Class C
Invested Amount.
"Class C Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class C Certificate Rate for the related Interest
Accrual Period, (ii) the actual number of days in such Interest Accrual Period
divided by 360 and (iii) the Class C Invested Amount on the related Record Date
or, with respect to the first Distribution Date, the initial outstanding
principal balance of the Class C Certificates.
"Class C Percentage" means a fraction, the numerator of which is the Class C
Invested Amount and the denominator of which is the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested Amount.
"Class C Principal" with respect to any Distribution Date on or after the
Class C Principal Commencement Date will equal the sum of (i) an amount equal
to the ABC Fixed/Floating Allocation Percentage of all Principal Collections
(less the amount of Reallocated Class C Principal Collections) received during
the Monthly Period immediately preceding such Distribution Date (or, in the
case of the first Distribution Date following the date on which an amount equal
to the Class B Invested Amount is deposited in the Principal Account to be
applied to the payment of Class B Principal, the ABC Fixed/Floating Allocation
Percentage of Principal Collections from the date on which such deposit is
made), (ii) any amount on deposit in the Excess Funding Account allocated to
the Class C Certificates with respect to the preceding Monthly Period, (iii)
the aggregate ABC Investor Default Amount paid from Available Series Interest
Collections, Excess Interest Collections or Reallocated Principal Collections
with respect to the preceding Monthly Period and any reimbursements from
Available Series Interest Collections, Excess Interest Collections or
Reallocated Principal Collections of unreimbursed Class C Investor Charge-Offs
and Class D Investor Charge-Offs and (iv) Shared Principal Collections
allocated to the Class C Certificates; provided, that with respect to the
Termination Date, Class C Principal will be an amount equal to the Class C
Invested Amount.
"Class C Principal Commencement Date" means the earlier of (a) the
Distribution Date during the Controlled Accumulation Period on which the Class
B Invested Amount is paid in full or, if there are no Principal Collections
allocable to the Series 1995-1 Investor Certificates remaining after payments
have been made to the Class B Certificates on such Distribution Date, the
Distribution Date following the Distribution Date on which the Class B Invested
Amount is paid in full and (b) the Distribution Date following a sale or
repurchase of the Receivables as set forth in the Pooling and Servicing
Agreement and the 1995-1 Series Supplement.
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"Class C Required Amount" means the amount determined by the Servicer on each
business day equal to the excess, if any, of (x) the sum of (i) Class C
Interest for the prior Monthly Period, (ii) any Class C Interest due but not
paid on any previous Distribution Date plus any Class C Additional Interest
previously due but not paid to the Class C Certificateholders on a prior
Distribution Date, (iii) if Green Tree or an Affiliate of Green Tree is no
longer the Servicer, the Class C Floating Allocation Percentage of the
Servicing Fee for the prior Monthly Period and (iv) the Class C Floating
Allocation Percentage of the Default Amount, to the extent not previously paid,
for any business day in the prior Monthly Period over (y) the Available Series
1995-1 Interest Collections plus any Excess Interest Collections from other
Series allocated with respect to the amounts described in clauses (x)(i)
through (iv).
"Class D Certificates" means each of the Floating Rate Floorplan Receivable
Trust Certificates, Series 1995-1, Class D.
"Class D Certificateholders" means the person in whose name a Class D
Certificate is registered in the Certificate Register.
"Class D Certificateholders' Interest" means the portion of the
Certificateholders' Interest evidenced by the Class D Certificates.
"Class D Fixed/Floating Allocation Percentage" means, with respect to any
business day, the percentage equivalent of a fraction, the numerator of which
is the Class D Invested Amount at the end of the last day of the Revolving
Period and the denominator of which is the greater of (a) the sum of the
aggregate amount of Principal Receivables and the amount on deposit in the
Excess Funding Account as of the end of the preceding business day and (b) the
sum of the numerators used to calculate the allocation percentages with respect
to Principal Collections for all Series.
"Class D Floating Allocation Percentage" means, with respect to any business
day, the percentage equivalent of a fraction, the numerator of which is the
Class D Invested Amount as of the end of the preceding business day and the
denominator of which is the greater of (a) the total amount of Principal
Receivables and the amount on deposit in the Excess Funding Account at the end
of the preceding business day and (b) when used with respect to Principal
Collections only, the sum of the numerators with respect to all Classes of all
Series then outstanding used to calculate the applicable allocation percentage.
"Class D Incremental Invested Amount" means for any Monthly Period the
product of (a) a fraction, the numerator of which is the sum of the Invested
Amount (exclusive of the Class D Incremental Invested Amount) on the last day
of the immediately preceding Monthly Period and the denominator of which is the
total amount of Principal Receivable on such last day times (b) the
Overconcentration Amount for such Monthly Period.
"Class D Invested Amount" means an amount equal to (a) the initial principal
balance of the Class D Certificates (which will be zero), plus (b) the Class D
Incremental Invested Amount for the related Monthly Period, plus (c) any
Additional Class D Invested Amount, minus (d) the aggregate amount of principal
payments made to Class D Certificateholders prior to such date, minus (e) the
aggregate amount of Class D Investor Charge-Offs for all prior Distribution
Dates, equal to the amount by which the Class D Invested Amount has been
reduced to fund the Investor Default Amount on all prior Distribution Dates as
described under "--Investor Charge-Offs," minus (f) the aggregate amount of
Reallocated Principal Collections for all prior Distribution Dates, plus (g)
the aggregate amount of Interest Collections and Excess Interest Collections
applied on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (d) and plus (e).
"Class D Investor Charge-Off" means the amount by which the Class D Invested
Amount will be reduced by the remaining aggregate Investor Default Amount if
the Available Series Interest Collections amount is not sufficient to cover the
entire Investor Default Amount.
"Class D Investor Default Amount" means the portion of all Defaulted
Receivables in an amount equal to the product of (a) the Class D Floating
Allocation Percentage and (b) the aggregate principal amount of Defaulted
Receivables identified since the prior reporting date.
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"Class D Principal" means, beginning on the Transfer Date preceding the Class
D Principal Commencement Date, the amounts that the Trustee, acting in
accordance with instructions from the Servicer, will withdraw from amounts
deposited into the Principal Account in respect of Principal Collections
processed during the related Monthly Period and, to the extent of the Class D
Invested Amount, shall deposit in the Distribution Account for distribution to
the Class D Certificateholders on the next succeeding Distribution Date.
"Class D Principal Payment Commencement Date" means the earlier of (a) the
Distribution Date on which the Class C Invested Amount is paid in full or, if
there are no Principal Collections allocable to the Series 1995-1 Investor
Certificates remaining after payments have been made to the Class C
Certificates on such Distribution Date, the Distribution Date following the
Distribution Date on which the Class C Invested Amount is paid in full and (b)
the Distribution Date following a sale or repurchase of the Receivables as set
forth in the Pooling and Servicing Agreement and the 1995-1 Series Supplement.
"Closing Date" means December , 1995.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Security" means an assignment of a security interest in the
consumer and commercial products or other assets securing each Receivable.
"Collection Account" means a segregated account established by and maintained
by the Servicer with a Qualified Institution in the name of the Trust, for the
benefit of certificateholders of all Series.
"Collections" means the Principal Collections and Interest Collections.
"Commission" means the Securities and Exchange Commission.
"Companion Series" means one or more other Series with which the Series 1995-
1 Certificates may be paired.
"Controlled Accumulation Amount" means an amount sufficient to amortize the
Class A Invested Amount given the Controlled Accumulation Period Length.
"Controlled Accumulation Period" means the period that will commence on the
Controlled Accumulation Period Commencement Date and will end on the earliest
of (i) the commencement of the Early Amortization Period, (ii) the Initial
Principal Payment Date, (iii) payment of the Investor Interest in full and (iv)
the Series 1995-1 Termination Date.
"Controlled Accumulation Period Commencement Date" means, if the Controlled
Accumulation Period has not been postponed, the September 15, 1998 Distribution
Date.
"Controlled Accumulation Period Length" will be one, two, three or four
months, and will be determined on September 15, 1998 as described under
"Description of the Offered Certificates--Postponement of Controlled
Accumulation Period."
"Controlled Deposit Amount" means, for any Monthly Period, the sum of the (i)
Controlled Accumulation Amount for such Monthly Period plus (ii) the
Accumulation Shortfall for the related Monthly Period.
"Cooperative" means the Euroclear Clearance System, S.C., a Belgian
cooperative corporation.
"Counsel" means Dorsey & Whitney P.L.L.P.
"Cut-off Date" means November 10, 1995.
"DHI Fees" means, with respect to the Floorplan Receivables, the
documentation, handling and inspection fee charged to each Dealer by Green Tree
for each unit financed.
"DOL" means the United States Department of Labor.
"DTC" means The Depository Trust Company.
"DTC Participants" means the participating organizations of DTC.
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"Dealer Overconcentration" means, on any Distribution Date with respect to
any Account with a Dealer, the excess of (a) the aggregate amount of Principal
Receivables in such Account on the last day of Monthly Period immediately
preceding such Distribution Date over (b) 2% of the Pool Balance on the last
day of such immediately preceding Monthly Period. Notwithstanding the above, in
the case of such Overconcentration, the percentage in clause (b) may be
increased by the Transferor, without the consent of any Certificateholder, to a
level acceptable to each Rating Agency without any reduction or withdrawal of
its rating of the Class A, Class B or Class C Certificates (but which may
involve an adjustment, upward or downward, of the Class D Invested Amount).
"Dealers" means those dealers, manufacturers and distributors who are
obligated under the Receivables.
"Defaulted Receivables" means the Receivables that will be charged off as
uncollectible in accordance with the Servicer's customary and usual policies.
"Definitive Certificates" means definitive, fully registered Certificates
issued to Certificate Owners pursuant to the Pooling and Servicing Agreement.
"Depositaries" means Cede, Cedel and Euroclear.
"Depository" means the nominee of DTC (together with any successor depository
selected by the Transferor).
"Determination Date" means the third business day preceding each Distribution
Date.
"Discount Factor" means a specified percentage of Principal Collections to be
treated as interest collections. The Discount Factor, if any, may vary from
time to time and initially will be zero.
"Distribution Account" means a non-interest bearing segregated demand deposit
account established by the Trustee with a Qualified Institution for the benefit
of the certificateholders of each Series.
"Distribution Date" means the 15th day of each month, or if such day is not a
business day, the next succeeding business day, beginning January 15, 1996.
