<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 1996
REGISTRATION NO. 33-63575
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
PRE-EFFECTIVE AMENDMENT NO. 5
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GREEN TREE FINANCIAL CORPORATION
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 41-1263905
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1100 LANDMARK TOWERS
345 ST. PETER STREET
SAINT PAUL, MINNESOTA 55102-1639
(612) 293-3400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
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, ESQ. CATHY M. KAPLAN, ESQ.
DORSEY & WHITNEY P.L.L.P. BROWN & WOOD
220 SOUTH SIXTH STREET ONE WORLD TRADE CENTER
MINNEAPOLIS, MINNESOTA 55402 NEW YORK, NEW YORK 10048
(612) 340-2600 (212) 839-5531
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
--------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
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(b)
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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Asset-Backed Securi-
ties.................. $435,000,000 100% $435,000,000 $150,000(2)
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Limited Guaranty of
Green Tree Financial
Corporation........... (3) (3) (3) (3)
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
(3) No additional consideration will be paid for the Limited Guaranty;
accordingly, no additional filing fee is being paid herewith pursuant to
Rule 457(n).
--------------
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 THIS
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 SUPPLEMENT AND THE ACCOMPANYING 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--Preliminary Prospectus Supplement Dated January 19, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated January , 1996)
LOGO
$431,146,642 (APPROXIMATE)
GREEN TREE FINANCIAL CORPORATION
(SELLER AND SERVICER)
GREEN TREE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1996-A
$ (APPROXIMATE) % CERTIFICATES, CLASS A-1
$ (APPROXIMATE) % CERTIFICATES,
CLASS A-4
$ (APPROXIMATE) % CERTIFICATES, CLASS A-2
$ (APPROXIMATE) % CERTIFICATES,
CLASS B
$ (APPROXIMATE) % CERTIFICATES, CLASS A-3
------------
The Certificates offered hereby will represent interests in Green Tree
Recreational, Equipment & Consumer Trust 1996-A (the "Trust"), to be formed by
Green Tree Financial Corporation ("Green Tree"). The Trust Property will
include a pool of retail installment sales contracts and promissory notes (the
"Contracts") for the purchase of a variety of consumer products and all
payments due thereunder on or after February 1, 1996 (the "Cutoff Date"). The
Contracts were originated or purchased by Green Tree in the ordinary course of
its business. The Trust Property will also include an assignment of Green
Tree's security interests in the products financed thereby (the "Products") and
certain other property, as more fully described herein. The aggregate principal
balance of the Contracts on the Cutoff Date was $431,146,642.43. Green Tree
will also act as Servicer of the Contracts. Terms used and not otherwise
defined herein have the meanings ascribed thereto in the Prospectus dated
January , 1996 attached hereto (the "Prospectus").
The Certificates will consist of five classes. The Class A-1 Certificates
will evidence in the aggregate a % (approximate) undivided interest in the
Trust; the Class A-2 Certificates will evidence in the aggregate a %
(approximate) undivided interest in the Trust; the Class A-3 Certificates will
evidence in the aggregate a % (approximate) undivided interest in the Trust;
the Class A-4 Certificates will evidence in the aggregate a % (approximate)
undivided interest in the Trust; and the Class B Certificates will evidence in
the aggregate a % (approximate) undivided interest in the Trust.
(Continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE CERTIFICATES, SEE "RISK FACTORS" ON PAGE S-10 HEREIN AND ON
PAGE 11 IN THE ACCOMPANYING PROSPECTUS.
------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST
AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF GREEN TREE OR ANY AFFILIATE,
EXCEPT TO THE LIMITED EXTENT DESCRIBED
HEREIN.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount Green Tree(1)(2)
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<S> <C> <C> <C>
Per Class A-1 Certificate..............
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Per Class A-2 Certificate..............
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Per Class A-3 Certificate..............
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Per Class A-4 Certificate..............
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Per Class B Certificate................
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Total..................................
</TABLE>
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(1) Plus accrued interest, if any, from and including January , 1996.