"Early Amortization Period" means the period beginning on the date that a Pay
Out Event occurs and ending on the earlier of (i) the date on which the Class A
Invested Amount, the Class B Invested Amount, the Class C Invested Amount and
the Class D Invested Amount have been paid in full and (ii) the Series 1995-1
Termination Date.
"Eligible Account" means as of the relevant Cut-off Date (or, with respect to
Additional Accounts, as of their date of designation for inclusion in the
Trust), an arrangement to provide a revolving extension of credit by Green Tree
or one of its subsidiaries to a Dealer (i) in order to finance the purchase by
a Dealer of consumer and commercial product inventory or (ii) as a line of
credit secured by unencumbered assets of such Dealer, which extension of
credit, as of the date of determination thereof, (a) is in existence and
maintained with Green Tree or such subsidiary, (b) is payable in United States
dollars, (c) is with a Dealer whose most recent billing address is in the
United States or its territories or possessions, (d) has been originated by
Green Tree or such subsidiary in the ordinary course of its business (e) in
respect of which no amounts have been charged off by Green Tree or such
subsidiary as uncollectible in its customary and usual manner as of the Cut-off
Date (or, with respect to Additional Accounts, as of their date of designation
for inclusion in the Trust), and (f) is with a Dealer that is not involved in
insolvency proceedings.
"Eligible Accounts" means the accounts selected from all such credit
agreements of Green Tree that meet the credit criteria specified in the Pooling
and Servicing Agreement and the related Series Supplement.
"Eligible Portfolio" means all the accounts that were Eligible Accounts at
the Cut-off Date.
"Eligible Receivable" means a Receivable (a) that was originated by Green
Tree or one of its subsidiaries in the ordinary course of business, (b) that
has arisen under an Eligible Account, (c) that was created in
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compliance with all requirements of law applicable thereto and pursuant to a
floorplan or asset-based financing agreement that complies with all
requirements of law applicable thereto, (d) with respect to which all consents,
licenses or authorizations of, or registrations with, any governmental
authority required to be obtained or given by Green Tree or the Transferor in
connection with the creation of such Receivable, or the transfer thereof to the
Trust or the execution, delivery, creation and performance by Green Tree or
such subsidiary of the related floorplan or asset-based financing agreement
have been duly obtained or given and are in full force and effect as of the
date of the creation of such Receivable, (e) as to which, at the time of its
creation, the Transferor had good and marketable title free and clear of all
liens and security interests (other than certain liens permitted pursuant to
the Pooling and Servicing Agreement), and at all times following the transfer
of such Receivables to the Trust, the Trust will have good and marketable title
free and clear of all liens and security interests (other than certain liens
permitted pursuant to the Pooling and Servicing Agreement) or the grant of a
first priority security interest therein, (f) that is the legal, valid, binding
and assignable payment obligation of the related Dealer, legally enforceable
against such Dealer in accordance with its terms (with certain bankruptcy
related exceptions), (g) that constitutes "chattel paper," an "account" or a
"general intangible" under Article 9 of the Uniform Commercial Code as then in
effect in the State of Minnesota, (h) if such Receivable has the benefit of a
Floorplan Agreement with a Manufacturer, such Floorplan Agreement provides,
subject to the specific terms thereof and any limitations therein (which may
vary among Floorplan Agreements), that the Manufacturer is obligated to
repurchase the products securing the Receivables upon the Servicer's
repossession thereof upon the related Dealer's default, (i) which has been the
subject of a valid transfer and assignment from the Transferor to the Trust of
all the Transferor's interest therein and in the related Collateral Security
(including any proceeds thereof), (j) which at the time of transfer to the
Trust is not subject to any right of rescission, setoff, or any other defense
(including defenses arising out of violations of usury laws) of the Dealer, (k)
as to which, at the time of transfer of such Receivable to the Trust, Green
Tree or such subsidiary and the Transferor have satisfied all their respective
obligations with respect to such Receivable required to be satisfied at such
time, (l) as to which, at the time of transfer of such Receivable to the Trust,
neither Green Tree or such subsidiary nor the Transferor has taken or failed to
take any action which would impair the rights of the Trust or the
certificateholders therein and (m) which represents the obligation of a Dealer
to repay an advance made to or on behalf of such Dealer to finance products or
the accounts receivable arising from the sale of such products.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" or "Euroclear Operator" means Morgan Guaranty Trust Company of
New York, Brussels, Belgium office as operator of the Euroclear System.
"Euroclear Participants" means participants of the Euroclear System.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any Series of Certificates.
"Euroclear System" means the system created in 1968 to hold securities for
Euroclear Participants and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment.
"Excess Funding Account" means the segregated account established by and
maintained by the Servicer in the name of the Trust with a Qualified
Institution for the benefit of the certificateholders of all Series.
"Excess Interest Collections" means Interest Collections allocable to any
Series in excess of the amounts necessary to make required payments with
respect to such Series.
"Exchange" means a transaction whereby the Transferor may tender the
Exchangeable Transferor Certificate or, if provided in the relevant Series
Supplement, certificates comprising any Series and the Exchangeable Transferor
Certificate, to the Trustee in exchange for certificates comprising one or more
new Series and a reissued Exchangeable Transferor Certificate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Exchangeable Transferor Certificate" means a certificate representing the
Transferor's interest in the Trust, which shall be the remaining undivided
interest in the Trust not represented by the Certificates and any other
investor certificates issued by the Trust.
"FDIC" means the United States Federal Deposit Insurance Corporation.
"Final Regulation" means the final regulation issued by the DOL concerning
the definition of what constitutes the "plan assets" of an employee benefit
plan subject to Title I of ERISA or Section 4975 of the Code, or an IRA.
"Finance Charge Collections" means, for any business day, the aggregate of
(a) all collections on the Receivables with respect to interest or other fees,
(b) investment earnings on amounts on deposit in all Trust Accounts on such
business day and (c) Recoveries.
"Fixed/Floating Allocation Percentage" means for a Series on any business
day, the percentage equivalent of a fraction, the numerator of which is the
Class A Invested Amount, the Class B Invested Amount, the Class C Invested
Amount, or the Class D Invested Amount, respectively, at the end of the
preceding business day and the denominator of which is the greater of (a) the
Pool Balance (plus amounts, if any, on deposit in the Excess Funding Account)
as of the end of the preceding business day and (b) with respect to Principal
Collections only, the sum of the numerator for all classes of all Series then
outstanding used to calculate the applicable allocation percentage.
"Floating Allocation Percentage" means for a Series the percentage equivalent
of a fraction, the numerator of which is the Class A Invested Amount, the Class
B Invested Amount, the Class C Invested Amount or the Class D Invested Amount,
respectively, at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the Pool Balance (plus amounts, if
any, on deposit in the Excess Funding Account) at the end of the preceding
business day and (b) the sum of the numerators used to calculate the allocation
percentages with respect to Principal Collections for all Series.
"Floorplan Agreement" means the agreement Green Tree enters into with a
Manufacturer providing financing for products for Dealers.
"Floorplan Receivables" means Receivables arising from the revolving credit
agreements entered into with Green Tree by dealers located in the United States
to finance their consumer and commercial product inventory.
"Foreign Person" means any person other than (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof or
(iii) an estate or trust the income of which is includible in gross income for
U.S. federal income tax purposes, regardless of its source.
"Global Securities" means the globally offered Floorplan Receivable Trust
Certificates, Series 1995-1.
"Green Tree" means Green Tree Financial Corporation.
"Holders" means the holders of record of the Class A, Class B, Class C and
Class D Certificates.
"Free Flooring Period" means a period during which no interest or finance
charges accrue on a Dealer's account.
"Imputed Yield Collections" means those Principal Collections which the
Transferor elects to allocate a specified percentage to be treated as interest
collections.
"Independent Director" means a person who is not now, and has never been, a
director or officer of, employed by, or the holder of any beneficial economic
interest in any Affiliate of the Transferor, and who may at no time hold any
beneficial or economic interest in the Transferor.
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"Indirect Participants" means securities brokers and dealers, banks, and
trust companies that have an indirect access to the DTC system and that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly.
"Ineligible Receivable" means, in the case of a breach of the representations
and warranties to the Trust relating to an Account, all Receivables in the
related Account.
"Initial Invested Amount" means, with respect to any Series of Certificates,
the amount stated in the related Supplement.
"Initial Principal Payment Date" means initially the December 1997
Distribution Date, but will successively and automatically be extended to the
next Distribution Date after the then-current Initial Principal Payment Date
unless the Servicer elects not to so extend; provided that the Initial
Principal Payment Date may not be later than the Class A Scheduled Payment
Date.
"Insolvency Event" means the event whereby (i) pursuant to certain provisions
of federal law, the Transferor voluntarily enters liquidation or a trustee in
bankruptcy is appointed for the Transferor, or (ii) the Retained Percentage is
equal to or less than 2%.
"Insolvency Laws" means the United States Bankruptcy Code or similar
applicable state laws.
"Interest Accrual Period" means, with respect to a Distribution Date, the
period during which interest will accrue from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"Interest Collections" are calculated as the sum of (A) all collections of
interest and other fees on the Receivables, (B) all Imputed Yield Collections
(if a Discount Factor is then in effect), (C) investment earnings on amounts on
deposit in the Trust Accounts on such business day and (d) Recoveries on such
business day.
"Interest Free Period" means a period during which no interest or finance
charges accrue on a Dealer's account.
"Interest Funding Account" means a segregated trust account (which need not
be a deposit account) established and maintained by the Trustee with a
Qualified Institution in the name of the Trust, for the benefit of the
Certificateholders.
"Interest Receivables" means, with respect to any Account, all amounts billed
to the related Dealer in respect of interest and all other non-principal
charges, plus any Imputed Yield Receivables.
"Invested Amount" means the sum of the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount and the Class D Invested Amount.
"Investment Company Act" means the Investment Company Act of 1940, as amended
from time to time.
"Investor Default Amount" means a portion of all Defaulted Receivables which
will be allocated to the Certificateholders in an amount equal to the product
of the Floating Allocation Percentage applicable during the related Monthly
Period and the Principal Amount of Defaulted Receivables for such Monthly
Period.
"Investor Interest" means .
"IRA" means an individual retirement account.
"IRS" means the Internal Revenue Service.
"LIBOR" for any Interest Accrual Period is described under "Description of
the Offered Certificates-- Interest Payments."
"LIBOR Determination Date" means the second business day prior to the
commencement of the second and each subsequent Interest Accrual Period.
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"Limited Guaranty" means the obligation of Green Tree to make Class C
Guaranty Payments pursuant to the Series 1995-1 Supplement.
"Manufacturer" means the manufacturer, distributor or vendor of products for
sale or lease to Dealers in the ordinary course of business.
"Manufacturer Overconcentration" means, on any Distribution Date, the excess
of (a) the aggregate of all amounts of Principal Receivables in Accounts
created pursuant to Floorplan Agreements with a single Manufacturer on the last
day of the Monthly Period immediately preceding such Distribution Date over (b)
15% of the Pool Balance on the last day of such immediately preceding Monthly
Period. Notwithstanding the above, in the case of each such Overconcentration,
the percentage in clause (b) for such Overconcentration may be increased by the
Transferor, without the consent of any Certificateholder, to a level acceptable
to each Rating Agency without any reduction or withdrawal of its rating of the
Class A, Class B or Class C Certificates (but which may involve an adjustment,
upward or downward, of the Class D Invested Amount).
"Minimum Transferor Interest" means, as of any date of determination, the
product of (i) the sum of (a) the Pool Balance and (b) the amounts on deposit
in the Excess Funding Account and (ii) the Minimum Transferor Percentage.
"Minimum Transferor Percentage" means the highest Minimum Transferor
Percentage specified in any Supplement for an outstanding Series; such Minimum
Transferor Percentage is 4% pursuant to the 1995-1 Series Supplement.
"Monthly Payment Rate" means, for any Monthly Period, the percentage
equivalent of a fraction, the numerator of which is the aggregate of the
Receivables balances (without deducting therefrom the discount portion, if any)
collected during such Monthly Period and the denominator of which is the
average daily aggregate Receivables balance (without deducting therefrom the
discount portion, if any) for such Monthly Period.
"Monthly Period" means the period from and including the first day of each
calendar month to and including the last day of such calendar month.
"Monthly Servicing Fee" means the portion of the servicing fee allocable to
the Certificateholders' Interest during each Monthly Period, which will be
equal to one-twelfth of the product of (x) the Servicing Fee Rate per annum and
(y) the Invested Amount on the preceding Record Date or, in the case of the
first Distribution Date, the initial principal amount of the Certificates.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Negative Carry Amount" means the difference between the amount of interest
actually earned on investments in the Excess Funding Account on any day and the
amount of interest that would have been earned on such investments at the Base
Rate on such day.
"Net Receivables Rate" means for a Distribution Date (i) the weighted average
of the interest rates borne by the Receivables during the second preceding
Monthly Period (because interest payments on the Receivables at such rates will
be due and payable in the Monthly Period preceding such Distribution Date),
plus (ii) the product of (x) the Monthly Payment Rate for the Monthly Period
preceding such Distribution Date, the (y) Discount Factor, if any, for such
Distribution Date and (z) twelve, less 2% per annum, unless the Servicing Fee
has been waived for such Monthly Period.
"New Issuance" means one or more new Series of Certificates that the
Transferor may cause the Trustee to issue pursuant to any one or more
supplements to the Pooling and Servicing Agreement.
"Offered Certificates" means the Class A Certificates and the Class B
Certificates.
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"OID" means original issue discount.
"Overconcentration Amount" means on each Distribution Date, the aggregate
principal amount of Receivables in the Trust on such Distribution Date which
are Asset-Based Receivable Overconcentrations, Dealer Overconcentrations,
Manufacturer Overconcentrations and Product Line Overconcentrations.
"Participants" means the participating organizations of DTC.
"Pay Out Event" is described under "Description of the Offered Certificates--
Pay Out Event."
"Paying Agent" means the agent making payments to the Certificateholders.
"Period Length Determination Date" means the period beginning on the
Determination Date immediately preceding the Distribution Date and
on each Determination Date thereafter until the Controlled Accumulation Period
commences.
"Permitted Lien" means, with respect to the Receivables, (i) liens in favor
of the Transferor created pursuant to the Purchase Agreement assigned to the
Trustee pursuant to the Pooling and Servicing Agreement; (ii) liens in favor of
the Trustee pursuant to Pooling and Servicing Agreement; and (iii) liens which
secure the payment of taxes, assessments and governmental charges or levies, if
such taxes are either (a) not delinquent or (b) being contested in good faith
by appropriate legal or administrative proceedings and as to which adequate
reserves in accordance with generally accepted accounting principles shall have
been established.
"Pool Balance" means the product of (i) the total amount of Principal
Receivables and (ii) one minus the Discount Factor.
"Pooling and Servicing Agreement" means the Pooling and Servicing Agreement,
dated as of , 1995, among the Transferor, the Servicer, and the
Trustee, as supplemented or amended in accordance with its terms. Unless the
context requires otherwise, the term "Pooling and Servicing Agreement" refers
to the Pooling and Servicing Agreement as supplemented by the 1995-1 Series
Supplement.
"Portfolio Yield" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is the sum of the
aggregate amount of Available Series Interest Collections for such Monthly
Period (minus the Floating Allocation Percentage of the portion of Interest
Collections for such period described in clause (D) of the definition thereof
contained in the 1995-1 Series Supplement), calculated on a cash basis, minus
the aggregate Investor Default Amount for such Monthly Period, and the
denominator of which is the average daily Invested Amount during the preceding
Monthly Period.
"Presold" means the financing program offered by Green Tree to dealers
through which floorplan financing is provided to a dealer on units for which
Green Tree has already approved a retail financing contract for sale to a
customer.
"Principal Account" means a segregated trust account (which need not be a
deposit account) established and maintained by the Trustee with a Qualified
Institution in the name of the Trust, for the benefit of the
Certificateholders.
"Principal Collections" means all Collections other than Interest
Collections.
"Principal Funding Investment Shortfall" means, for any day, the difference
between the amount of interest actually earned on investments in the Principal
Account on any day and the amount of interest that would have been earned on
such investments at the Base Rate for such day.
"Principal Investment Proceeds" means investment earnings (net of investment
losses and expenses) on funds on deposit in the Principal Account during the
Controlled Accumulation Period.
"Principal Receivables" means, with respect to an Account, amounts shown on
the Servicer's records as Receivables (other than such amounts that represent
Interest Receivables, Defaulted Receivables or interest payable by the related
Dealer).
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"Principal Shortfalls" means the amounts representing scheduled or permitted
principal distributions to certificateholders and deposits to principal funding
accounts, if any, for any Series that have not been covered out of the
Principal Collections allocable to such Series and certain other amounts.
"Principal Terms" means certain terms, with respect to any newly issued
Series, including: (i) its name or designation; (ii) its initial invested
amount (or method for calculating such amount); (iii) its certificate rate (or
the method of allocating interest payments or other cash flows to such Series);
(iv) the closing date; (v) the rating agency or agencies, if any, rating the
Series; (vi) the interest payment date or dates and the date or dates from
which interest shall accrue; (vii) the name of the clearing agency, if any;
(viii) the method for allocating collections to certificateholders of such
Series with respect to Principal Collections, Interest Collections, and
Defaulted Receivables and the method by which the principal amount of such
Series will amortize or accrue; (ix) the names of any accounts to be used by
such Series and the terms governing the operation of any such accounts; (x) the
percentage used to calculate monthly servicing fees; (xi) the Minimum
Transferor Interest; (xii) the credit enhancement provider, if applicable, and
the terms of any credit enhancement with respect to such Series; (xiii) the
base rate applicable to such Series; (xiv) the terms on which the certificates
of such Series may be repurchased or remarketed to other investors; (xv) the
termination date of such Series; (xvi) any deposit into any account provided
for such Series; (xvii) the number of classes of such Series and, if more than
one class, the rights and priorities of each such class; (xviii) the fees, if
any, to be included in funds available to certificateholders in such Series;
(xix) the subordination, if any, of such new Series with respect to any other
Series; (xx) the rights, if any, of the holder of the Exchangeable Transferor
Certificate that have been transferred to the holders of such Series; (xxi)
whether such Series will be part of a group or subject to being paired with any
other prefunded Series; (xxii) whether such Series will be prefunded; and
(xxiii) any other relevant terms, including whether or not such Series will be
pledged as collateral for an issuance of any other securities, including
commercial paper.
"Product Line Overconcentration" on any Distribution Date means the excess of
(a) the aggregate of all amounts of Principal Receivables in the Accounts that
represent financing for a single product line (other than Asset-Based
Receivables and Receivables that represent financing for manufactured housing)
on the last day of the Monthly Period immediately preceding such Distribution
Date over (b) 5% for marine products, 5% for recreational vehicles, and 5% for
any other products in total, of the Pool Balance on the last day of such
immediately preceding Monthly Period. Notwithstanding the above, in the case of
each such Overconcentration, the percentage in clause (b) for such
Overconcentration may be increased by the Transferor, without the consent of
any Certificateholder, to a level acceptable to each Rating Agency without any
reduction or withdrawal of its rating of the Class A, Class B or Class C
Certificates (but which may involve an adjustment, upward or downward, of the
Class D Invested Amount).
"Purchase Agreement" means the Receivables Purchase Agreement dated as of
, 1995, between the Transferor and Green Tree Financial Corporation.
"Qualified Institution" means a depository institution or trust company,
which may include the Trustee, organized under the laws of the United States or
any one of the states thereof, which at all times has a certificate of deposit
rating of P-1 by Moody's and of A-1+ by Standard & Poor's or long-term
unsecured debt obligation (other than such obligation the rating of which is
based on collateral or on the credit of a person other than such institution or
trust company) rating of by Moody's and of by Standard & Poor's
and deposit insurance provided by the FDIC, or a depository institution, which
may include the Trustee, which is acceptable to the Rating Agencies; provided,
however, that no such rating shall be required of an institution which shall
have corporate trust powers and which maintains the Collection Account, any
principal account, any interest funding account or any other account maintained
for the benefit of Certificateholders as a fully segregated trust account with
the trust department of such institution which is rated at least Baa3 by
Moody's.
"Rating Agency" means each of Standard & Poor's Ratings Services, a Division
of The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc.
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"Reallocated Class B Principal Collections" is described in "--Description of
the Certificates--Reallocated Principal Collections."
"Reallocated Class C Principal Collections" is described in "--Description of
the Certificates--Reallocated Principal Collections."
"Reallocated Class D Principal Collections" is described in "--Description of
the Certificates--Reallocated Principal Collections."
"Reallocated Principal Collections" means the sum of Reallocated Class D
Principal Collections, Reallocated Class C Principal Collections and
Reallocated Class B Collections.