(2) Before deducting estimated expenses of $ payable by Green Tree.
------------
The Certificates are offered hereby by the Underwriters named below, subject
to receipt and acceptance by the Underwriters and their right to reject any
order in whole or in part. It is expected that delivery of the Certificates
will be made on or about January , 1996.
------------
LEHMAN BROTHERS MORGAN STANLEY & CO.
INCORPORATED
January , 1996.
<PAGE>
(Continued from preceding page)
Principal and interest are payable on the 15th day of each month (or, if the
15th day is not a business day, the next business day thereafter) (a
"Distribution Date"), beginning in March 1996. The rights of the holders of the
Class A-2, Class A-3, Class A-4 and Class B Certificates to receive
distributions on each Distribution Date will be subordinated to such rights of
the Class A-1 Certificateholders; such rights of the holders of the Class A-3,
Class A-4 and Class B Certificates will be subordinated to such rights of the
Class A-2 Certificateholders; such rights of the holders of the Class A-4 and
Class B Certificates will be subordinated to such rights of the Class A-3
Certificateholders; and such rights of the Class B Certificateholders will be
subordinated to such rights of the Class A-4 Certificateholders.
The Class B Certificateholders will have the benefit of a Limited Guaranty of
Green Tree to protect against losses that would otherwise be absorbed by the
Class B Certificates. To the extent that available funds in the Collection
Account are insufficient to distribute to the holders of the Class B
Certificates the Class B Formula Distribution Amount (as described herein),
Green Tree will be obligated to make a Guaranty Payment equal to the amount of
such deficiency.
The Certificates initially will be represented by certificates registered in
the name of Cede & Co., the nominee of The Depository Trust Company (" DTC").
The interests of beneficial owners of the Certificates will be represented by
book entries on the records of the participating members of DTC. Definitive
Certificates will be available only under the limited circumstances described
herein.
There currently is no secondary market for the Certificates. The Underwriters
expect, but are not obligated, to make a market in the Certificates. There is
no assurance that any such market will develop or continue.
---------------
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
OFFERED HEREBY 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 are issued, unaudited monthly and
annual reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to First Trust National
Association, as Trustee, and Cede & Co., as registered holder of the
Certificates and the nominee of DTC. See "Description of the Certificates--
Statements to Certificateholders," herein and "Certain Information Regarding
the Securities--Book-Entry Registration" and "--Reports to Securityholders" in
the accompanying Prospectus. Certificate Owners may receive 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 at 180 East Fifth Street, St.
Paul, Minnesota 55101, Attention: Corporate Trust Administration, Structured
Finance. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Servicer, on
behalf of the Trust, will file with the Commission periodic reports concerning
the Trust to the extent required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder. However, in accordance with the Exchange Act and the rules and
regulations of the Commission thereunder, Green Tree expects that the Trust's
obligation to file such reports will be terminated following the end of 1996.
S-2
<PAGE>
SUMMARY OF THE TERMS OF THE CERTIFICATES
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed to such terms
elsewhere in this Prospectus Supplement or the accompanying Prospectus.
Issuer........................ Green Tree Recreational, Equipment & Consumer
Trust 1996-A (the "Trust"), to be formed on or
about January , 1996 (the "Closing Date"), by
Green Tree Financial Corporation ("Green Tree")
pursuant to a Pooling and Servicing Agreement,
dated as of January 1, 1996 (the "Agreement"),
between Green Tree, as Seller and as Servicer
(in such capacity referred to herein as the
"Servicer") and First Trust National
Association, as Trustee.
Servicer...................... Green Tree Financial Corporation. See "Green
Tree Financial Corporation" in the accompanying
Prospectus.
Trustee....................... First Trust National Association, St. Paul,
Minnesota (the "Trustee"). See "Description of
the Trust Documents--The Trustee" in the
accompanying Prospectus.
Cutoff Date Pool Principal $431,146,642.43 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-1 Principal $ (Approximate. Subject to a permitted
Balance....................... variance of plus or minus 5%).
Original Class A-2 Principal $ (Approximate. Subject to a permitted
Balance....................... variance of plus or minus 5%).