"Receivables" means, with respect to an Account, all amounts payable
(including interest, finance charges and other charges), and the obligation to
pay such amounts, by the related Dealer from time to time in respect of
advances made by Green Tree to or on behalf of such Dealer in connection with
the Floorplan Business or the Asset Based Lending Business, as the case may be,
together with the group of writings evidencing such amounts and the security
interest created in connection therewith and all of the rights, remedies,
powers and privileges thereunder (including under the related Financing
Agreement); [provided that if a Participation Interest has been created in
respect of such Account, the amounts so payable by the related Dealer that are
allocable to such Participation Interest shall not be part of the "Receivables"
in respect of such Account.] Receivables which become Defaulted Receivables
will cease to be included as Receivables on the day on which they become
Defaulted Receivables. Receivables which Green Tree is unable to transfer to
the Transferor pursuant to the Purchase Agreement or which the Transferor is
unable to transfer to the Trust as provided in the Pooling and Servicing
Agreement and Receivables which arise in Designated Accounts from and after the
related Removal Commencement Date shall not be included in calculating the
amount of Receivables.
"Record Date" means, with respect to any Distribution Date, the business day
preceding such Distribution Date, except that, with respect to any Definitive
Certificates, Record Date shall mean the fifth day of the then current Monthly
Period.
"Recoveries" means any amounts received by the Servicer with respect to
Receivables that were previously charged off as uncollectible in accordance
with the Servicer's customary and usual servicing procedures.
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer to determine and provide LIBOR on the basis of
quotations of the offered rates for one-month United States dollar deposits
following the LIBOR Determination Date.
"Removal Date" means, with respect to the Transferor's removal from the Trust
of Eligible Accounts, the fifth business day prior to the date of removal.
"Removal Notice" means, with respect to the Transferor's removal from the
Trust of Eligible Accounts, the written notice furnished to the Trustee, any
credit enhancement provider and each Rating Agency specifying the Removal Date
of such Removed Accounts.
"Removed Accounts" means the Accounts that were removed from the Trust, as
identified on a computer file, microfiche list or other list furnished by the
Transferor to the Trustee.
"Required Amount" means on the first business day following a Monthly Period,
the amount, if any, by which the full amount to be paid pursuant to clauses
(i)-(xiii) in "Description of the Offered Certificates--Payments of Fees,
Interest, and Other Items" for such prior Monthly Period exceeds the portion of
the Available Series Interest Collections applied to the payment of the amounts
described in such clauses for such prior Monthly Period.
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"Retained Percentage" means, on any date of determination, the percentage
equivalent of a fraction the numerator of which is the sum of the Transferor
Interest and the Invested Amount represented by any Transferor Retained
Certificate and the denominator of which is the Pool Balance at the end of the
day immediately prior to such date of determination plus all amounts on deposit
in the Excess Funding Account (but not including investment earnings on such
amounts).
"Revolving Period" with respect to Series 1995-1 means the period from and
including the Closing Date to, but not including, the earlier of (a) the
Initial Principal Payment Date, (b) the commencement of the Controlled
Accumulation Period and (c) the commencement of the Early Amortization Period.
"SAU" means "sold and unpaid" and refers to inventory that the Dealer has
sold without immediate repayment to Green Tree.
"SAU/NSF" means an account that is deemed delinquent when (i) there is an
unpaid receivable balance as to which the related product has been sold and
such receivable balance has not been paid by the related Dealer or (ii) a
payoff check from the related Dealer has been returned because of insufficient
funds.
"Securities Act" means the Securities Act of 1933, as amended.
"Series" means any series of certificates issued by the Trust pursuant to a
Supplement, including the 1995-1 Series Supplement.
"Series Allocation Percentage" means, on any date of determination, the
percentage equivalent of a fraction the numerator of which is the Invested
Amount of such Series and the denominator of which is the sum of the Invested
Amounts of all Series then outstanding.
"Series Available Interest Collections" means the amount of the Floating
Allocation Percentage of Interest Collections available in the Collection
Account.
"Series Issuance Date" means the date of issuance of any other Series.
"Series 1995-1" means the Offered Certificates, the Class C Certificates and
the Class D Certificates.
"Series 1995-1 Supplement" means the Supplement, dated as of , 1995,
among the Transferor, the Servicer and the Trustee, relating to the Series
1995-1 Certificates.
"Series 1995-1 Closing Date" means December , 1995.
"Series 1995-1 Termination Date" means the earlier of (i) the date in which
the final distribution of principal and interest on the Certificates is made
and (ii) the 20 Distribution Date.
"Service Transfer" means, in the event of a Servicer Default, the termination
of all rights and obligations of the Servicer as servicer under the Pooling and
Servicing Agreement and in and to the Receivables and the proceeds thereof and
the appointment by the Trustee of a new Servicer.
"Servicer" means Green Tree Financial Corporation or an Affiliate or
successor of Green Tree Financial Corporation, and any replacement Servicer as
provided in the Pooling and Servicing Agreement.
"Servicer Default" means any of the following events: (i) failure by the
Servicer to make any payment, transfer, or deposit, or to give instructions to
the Trustee to make certain payments, transfers, or deposits
within 10 business days after the date the Servicer is required to do so under
the Pooling and Servicing Agreement or any Supplement; provided, however, that
any such failure caused by a nonwillful act of the Servicer shall not
constitute a Servicer Default if the Servicer promptly remedies such failure
within 10 business days after receiving notice of such failure or otherwise
becoming aware of such failure; (ii) failure on the part of the Servicer duly
to observe or perform in any respect any other covenants or agreements of the
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Servicer which has a material adverse effect on the certificateholders of any
Series then outstanding and which continues unremedied for a period of 60 days
after written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by holders of Certificates evidencing undivided interests aggregating
not less than 50% of the Invested Amount of any Series materially adversely
affected thereby and continues to have a material adverse effect on the
certificateholders of any Series then outstanding for such period; or the
delegation by the Servicer of its duties under the Pooling and Servicing
Agreement, except as specifically permitted thereunder; (iii) any
representation, warranty, or certification made by the Servicer in the Pooling
and Servicing Agreement, or in any certificate delivered pursuant to the
Pooling and Servicing Agreement, proves to have been incorrect when made which
has a material adverse effect on the certificateholders of any Series then
outstanding, and which continues to be incorrect in any material respect for a
period of 60 days after written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and Trustee by the holders of Certificates evidencing undivided
interests aggregating not less than 50% of the Invested Amount of any Series
materially adversely affected thereby and continues to have a material adverse
effect on such certificateholders for such period; or (iv) the occurrence of
certain events of bankruptcy, insolvency, or receivership of the Servicer.
"Servicing Fee Rate" means 2.00% per annum.
"Servicing Compensation" means the Monthly Servicing Fee and certain other
amounts (as specified in the Pooling and Servicing Agreement and the Series
Supplement) which the Servicer will receive from the Trust.
"Shared Principal Collections" means the amount of Principal Collections for
any business day allocated by the Servicer to the Class A, Class B and Class C
Certificateholders' Interest (other than amounts allocated to the Transferor
Retained Class) remaining after covering required deposits or payments to the
Certificateholders and any similar amount remaining for any other Series.
"Standard & Poor's" means Standard & Poor's Rating Services, a Division of
The McGraw-Hill Companies, Inc., or any successor thereto.
"Supplement" means any supplement to the Pooling and Servicing Agreement.
"Supplemental Certificate" means a second certificate issued in addition to a
newly issued Exchangeable Transferor Certificate which was exchanged for an
Exchangeable Transferor Certificate.
"Terms and Conditions" means the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law which govern securities clearance accounts and cash
accounts within the Euroclear System.
"Transfer Agent and Registrar" means the transfer agent and registrar, which
initially will be the Trustee.
"Transfer Date" means with respect to any Series the business day immediately
prior to the Distribution Date on which the Servicer may make deposits and
payments.
"Transfer Deposit Amount" means, on any date on which a reassignment of an
Ineligible Receivable is to occur, the amount of the deposit by the Transferor
into the Collection Account in immediately available funds, equal to the amount
by which the Transferor Interest is less than the Minimum Transferor Interest.
"Transferor Retained Class" means any Class of investor certificates of any
Series which the Transferor retained pursuant to the terms of any Supplement.
"Transferor" means Green Tree Floorplan Funding Corp.
112
<PAGE>
"Transferor Interest" means the Transferor's right to the assets of the Trust
not allocated to the Series 1995-1 Certificateholders' interest or the interest
of the holders of certificates of any future Series pursuant to the Pooling and
Servicing Agreement and applicable Supplements.
"Transferor Interest Collections" means, on any business day, the Series
Allocation Percentage of the Interest Collections allocable to the Transferor
Interest for such business day.
"Transferor Percentage" (a) when used with respect to Principal Collections
during the Revolving Period and Interest Collections and the amount of
Defaulted Receivables at all times, 100% minus the sum of the Floating
Allocation Percentage and the floating allocation percentages for all other
Series and (b) when used with respect to Principal Collections during the
Controlled Accumulation Period or Early Amortization Period, 100% minus the sum
of the Fixed/Floating Allocation Percentage and the allocation percentages used
with respect to Principal Collections for all other Series.
"Transferor Retained Class" means an interest represented by any class of
investor certificates which is retained by the Transferor.
"Trust" means the Green Tree Floorplan Receivables Master Trust.
"Trust Accounts" means the Interest Funding Account, the Principal Account,
the Distribution Account and the Collection Account.
"Trust Portfolio" means the Receivables conveyed to the Trust that arise in
Accounts selected from Green Tree's portfolio of accounts on the basis of
criteria set forth in the Pooling and Servicing Agreement and the 1995-1 Series
Supplement as applied on the Cut-off Date and, with respect to Additional
Accounts, as of the related date of their designation.
"Trust Termination Date" means the date in which the Trust will terminate on
the earlier of (a) the day after the Distribution Date following the date on
which funds shall have been deposited in the Distribution Account for the
payment to certificateholders outstanding sufficient to pay in full the
aggregate investor interest of all Series outstanding plus interest thereon at
the applicable certificate rates to the next Distribution Date and (b) a date
which shall not be later than , , or (c) if the Receivables
are sold, disposed of or liquidated following the occurrence of an Insolvency
Event, immediately following such sale, disposition or liquidation, unless the
Servicer and the holder of the Exchangeable Transferor Certificate instruct the
Trustee otherwise.
"Trustee" means .
"UCC" means the Uniform Commercial Code, as amended from time to time, as in
effect in the applicable jurisdiction.
"U.S. Person" means (i) a citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United States
or any political subdivision thereof or (iii) an estate or trust the income of
which is includible in gross income for United States tax purposes, regardless
of its source.
"Underwriters" means Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Bear, Stearns & Co. Inc.
"Underwriting Agreement" means the underwriting agreement dated December ,
1995, among the Transferor and the Underwriters.
113
<PAGE>
ANNEX
GLOBAL CLEARANCE SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Floating Rate
Floorplan Receivable Trust Certificates, Series 1995-1 (the "Global
Securities") will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of The Depository Trust
Company ("DTC"), Cedel or Euroclear. The Global Securities will be tradeable as
home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Cedel and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject to
U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to conventional credit card certificate
issues. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no "lock-
up" or restricted period. Global Securities will be credited to the securities
custody accounts on the settlement date against payment in the same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and Transferor's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to conventional
credit card certificate issues in same-day funds.
A-1
<PAGE>
Trading between Cedel and/or Euroclear Participants. Secondary market trading
between Cedel Participants or Euroclear Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC Transferor and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
accounts of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, on the basis of actual days elapsed
and a 360 day year. Payment will then be made by the respective Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Participant's or Euroclear Participant's
account. The Global Securities credit will appear the next day (European time)
and the cash debit will be bad-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debit
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process De-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue form the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC Transferor on the
settlement date. Thus, to the DTC Participants a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Transferor and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The Transferor will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
Cedel or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date on the basis of
actual days elapsed and a 360 day year. The payment will then be reflected in
the account of the Cedel Participant or Euroclear Participant the following
day, and receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be
the
A-2
<PAGE>
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debt in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds
in the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase form the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Certificates
that are non-U.S. Persons can obtain a complete exemption from the withholding
tax by filing a signed Form W-8 (Certificate of Foreign Status) and a
certificate under penalties of perjury (the "Tax Certificate") that such
beneficial owner is (i) not a controlled foreign corporation (within the
meaning of Section 957(a) of the Code) that is related (within the meaning of
Section 864(d)(4) of the Code) to the Trust or the Transferor and (ii) not a 10
percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of
the Trust or the Transferor. If the information shown on Form W-8 or the Tax
Certificate changes, a new Form W-8 or Tax Certificate, as the case may be,
must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form 4224).
A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch,
for which the interest income is effectively connected with its conduct of a
trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States).
Exemption or reduced rate for non-U.S. persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner
or his agent.
A-3
<PAGE>
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
A-4
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRANSFEROR OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UN-
DER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF GREEN TREE FINANCIAL CORPORATION, GREEN TREE FLOORPLAN FUNDING
CORP. OR THE RECEIVABLES SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CON-
STITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SO-
LICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders.............................................. 2
Available Information...................................................... 2
Other Information.......................................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 24
The Trust.................................................................. 29
The Transferor............................................................. 29
Green Tree Financial Corporation and its Commercial Finance Division....... 30
The Receivables............................................................ 34
The Accounts............................................................... 36
Maturity Considerations.................................................... 40
Use of Proceeds............................................................ 43
Description of the Offered Certificates.................................... 43
Description of the Purchase Agreement...................................... 80
Certain Legal Aspects of the Receivables................................... 82
Certain Federal Income Tax
Consequences.............................................................. 85
Employee Benefit Plan Considerations....................................... 90
Underwriting............................................................... 92
Listing and General Information............................................ 93
Legal Matters.............................................................. 93
Glossary of Terms.......................................................... 94
Annex...................................................................... A-1
</TABLE>
---------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING TRANS-
ACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DIS-
TRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
GREEN TREE FLOORPLAN RECEIVABLES MASTER TRUST
$ FLOATING RATE
FLOORPLAN RECEIVABLE TRUST CERTIFICATES,
SERIES 1995-1, CLASS A
$ FLOATING RATE
FLOORPLAN RECEIVABLE TRUST CERTIFICATES,
SERIES 1995-1, CLASS B
GREEN TREE FLOORPLAN FUNDING CORP.
TRANSFEROR
GREEN TREE FINANCIAL CORPORATION
SERVICER
----------------------
PROSPECTUS
, 1995
----------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC registration fee............................................ $137,931.04
Blue Sky fees and expenses...................................... 10,000.00
Accountant's fees and expenses.................................. **
Attorney's fees and expenses.................................... 75,000.00*
Trustee's fees and expenses..................................... 15,000.00*
Printing and engraving expenses................................. **
Rating Agency fees.............................................. 150,000.00*
Miscellaneous................................................... **
-----------
Total......................................................... $
===========
</TABLE>
- --------
* Estimated
**To be furnished by Amendment
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<C> <S>
*1.1 Proposed form of Underwriting Agreement
*3.1 Certificate of Incorporation of Green Tree Floorplan Funding Corp.
*3.2 Bylaws of Green Tree Floorplan Funding Corp.
*4.1 Form of Pooling and Servicing Agreement
*4.2 Form of Series 1995-1 Supplement to the Pooling and Servicing Agreement
*4.3 Form of Receivables Purchase Agreement
*5.1 Opinion and consent of Dorsey & Whitney P.L.L.P. as to legality
8.1 Opinion and consent of Dorsey & Whitney P.L.L.P. as to tax matters
*23.1 Consent of Dorsey & Whitney P.L.L.P. (included as part of Exhibit 5.1)
23.2 Consent of Dorsey & Whitney P.L.L.P. (included as part of Exhibit 8.1)
*24.1 Power of attorney from officers and directors of the Registrants signed
by an attorney-in-fact
</TABLE>
--------
*Previously filed.
(b) Financial Statements:
Not Applicable
II-1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT 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 NOVEMBER 30, 1995.
Green Tree Floorplan Funding Corp.
/s/ John W. Brink
By: _________________________________
JOHN W. BRINK
VICE PRESIDENT AND TREASURER
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.
SIGNATURE TITLE DATE
/s/ Lawrence M. Coss Chairman of the
- ------------------------------------- Board and President November 30,
LAWRENCE M. COSS (Principal 1995
Executive Officer)
/s/ John W. Brink Vice President and
- ------------------------------------- Treasurer November 30,
JOHN W. BRINK (Principal 1995
Financial Officer
and Principal
Accounting Officer)
and Director
/s/ Richard G. Evans Director
- ------------------------------------- November 30,
RICHARD G. EVANS 1995
II-2
<PAGE>
INDEX TO EXHIBITS
Exhibit Form of
Number Description* Filing
- ------ ----------- ------
*1.1 Proposed form of Underwriting Agreement
*3.1 Certificate of Incorporation of Green
Tree Floorplan Funding Corp.
*3.2 Bylaws of Green Tree Floorplan Funding
Corp.
*4.1 Form of Pooling and Servicing Agreement
*4.2 Form of Series 1995-1 Supplement to the
Pooling and Servicing Agreement
*4.3 Form of Receivables Purchase Agreement
*5.1 Opinion and consent of Dorsey & Whitney
P.L.L.P. as to legality
8.1 Opinion of Dorsey & Whitney P.L.L.P. as
to tax matters Electronically Filed
*23.1 Consent of Dorsey & Whitney P.L.L.P.
(included as part of Exhibit 5.1)
*23.2 Consent of Dorsey & Whitney P.L.L.P.
(included as part of Exhibit 8.1)
*24.1 Power of attorney from officers and directors
of the Registrant signed by an attorney-in-fact
- ----------
* Previously filed.
<PAGE>
Exhibit 8.1
________, 1995
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Registration Statement on Form S-1
File No. 33-62433
Federal Tax Characterization Issues
Gentlemen and Ladies:
We have acted as counsel to Green Tree Floorplan Funding Corp., a
Delaware corporation (the "Transferor"), in connection with the preparation of a
Registration Statement on Form S-1, File No. 33-62433, filed with the Securities
and Exchange Commission on September 7, 1995, as amended by Amendment No. 1
thereto filed on November 8, 1995, and Amendment No. 2 thereto filed on December
4, 1995 (the "Registration Statement"), relating to the registration of
$________ of Floating Rate Floorplan Receivable Trust Certificates, Series
1995-1, Class A (the "Class A Certificates") and $________ of Floating Rate
Floorplan Receivable Trust Certificates, Series 1995-1, Class B (the "Class B
Certificates" and, together with the Class A Certificates, the "Offered
Certificates") to be issued by Green Tree Floorplan Receivables Master Trust
(the "Trust"). The Offered Certificates are to be issued under a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") substantially in the
form filed as Exhibit 4.1 to the Registration Statement, among the Transferor,
Green Tree Financial Corporation, a Delaware corporation, as Servicer ("Green
Tree"), and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") and a Series 1995-1 Supplement (the "Series 1995-1 Supplement") to
the Pooling and Servicing Agreement substantially in the form filed as Exhibit
4.2 to the Registration Statement.
<PAGE>
Green Tree Financial Corporation
- -----------------------------
Page 2
You have requested our opinion with respect to the federal income tax
characterization of the Offered Certificates and the Trust. For purposes of
rendering our opinion we have examined the Registration Statement, the Pooling
and Servicing Agreement, the Series 1995-1 Supplement 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 Pooling and Servicing Agreement
or the Series 1995-1 Supplement, as applicable.
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 change, either prospectively or retroactively, and to possibly differing
interpretations. Any change in such authorities may affect the opinions
rendered herein. In rendering our opinion, we have reviewed the partnership
anti-abuse rules contained in Section 1.701-2 of the Treasury Regulations, and
have determined that such rules will have no effect on our opinion.
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 Transferor, the Certificateholders, the
Trustee, and the holders of all other classes and series of certificates issued
by the Trust 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 Transferor, including the following:
1. There are and will be during the life of the Trust no contracts
or other agreements between the Transferor and the
Certificateholders other than as set forth in the Transaction
Documents.
2. The Certificateholders will not control the Transferor or
otherwise cause the Transferor to act as their agent, and will
not use the Transferor to conceal their own active involvement in
the conduct of the business of the Trust.
<PAGE>
Green Tree Financial Corporation
- -----------------------------
Page 3
3. The net worth of the Transferor shall be not less than the
Minimum Net Worth.
4. Based on Green Tree's past experience with accounts and
receivables similar to the Accounts and Receivables, Green Tree
and the Transferor believe that the average period of time that
any Receivable will be outstanding will be approximately three
months.
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.