Original Class A-3 Principal $ (Approximate. Subject to a permitted
Balance....................... variance of plus or minus 5%).
Original Class A-4 Principal $ (Approximate. Subject to a permitted
Balance....................... variance of plus or minus 5%).
Original Class B Principal $ (Approximate. Subject to a permitted
Balance....................... variance of plus or minus 5%).
Class A-1 Pass-Through Rate... % per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-2 Pass-Through Rate... % per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-3 Pass-Through Rate... % per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-4 Pass-Through Rate... % per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class B Pass-Through Rate..... % per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Distribution Date............. The 15th day of each month (or, if such 15th
day is not a business day, the next succeeding
business day), beginning March 15, 1996.
S-3
<PAGE>
Record Date................... The business day immediately preceding the
related Distribution Date.
Description of Certificates... The Class A-1, Class A-2, Class A-3, Class A-4
and Class B Certificates (together, the
"Certificates") represent fractional undivided
interests in the Trust. The rights of the
holders of each Class of Certificates will be
subordinated to the rights of the holders of
each Class of Certificates with a prior numeric
or alphabetical designation, in the manner and
to the extent described herein.
Distributions................. On each Distribution Date, distributions on the
Certificates will be made first to the holders
of the Class A-1 Certificates, then to the
holders of the Class A-2 Certificates, then to
the holders of the Class A-3 Certificates, then
to the holders of the Class A-4 Certificates
and then to the holders of the Class B
Certificates, in the manner described below.
A. Class A-1 Interest...... Interest on the outstanding Class A-1 Principal
Balance will accrue at the Class A-1 Pass-
Through Rate from January , 1996, or from the
most recent Distribution Date on which interest
has been paid to but excluding the following
Distribution Date. The "Class A-1 Principal
Balance" as of any Distribution Date will be
the Original Class A-1 Principal Balance minus
all amounts previously distributed to the Class
A-1 Certificateholders in respect of principal.
Interest will be paid on the Class A-1
Certificates to the extent of the Amount
Available in the Collection Account on such
Distribution Date (as described under
"Description of the Certificates" herein). In
the event the Amount Available in the
Collection Account is not sufficient to make a
full distribution of interest on the Class A-1
Certificates, the amount of the shortfall will
be carried forward and added to the amount of
interest payable on the next Distribution Date.
Any amount so carried forward will bear
interest at the Class A-1 Pass-Through Rate, to
the extent legally permissible. See
"Description of the Certificates."
B. Class A-1 Principal..... Class A-1 Certificateholders will be entitled
to receive on each Distribution Date as payment
of principal, to the extent of the Amount
Available in the Collection Account after
payment of all interest payable on the Class A-
1 Certificates, an amount equal to the sum of
% of the Formula Principal Distribution
Amount for such Distribution Date plus the
Unpaid Class A-1 Principal Shortfall (as
described under "Description of the
Certificates--Class A-1 Principal"), if any,
from prior Distribution Dates.
The "Formula Principal Distribution Amount"
with respect to any Distribution Date will be
an amount equal to the sum of the following
amounts with respect to the related Monthly
Period, in each case computed in accordance
with the method specified in each Contract: (i)
all scheduled payments of principal due on
S-4
<PAGE>
each outstanding Contract during the related
Monthly Period, (ii) the Scheduled Principal
Balance (as defined below) of each Contract
which, during the related Monthly Period, was
purchased by Green Tree pursuant to the
Agreement on account of a breach of a
representation or warranty, (iii) all Partial
Principal Prepayments applied and all Principal
Prepayments in Full received during the related
Monthly Period, and (iv) the Scheduled
Principal Balance of each Contract that became
a Liquidated Contract (as defined below) during
the related Monthly Period. A "Monthly Period"
with respect to a Distribution Date is the
calendar month immediately preceding the month
in which the Distribution Date occurs. The
Scheduled Principal Balance of a Contract for
any Monthly Period is its principal balance as
specified in its amortization schedule, after
giving effect to any previous Partial Principal
Prepayments and to the scheduled payment due on
its scheduled payment date (the "Due Date") in
that month, but without giving effect to any
adjustments due to bankruptcy or similar
proceedings. A Liquidated Contract is a
defaulted Contract as to which all amounts that
the Servicer expects to recover through the
date of disposition of the Product securing
such Contract have been recovered. See
"Description of the Certificates--
Distributions" herein.