I. Federal Income Tax Characterization of the Offered Certificates.
---------------------------------------------------------------
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. In general, the substance of the transaction in
which the Offered Certificates are issued should be consistent with treatment of
the Offered Certificates as debt. Although there are certain judicial
precedents holding that, under appropriate circumstances, a taxpayer should be
required to treat a transaction in accordance with the form chosen by the
taxpayer regardless of the transaction's substance, the application of these
authorities should not prevent the treatment of the Offered Certificates as debt
because the form, as well as the substance, of the transaction is consistent
with debt treatment. Even if it should be determined that certain aspects of
the transaction are indicative of a sale of the Receivables or an interest
therein, the transaction's form as a whole would at worst be viewed as ambiguous
rather than clearly as a sale. Accordingly, the
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characterization of the sale of the Offered Certificates should be governed by
the substance of the transaction which should be viewed as most similar to the
issuance of debt by the Transferor.
A. Economic Substance of the Transaction. If the economic substance
of a transaction differs from the form in which it is cast, except in certain
limited circumstances (see discussion below), the substance, rather than the
form, governs the federal income tax consequences of the transaction. Gregory
v. Helvering, 293 U.S. 465 (1935); Helvering v. F. & R. Lazarus & Co., 308 U.S.
252, aff'g, 101 F.2d 728 (6th Cir. 1939); Gatlin v. Commissioner, 34 B.T.A. 50
(1936).
Whether the Offered Certificates are in substance debt or ownership
interests in the Receivables is based on a determination of which party to the
transaction holds the "substantial incidents of ownership." The courts have
identified a variety of factors that must be considered in making that
determination. See Town & Country Food Co. v. Commissioner, 51 T.C. 1049
(1969), acq., 1969-2 C.B. xxv; United Surgical Steel Co. v. Commissioner, 54
T.C. 1215 (1970), acq., 1971-2 C.B. 3; G.C.M. 39584 (December 3, 1986); Plumb,
The Federal Income Tax Significance of Corporate Debt: A Critical Analysis and
a Proposal, 26 Tax L. Rev. 369 (1971). In the context of this transaction, the
most important considerations are: (i) whether the Transferor bears the burdens
of ownership (i.e., the risk of loss from the Receivables) and (ii) whether the
Transferor retains the benefits of ownership (i.e., the potential for gain from
the Receivables). The following discussion considers these as well as other
relevant factors and demonstrates that each factor should be viewed as
supporting characterization of the Certificates as debt.
1. The Transferor Bears the Burdens of Ownership. The principal
burden of ownership with respect to the Receivables is risk of loss arising from
defaulted payments. The risk of loss arising from defaults, under most
reasonable default scenarios, is borne by the Transferor.
The principal amount of all Defaulted Receivables for any Business Day
will be allocated between the Transferor Interest and the Certificateholders
according to the Floating Allocation Percentage applicable for such day. Before
any such allocation of Defaulted Receivables has the effect of reducing the
Invested Amount of any class of Certificates, certain excess interest
collections will be applied to make up for any deficiency caused by such
Defaulted Receivables. If the amount of Defaulted Receivables exceeds the
amount of such excess interest collections so
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applied, the amount of any such Defaulted Receivables that are allocable to the
Certificateholders will first be allocated to reduce the Class D Invested
Amount.
The Transferor is ultimately entitled to receive the excess interest
collections from the Receivables which are not applied to payments on the
Certificates. Since payments made to fund shortfalls due to Certificateholders
will ultimately be funded out of such excess interest collections, the
Transferor ultimately bears the risk of default losses realized on the
Receivables. In addition, under the Pooling and Servicing Agreement, the
Transferor is required to retain the Class D Certificates. Thus, the Transferor
is entitled to receive the principal payments thereon, which are subordinated to
the Class A, Class B and Class C Certificates. To the extent that defaults on
the Receivables reduce the amount paid on the Class D Certificates, the
Transferor bears the risk of losses caused by such defaults.
The Pooling and Servicing Agreement provides that the Offered
Certificateholders are entitled to receive a fixed principal amount and a rate
of return (i.e., a floating rate based on a spread over LIBOR which is set at
the time of the issuance of the Certificates or, if less, the Net Receivables
Rate). Thus, the economic return to the Offered Certificateholders is not
affected by any change in the value of the Receivables, and the Offered
Certificateholders do not bear the burden of any decrease in the value of the
Receivables. We note that the interest rates on the Offered Certificates are
subject to a maximum rate equal to the Net Receivables Rate. It is anticipated
that factors which cause changes in LIBOR will, under most reasonable scenarios,
cause similar changes to the rates on the Receivables and, thus, that the Net
Receivables Rate generally will experience changes similar to those of LIBOR.
Therefore, it is anticipated that the Net Receivables Rate will not be used as
the interest rate on the Offered Certificates.
2. The Transferor Retains the Benefits of Ownership. If market
interest rates for comparable receivables decrease in relation to the yield on
the Receivables, the Receivables will increase in value. If interest rates
remain constant, but customers take a longer period of time to pay their
principal balances, the value of the Receivables will also increase because the
Transferor will continue to receive the yield on the Receivables over a longer
period of time. Regardless of interest rates, a change in customer payment
patterns resulting in fewer defaults than expected based on historical
experience will also increase the value of the
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Receivables. Any increase (to the extent permitted by applicable law and the
terms of the applicable agreement) in the rate at which interest is payable on
the Accounts will also increase the value of the Receivables.
The Pooling and Servicing Agreement provides that the Offered
Certificateholders are entitled to receive a fixed principal amount and a rate
of return (i.e., a floating rate based on a spread over LIBOR which is set at
the time of the issuance of the Offered Certificates or, if less, the Net
Receivables Rate). Thus, the economic return to the Offered Certificateholders
is not affected by any change in the value of the Receivables, and the Offered
Certificateholders do not receive any benefit from any increase in the value of
the Receivables.
The Transferor has retained the sole opportunity to realize gain on
the Receivables by retaining the Transferor Interest, which represents the
interest in all of the assets of the Trust in excess of the required payments to
Certificateholders. Thus, the Transferor receives the benefit from any increase
in the value of the Receivables. When the Invested Amount of the Certificates
is reduced to less than 10% of the initial Invested Amount, the Transferor has
the option to repurchase the Certificates for an amount equal to the Invested
Amount plus accrued and unpaid interest on the Certificates.
Therefore, the Transferor retains the benefits and burdens associated
with owning the Receivables.
3. Subordination and Ratings. As mentioned above, the principal
amount of all Defaulted Receivables for any Business Day will be allocated
between the Transferor Interest and the Certificateholders according to the
Floating Allocation Percentage applicable for such day. Before any such
allocation of Defaulted Receivables has the effect of reducing the Invested
Amount of any class of Certificates, certain excess interest collections will be
applied to make up for any deficiency caused by such Defaulted Receivables. If
the amount of Defaulted Receivables exceeds the amount of such excess interest
collections so applied, the amount of any such Defaulted Receivables that are
allocable to the Certificateholders will first be allocated to reduce the Class
D Invested Amount; if the Class D Invested Amount is reduced to zero by such
allocation, then Defaulted Receivables will be allocated to reduce the Class C
Invested Amount; if the Class C Invested Amount is
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reduced to zero by such allocation, then Defaulted Receivables will be allocated
to reduce the Class B Invested Amount; if the Class B Invested Amount is reduced
to zero by such allocation, then Defaulted Receivables will be allocated to
reduce the Class A Invested Amount. Thus, the Class B Invested Amount will be
affected by Defaulted Receivables only if the Class D Invested Amount and Class
C Invested Amount are reduced to zero, and the Class A Invested Amount will be
affected by Defaulted Receivables only if the Class D Invested Amount, Class C
Invested Amount and Class B Invested Amount are reduced to zero. In addition,
even if the Class B Invested Amount or Class A Invested Amount is so reduced by
allocations of Defaulted Receivables, such Invested Amounts may be subsequently
increased by certain excess interest collections available for that purpose.
All of these factors increase the likelihood that the principal payments made to
the Offered Certificateholders ultimately will equal the initial Class A and
Class B Invested Amount.
In addition, the likelihood of the Offered Certificateholders bearing
any actual loss is considered to be relatively remote, reflected by the fact
that the Class A Certificates have an initial rating of "AAA" or its equivalent
from at least one nationally recognized rating agency, and the Class B
Certificates have an initial rating of "____" or its equivalent from at least
one nationally recognized rating agency. These ratings are based, in part, on
the fact that such losses would occur only if the excess interest collections
which are used to offset any defaults on the Receivables, as well as other
distributions due with respect to the classes of certificates which are
subordinated to the Offered Certificates, were all exhausted. These ratings are
investment grade ratings, and such ratings indicate that it is likely that all
interest and principal will be paid. Accordingly, one would reasonably expect
that the Offered Certificateholders would not bear the risk of loss associated
with ownership of the Receivables.
4. Other Factors. A number of other factors support the conclusion
that the Offered Certificates are in substance debt. The terms of the
Receivables differ materially from the terms of the Offered Certificates with
regard to their respective interest rates and maturity dates. During the
Revolving Period, the obligors on the Receivables will make payments of
principal and interest on the Receivables. During the Revolving Period, the
Offered Certificateholders will receive interest payments, but collections of
principal on the Receivables otherwise allocable to the Offered
Certificateholders will be paid to the Transferor. Payments of principal on the
Offered Certificates are scheduled to commence on the January
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1998 Distribution Date, and this date will be automatically extended until the
Class A Scheduled Payment Date unless the Servicer elects not to so extend.
The Transferor will retain control and possession of the Receivables.
The Servicer is responsible for servicing, management, collection and
administration of the Receivables and will bear all costs and expenses incurred
in connection with such activities, although the Servicer will be entitled to
receive the Servicing Fee. In addition, the Transferor will agree to indemnify
the Certificateholders for the entire amount of losses, claims, damages or
liabilities arising out of the activities of the Servicer. The Trustee, on
behalf of the Certificateholders, has the right to inspect the Servicer's
documentation on the Receivables, a right which is common in loan transactions.
In addition, the Servicer, an affiliate of the Transferor and the entity from
whom the Transferor purchases the Receivables, collects the Receivables without
significant supervision by the Trustee or Certificateholders. The foregoing
additional factors support the conclusion that the transaction described in the
Agreement with respect to the Offered Certificates constitutes an issuance of
debt by the Transferor.
B. Form versus Substance. As mentioned above, a basic premise of
federal income taxation is that the economic substance of a transaction, and not
its form, determines the tax consequences. In appropriate cases, the courts
have allowed taxpayers, as well as the IRS, to treat a transaction in accordance
with its economic substance even though they have cast it in a different form
for non-tax purposes. For example, in Helvering v. F. & R. Lazarus & Co., 308
U.S. 252, aff'g, 101 F.2d 728 (6th Cir. 1939), the taxpayer sold property to a
bank as trustee for $3.25 million and concurrently leased the property back for
99 years. The rental payments on the lease were equal to 5% of $3.25 million,
and the taxpayer was required to make payments to a fund that would be
sufficient to repay $3.25 million within 48.5 years. The IRS denied the
taxpayer's claim of depreciation deductions on the property on the ground that
the taxpayer had transferred ownership of the property. The Supreme Court,
however, upheld the taxpayer's right to show that, for tax purposes, the
transaction was in substance a loan secured by the transferred property.
There is a series of cases holding that, in certain circumstances, the
taxpayer is bound by the form of the transaction selected notwithstanding that
the characterization of the economic substance of the transaction would be
different from the form of the transaction. For example, in Commissioner v.
Danielson, 378 F.2d 771 (3rd Cir.), cert. denied, 389 U.S. 858 (1967), a
purchase agreement expressly
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allocated consideration to a covenant not to compete, while the taxpayer
reported the entire amount as proceeds from the sale of capital assets. The
court held that the taxpayer could not contradict the form of the agreement and
attack the allocation to the covenant not to compete except in cases of fraud,
duress or undue influence. See also Spector v. U.S., 641 F.2d 376 (5th Cir.
1981)(pursuant to a written agreement, a partnership deducted Section 736
guaranteed payments to a withdrawing partner; the partner, contrary to the terms
of the agreement, treated such payments as Section 741 capital gain payments
realized upon the sale of the partnership interest; the court held that the
taxpayer was bound by the terms of the agreement unless he could show mistake,
fraud or undue influence); Sullivan v. U.S., 618 F.2d 1001 (3d Cir.
1980)(taxpayer disavowed original allocation of purchase price between land and
agreements to lease space in a shopping mall to be built on the land when, upon
audit, the gain on the sale of the leases was held to be short-term capital
gain; the court held that the contract allocations must be respected). In
general, the Danielson line of cases involve taxpayers who, contrary to the
written documents, later adopt inconsistent positions regarding the allocation
of purchase price, the valuation of assets or the character of income or gain to
the detriment of the Treasury.
Under the standards in Lazarus and similar cases, the Offered
Certificates should be treated as debt and the Transferor should be treated as
the owner of the Receivables. The Offered Certificateholders do not have
possession of the Receivables or the authority to dispose of them. Like the
bank in Lazarus, the Offered Certificateholders are entitled to receive only a
specified return and do not enjoy the benefit of any increase in the value of
the Receivables.
Neither Danielson nor any similar decision would, in our opinion,
prevent the Transferor and the Certificateholders from treating the Offered
Certificates as debt for federal income tax purposes. The rules from Danielson
and such cases are not intended to require consistent treatment of a transaction
for tax and non-tax purposes. Rather, they are intended to prevent a taxpayer
from renouncing intentions previously expressed in a document governing the
transaction. In this case, treating the Offered Certificates as debt does not
contravene any statement of intent in a governing document, and the form of the
transaction is not necessarily inconsistent with characterization of the Offered
Certificates as debt. The Prospectus, the Pooling and Servicing Agreement and
the Offered Certificates will state that the Offered Certificateholders and the
Transferor will treat the transaction as a financing for federal, state, and
local tax purposes. The language in the Agreement whereby the Transferor agrees
to "transfer" all "right, title and interest" in the Receivables to the Trust is
consistent with language of transfer in
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other security arrangements where debtors pledge assets to secure debt. The
Offered Certificates will state that they represent an "undivided interest" in
the Trust. However, the only rights of an Offered Certificateholder are to
receive payments of interest on the outstanding amount of the Offered
Certificates and repayment of the Invested Amount of the Offered Certificates on
or prior to their maturity dates. The Offered Certificates will not provide the
Offered Certificateholders with any specific rights in any Receivable, but
rather will provide only for rights to receive a specified amount of payments
out of the cash flow from the Receivables pool.
Moreover, even if certain aspects of the transaction should be
determined to be inconsistent with treatment of the Offered Certificates as debt
and the form of the transaction is therefore considered ambiguous, numerous
cases hold that the economic substance of the transaction controls the
transaction's characterization. Elrod v. Commissioner 87 T.C. 1046, 1066
(1986); Smith v. Commissioner, 82 T.C. 705, 713 (1984); Morrison v.
Commissioner, 59 T.C. 248, 256 (1972), acq., 1973-2 C.B. 3; Kreider v.
Commissioner 762 F.2d 580, 588 (7th Cir. 1985); Comdisco, Inc. v. United States,
756 F.2d 569, 578 (7th Cir. 1985). In such circumstances, it would be
inappropriate to restrict taxpayers to the "four corners" of their document,
since the written instrument by its own terms is unclear. "The Danielson rule
. . . [is not] applicable to exclude parole evidence offered with respect to an
ambiguous document." Elrod, supra, at 1066. Accordingly, it is our view that
the Danielson line of authorities is not applicable to the transaction and will
not cause the transaction to be treated as a sale of an interest in the
Receivables to the holders of the Offered Certificates. Even if the form of the
transaction is deemed to be ambiguous, the transaction's economic substance will
determine its character.
C. Accounting Treatment. In Notice 94-47, 1994-19 I.R.B. 1 (April
18, 1994) the Internal Revenue Service has taken the position, without apparent
support from existing legal authority, that the fact that an instrument is
intended to be treated differently for tax purposes than for other purposes,
including regulatory accounting purposes, is a factor to be considered in
determining whether the instrument should be characterized as debt or equity for
federal income tax purposes. That factor, however, should not by itself control
the classification of the instrument for tax purposes. Accordingly, the fact
that the Transferor intends to report the transaction as a sale to
Certificateholders for certain regulatory and financial accounting purposes
should not by itself control the result for tax purposes, and such fact is not
necessarily inconsistent with characterizing the form of the transaction as a
financing for tax purposes.
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Indeed, the Supreme Court has frequently rejected the proposition that
the financial accounting treatment of a transaction controls its tax treatment.
For example, in Cottage Savings Ass'n v. Commissioner, 499 U.S. 554 (1991),
rev'g 890 F.2d 848 (6th Cir. 1989), rev'g 90 T.C. 372 (1988), reciprocal "sales"
of mortgage loans were respected as sales for federal income tax purposes
(permitting thrifts to realize losses that produced loss carrybacks and tax
refunds) even though such transactions were not treated as sales for regulatory
accounting purposes. Thus, thrifts were able to generate tax losses without
such losses being reflected on their financial statements for regulatory
accounting purposes. (It should be noted that in Cottage Savings the legal form
of the transaction was respected. Thus, the taxpayer was not asserting a tax
position inconsistent with the form of the transaction.)
Several other Supreme Court cases demonstrate that divergence between
tax and financial accounting is not uncommon. See Thor Power Tool Co. v.
Commissioner, 439 U.S. 552, 538-44 (1979)(company's inventory deductions for
financial accounting purposes were disallowed for federal income tax purposes--
"any presumptive equivalency between tax and financial accounting would be
unacceptable"); Commissioner v. Hansen, 360 U.S. 446 (1959)(reserve to cover
contingent liability in event of nonperformance of guaranty); Lucas v. American
Code Co., 280 U.S. 445 (1930)(reserve to cover expected liability on contested
lawsuit). (These cases, however, involved taxpayer reliance on accounting
treatment rather than IRS reliance thereon.) See also Frank Lyon Co. v. United
States, supra, at 577 (financial accounting treatment of a mortgage reflected
the taxpayer's proper tax treatment of a sale leaseback transaction although tax
and accounting treatment "need not necessarily be the same").
In our opinion, although the matter is not free from doubt, the
substance and form of the transaction are more consistent with the
characterization of the Offered Certificates as debt than with the
characterization of the Offered Certificates as a form of equity interest in the
Receivables. To the extent that the form of the transaction were determined to
include some features of a sale in addition to the features indicative of a debt
financing, the form is at worst ambiguous. Accordingly, in our opinion,
pursuant to the aforementioned authorities, the Offered Certificates will be
treated as debt for federal income tax purposes.
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II. Characterization of the Trust.
-----------------------------
In many respects, the Trust is similar to trusts established to hold
collateral pledged as security in connection with lending transactions. If all
classes of Certificates issued by the Trust were debt for federal income tax
purposes, the Trust would be disregarded for federal income tax purposes and
would be characterized as a mere security arrangement. Treas. Reg. (S) 1.61-
13(b); Rev. Rul. 76-265, 1976-2 C.B. 448; see also Rev. Rul. 73-100, 1973-1 C.B.
613 (domestic corporations's transfer of securities to Canadian security holder,
to secure liabilities to policyholders in Canada, does not create a trust where
discretionary powers retained by corporation); Rev. Rul. 71-119, 1971 C.B. 163
(settlement fund administered by "trustee" not a trust). The Trust intends,
however, to issue and to distribute classes of Series 1995-1 Certificates that
may not clearly be classified as debt for federal income tax purposes.
If any class of the Series 1995-1 Certificates were in fact viewed as
an equity interest in the Trust, the Trust could be viewed, pursuant to Treasury
Regulation Section 301.7701-4(c), as an entity whose characterization would be
determined under Section 7701 and Treasury Regulation Section 301.7701-2. 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.
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. 95-9, 1995-3 I.R.B. 17, 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.
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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
non-corporate 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. 95-9, 1995-3 I.R.B. 17,
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
or at least a majority in interest of all remaining partners agreeing to
continue the partnership.
Section 9.2(a) of the Pooling and Servicing Agreement provides that on
the day of an Insolvency Event, (i) the Transferor shall immediately cease to
transfer Receivables to the Trust and (ii) the Trust shall be deemed to have
terminated, and shall begin the liquidation, winding-up and dissolution
procedures provided in the Pooling and Servicing Agreement. The dissolution
procedures provided in the Pooling and Servicing Agreement include the Trustee
selling, disposing of or otherwise liquidating the Receivables "in a
commercially reasonable manner and on commercially reasonable terms, which shall
include the solicitation of competitive bids" (a "Disposition") unless, within
no more than 90 days after the date of publication of notice of the Insolvency
Event, Holders of Certificates
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representing undivided interests aggregating in excess of 50% of the related
Invested Amount of each Series (or, in the case of a Series having more than one
Class, each Class of such Series) and the holders of any Supplemental
Certificates or any other interest in the Exchangeable Transferor Certificate
other than the Transferor instruct the Trustee not to effectuate a Disposition.