C. Class A-2 Interest...... Interest on the outstanding Class A-2 Principal
Balance will accrue at the Class A-2 Pass-
Through Rate from January , 1996, or from the
most recent Distribution Date on which interest
has been paid to but excluding the following
Distribution Date. The "Class A-2 Principal
Balance" as of any Distribution Date will be
the Original Class A-2 Principal Balance minus
all amounts previously distributed to the Class
A-2 Certificateholders in respect of principal.
Interest will be paid on the Class A-2
Certificates to the extent of the Amount
Available in the Collection Account on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-1 Certificates. In the event such
remaining Amount Available in the Collection
Account is not sufficient to make a full
distribution of interest on the Class A-2
Certificates, the amount of the shortfall will
be carried forward and added to the amount of
interest payable on the next Distribution Date.
Any amount so carried forward will bear
interest at the Class A-2 Pass-Through Rate, to
the extent legally permissible. See
"Description of the Certificates."
D. Class A-2 Principal..... Class A-2 Certificateholders will be entitled
to receive on each Distribution Date as payment
of principal, to the extent of the Amount
Available in the Collection Account after
payment of all interest and principal payable
on the Class A-1 Certificates and after payment
of all interest payable on the Class A-2
Certificates, the sum of % of the Formula
Principal
S-5
<PAGE>
Distribution Amount for such Distribution Date
plus the Unpaid Class A-2 Principal Shortfall,
if any, from prior Distribution Dates.
E. Class A-3 Interest...... Interest on the outstanding Class A-3 Principal
Balance will accrue at the Class A-3 Pass-
Through Rate from January , 1996, or from the
most recent Distribution Date on which interest
has been paid to but excluding the following
Distribution Date. The "Class A-3 Principal
Balance" as of any Distribution Date will be
the Original Class A-3 Principal Balance minus
all amounts previously distributed to the Class
A-3 Certificateholders in respect of principal.
Interest will be paid on the Class A-3
Certificates to the extent of the Amount
Available in the Collection Account on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-2 Certificates. In the event such
remaining Amount Available in the Collection
Account is not sufficient to make a full
distribution of interest on the Class A-3
Certificates, the amount of the shortfall will
be carried forward and added to the amount of
interest payable on the next Distribution Date.
Any amount so carried forward will bear
interest at the Class A-3 Pass-Through Rate, to
the extent legally permissible. See
"Description of the Certificates" herein.
F. Class A-3 Principal..... Class A-3 Certificateholders will be entitled
to receive on each Distribution Date as payment
of principal, to the extent of the Amount
Available in the Collection Account after
payment of all interest and principal payable
on the Class A-2 Certificates and after payment
of all interest payable on the Class A-3
Certificates, the sum of % of the Formula
Principal Distribution Amount for such
Distribution Date plus the Unpaid Class A-3
Principal Shortfall, if any, from prior
Distribution Dates.
G. Class A-4 Interest...... Interest on the outstanding Class A-4 Principal
Balance will accrue at the Class A-4 Pass-
Through Rate from January , 1996, or from the
most recent Distribution Date on which interest
has been paid to but excluding the following
Distribution Date. The "Class A-4 Principal
Balance" as of any Distribution Date will be
the Original Class A-4 Principal Balance minus
all amounts previously distributed to the Class
A-4 Certificateholders in respect of principal.
Interest will be paid on the Class A-4
Certificates to the extent of the Amount
Available in the Collection Account on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-3 Certificates. In the event such
remaining Amount Available in the Collection
Account is not sufficient to make a full
distribution of interest on the Class A-4
Certificates, the amount of the shortfall will
be carried forward and added to the amount of
interest payable on the next
S-6
<PAGE>
Distribution Date. Any amount so carried
forward will bear interest at the Class A-4
Pass-Through Rate, to the extent legally
permissible. See "Description of the
Certificates" herein.