Under Section 301.7701-2(b) of the Treasury Regulations, where the
entity in question is not a limited partnership formed under RULPA, one must
determine if the legal relationship between the parties has changed under state
law. Here, upon the occurrence of an Insolvency Event, the legal relationships
between the parties do change and therefore bring about a change in the identity
of the organization. In the case of an Insolvency Event, the Transferor must
immediately cease to transfer Principal Receivables to the Trust, and the
Trustee must, unless explicitly instructed otherwise by a Holders' Majority,
begin the dissolution process. This does alter the parties' obligations and
relationships and, in effect, changes the Trust from an active enterprise into a
mere "liquidating trust" that must effect a Disposition of all the Receivables.
Therefore, the Trust would lack 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.
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Section 7.4 of the Pooling and Servicing Agreement provides that the
Transferor shall be liable for any losses, claims, damages, penalties or
liabilities (other than those incurred by a Certificateholder in the capacity of
an investor in the Investor Certificates as a result of the performance of the
Receivables, market fluctuations, a shortfall or failure by the Enhancement
Provider to make payment under any Enhancement or other similar market or
investment risks associated with ownership of the Investor Certificates) arising
out of or based on the arrangement created by the Pooling and Servicing
Agreement and the actions of the Servicer taken pursuant thereto as though the
Pooling and Servicing Agreement created a partnership under the Minnesota
Uniform Partnership Act in which the Transferor is a general partner.
Although the Transferor has represented that it will have a net worth
at least equal to the Minimum Net Worth, we have not determined if the
Transferor has "substantial assets" within the meaning of the Treasury
Regulations and therefore do not rely upon the "substantial assets" test with
respect to the limited liability issue.
The Transferor has represented, however, that the Certificateholders
will not control the Transferor or otherwise cause the Transferor to act as
their agent, and that the Certificateholders will not use the Transferor to
conceal their own active involvement in the conduct of the business of the
Trust. Thus, even if the Certificates were recharacterized as equity interests
in the Trust, the Transferor would not be a "dummy" acting as the agent of the
Certificateholders. Therefore, based on the foregoing authorities and the
representations of the Transferor, 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. Accordingly, the Trust would, in the
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circumstances described above, be characterized as a partnership for federal
income tax purposes.
C. Publicly Traded Partnership. Section 7704 of the Code provides
that, subject to certain exceptions, a partnership the interests in which are
(i) traded on an established securities market or (ii) readily tradable on a
secondary market (or the substantial equivalent thereof) will be treated as a
corporation for federal income tax purposes.
Treasury Regulations Section 1.7704-1, issued on November 29, 1995
(the "PTP Regs"), provide further explanation of the rules governing publicly
traded partnerships. The PTP Regs provide that an "established securities
market" includes a national, foreign, regional or local exchange, as well as an
interdealer quotation system which regularly disseminates firm buy or sell
quotations by identified brokers or dealers, by electronic means or
otherwise.
The PTP Regs provide that interests in a partnership will not be
considered readily tradable on a secondary market or the substantial equivalent
thereof if (i) all interests in such partnership were issued in a transaction
(or transactions) that was not required to be registered under the Securities
Act of 1933 and (ii) the partnership does not have more than 100 partners at any
time during the taxable year of the partnership.
As discussed above, it is our opinion that the Offered Certificates
will be treated as debt for federal income tax purposes. The Class C
Certificates will be issued in a private placement and thus will be exempt from
registration under the Securities Act of 1933 pursuant to Section 4(a) of that
Act. Moreover, each purchaser of Class C Certificates (and purchasers of
certain other interests which would be treated as a direct or indirect nondebt
interest in the Trust) will, in effect, make certain representations for the
benefit of the Transferor and the other purchasers (with the express
acknowledgement that this Firm will be relying on such representation for
purpose of rendering this opinion) that would be breached if any such purchaser
were to buy or sell any such interest on an "established securities
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market" or "secondary market." In addition, Section 6.3 of the Agreement permits
the Transferor to prevent a transfer, participation or other disposition of any
interest in any Certificate with respect to which an Opinion of Counsel was not
received stating that such certificate would be treated as debt for federal
income tax purposes if the Transferor, in its sole and absolute discretion,
determines that such transfer, participation or other disposition, if effected,
would cause the Trust to be treated as a publicly traded partnership under the
PTP Regs. Accordingly, under current law, if the Trust were considered to be a
partnership for federal income tax purposes, it would not be a publicly traded
partnership for purposes of Section 7704.
We note that an entity that meets the definition of a "publicly traded
partnership" may nevertheless not be taxable as a corporation if 90% of its
income consists of interest income. Because it is not clear whether the Trust,
if viewed as an entity separate from the Transferor, would be viewed as engaged
in a "financial
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business," and thus ineligible for the exception, we have not relied on the
exception. See Code (S) 7704(d)(2).
D. Taxable Mortgage Pool. Section 7701(i) of the Code provides that
a "taxable mortgage pool" shall be treated as a corporation for federal income
tax purposes. Section 7701(i) defines taxable mortgage pool to include any
entity (other than a real estate mortgage investment conduit) which meets the
following requirements:
(i) substantially all of the assets of such entity consists of
debt obligations (or interests therein) and more than 50% of such debt
obligations (or interests) consists of real estate mortgages (or
interests therein),
(ii) such entity is the obligor under debt obligations with two or
more maturities, and
(iii) under the terms of the debt obligations referred to in clause
(ii) (or underlying arrangement), payments on such debt obligations
bear a relationship to payments on the debt obligations (or interests)
referred to in clause (i).
Proposed Treasury Regulations (S) 301.7701(i) (the "Proposed TMP
Regs") provide further explanation of the rules governing taxable mortgage
pools. The Proposed TMP Regs provide that "the purpose of Section 7701(i) is to
prevent income generated by a pool of real estate mortgages from escaping
federal income taxation when the pool is used to issue multiple class mortgage-
backed securities." The Proposed TMP Regs define real estate mortgages to
include all obligations that are principally secured by an interest in real
property. For this purpose, real property includes manufactured housing that
qualifies as a single family residence under Section 25(e)(10) of the Code.
Under a literal reading of Section 7701(i) of the Code and the
Proposed TMP Regs, one might argue that the Trust should be treated as a taxable
mortgage pool. In our opinion, however, the Trust will not be treated as a
taxable mortgage pool.
It is anticipated that a significant portion of the Receivables will
constitute obligations of dealers of manufactured housing, and that such
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Receivables will be secured by a security interest in the manufactured housing
inventory held by such dealers. Thus, such obligations would be treated as
"real estate mortgages" within the literal meaning of Section 7701(i) of the
Code and the Proposed TMP Regs. We do not believe, however, that Receivables
secured by such dealer inventory are the type of obligations intended to be
covered by the taxable mortgage pool rules. Furthermore, taxable mortgage pool
status is not dependent solely on the type of assets held by an entity. Rather,
both Section 7701(i) of the Code and the Proposed TMP Regs require that in
addition to holding real estate mortgages, in order to be a taxable mortgage
pool an entity must issue debt obligations with two or more maturities the
payments on which "bear a relationship" to payments on the debt obligations held
by the entity. The Proposed TMP Regs provide:
Payments on debt obligations under which an entity is the obligor
(liability obligations) "bear a relationship" to payments ... on debt
obligations an entity holds as assets (asset obligations) if under the
terms of the liability obligations (or underlying arrangement) the
timing and amount of payments on the liability obligations are in
large part determined by the timing and amount of payments or
projected payments on the asset obligations.
We believe that the payments to be made on the Offered Certificates
and the other classes of Certificates issued by the Trust will not bear a
relationship to the Receivables held by the Trust which is sufficient to satisfy
the requirements of Section 7701(i) of the Code and the Proposed TMP Regs.
Green Tree and the Transferor have represented to us that the average period of
time that any Receivable will be outstanding will be approximately three
months. Conversely, none of the Certificates issued by the Trust are scheduled
to receive any payments of principal until the January 1998 Distribution Date,
and this date will be automatically extended until the Class A Scheduled Payment
Date unless the Servicer elects not to so extend. Thus, because the Transferor
receives all collections of principal paid on the Receivables during the
Revolving Period, most, if not all, of the principal collections on the
Receivables which are paid to the holders of any class of Series 1995-1
Certificates issued by the Trust will arise from Receivables which are not in
existence on the date the Trust issues such Certificates. Therefore, it is our
opinion that the Trust will not constitute a taxable mortgage pool under Section
7701(i) of the Code.
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III. Minnesota State Tax Consequences.
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Our opinion with respect to the Minnesota state tax characterization
of the Offered Certificates and the Trust is based upon current statutory
provisions and the regulations promulgated thereunder, and applicable judicial
or ruling authority, all of which are subject to change (which may be
retroactive). No ruling on any of the issues discussed below will be sought
from the Minnesota Department of Revenue.
If the Offered Certificates are treated as debt for federal income tax
purposes, it is our opinion that this treatment will also apply for Minnesota
tax purposes and that the Trust will not be characterized as an association,
publicly traded partnership or taxable mortgage pool taxable as a corporation
for Minnesota tax purposes. Certificate Owners not otherwise subject to
Minnesota income or franchise taxation would not become subject to such a tax
solely because of their ownership of the Offered Certificates. Certificate
Owners already subject to income or franchise taxation in Minnesota could,
however, be required to pay such a tax on all or a portion of the income
generated from ownership of the Offered Certificates.
If the Trust is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, it is our opinion that the Trust
would also be treated as such a partnership for Minnesota income tax purposes.
The partnership therefore would not be subject to Minnesota taxation.
Certificate Owners that are not otherwise subject to Minnesota income or
franchise taxation would not become subject to such a tax solely because of
their interests in the constructive partnership. Certificate Owners already
subject to income or franchise taxation in Minnesota could, however, be required
to pay such a tax on all or a portion of the income from the constructive
partnership.
If the Offered Certificates are treated as ownership interests in an
association or publicly traded partnership taxable as a corporation, it is our
opinion that this treatment would also apply for Minnesota income and franchise
tax purposes. Pursuant to this treatment, the Trust would be subject to the
Minnesota franchise tax measured by net income (which could result in reduced
distributions to Certificate Owners). Certificate Owners that are not otherwise
subject to Minnesota income or franchise taxation would not become subject to
such a tax solely because of their interests in the constructive corporation.
Certificate Owners already subject to income or franchise taxation in Minnesota
could, however, be
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required to pay such a tax on all or a portion of the income from the
constructive corporation.
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 and Minnesota state income tax laws.
Dated: ______________, 1995
Very truly yours,