H. Class A-4 Principal..... Class A-4 Certificateholders will be entitled
to receive on each Distribution Date as payment
of principal, to the extent of the Amount
Available in the Collection Account after
payment of all interest and principal payable
on the Class A-3 Certificates and after payment
of all interest payable on the Class A-4
Certificates, the sum of % of the Formula
Principal Distribution Amount for such
Distribution Date plus the Unpaid Class A-4
Principal Shortfall, if any, from prior
Distribution Dates.
I. Class B Interest........ Interest on the outstanding Class B Principal
Balance will accrue at the Class B Pass-Through
Rate from January , 1996, or from the most
recent Distribution Date on which interest has
been paid to but excluding the following
Distribution Date. The "Class B Principal
Balance" as of any Distribution Date will be
the Original Class B Principal Balance minus
all amounts previously distributed to the Class
B Certificateholders in respect of principal.
Interest will be paid on the Class B
Certificates to the extent of the Amount
Available in the Collection Account on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-4 Certificates. In the event such
remaining Amount Available in the Collection
Account is not sufficient to make a full
distribution of interest on the Class B
Certificates, the amount of the shortfall will
be carried forward and added to the amount of
interest payable on the next Distribution Date.
Any amount so carried forward will bear
interest at the Class B Pass-Through Rate, to
the extent legally permissible. See
"Description of the Certificates" herein.
J. Class B Principal....... Class B Certificateholders will be entitled to
receive on each Distribution Date as payment of
principal, to the extent of the Amount
Available in the Collection Account after
payment of all interest and principal payable
on the Class A-4 Certificates and after payment
of all interest payable on the Class B
Certificates, the sum of % of the Formula
Principal Distribution Amount for such
Distribution Date plus the Unpaid Class B
Principal Shortfall, if any, from prior
Distribution Dates.
Spread Account................
The Class A-1, Class A-2, Class A-3 and Class
A-4 Certificateholders will have the benefit of
a Spread Account to be held in a segregated
trust account by the Trustee. On any
Distribution Date, if the Amount Available in
the Collection Account (after making all
distributions on each Class of Certificates
with a prior numeric designation) is
insufficient to distribute all interest and
principal then payable on any such Class of
Certificates, the Trustee will withdraw the
amount of the deficiency (or the amount on
deposit in the Spread Account, if less) and
deposit such amount in the Collection Account.
On any Distribution Date, an amount of funds in
the Spread Account equal to .2% of the
aggregate principal balance of the Class A-2,
Class A-3 and Class A-4 Certificates will not
be available to cover a shortfall in principal
distributable on any Class of Certificates, but
would only be available to cover a shortfall in
interest distributable on the Class A-1, Class
A-2, Class A-3 and
S-7
<PAGE>
Class A-4 Certificates. The remainder of the
funds in the Spread Account would be available
to cover any shortfall in interest or principal
on the Class A-1, Class A-2, Class A-3 or Class
A-4 Certificates.
On the Closing Date, the amount on deposit in
the Spread Account will be zero. On each
Distribution Date the Trustee will deposit all
funds remaining in the Collection Account,
after distribution of all interest and
principal then payable on the Certificates, in
the Spread Account, unless the amount on
deposit in the Spread Account equals $
(subject to reduction as provided in, and to
the other terms and conditions contained in,
the Agreement). The Spread Account is not, and
shall not under any circumstances be deemed to
be, included in the Trust. See "Description of
the Certificates--The Spread Account" herein.
Limited Guaranty.............. In order to mitigate the effect of the
subordination of the Class B Certificates and
the effect of liquidation losses on the
Contracts, the Class B Certificateholders are
entitled to receive on each Distribution Date
the amount equal to the Guaranty Payment, if
any, under Green Tree's Limited Guaranty. The
Guaranty Payment for any Distribution Date will
equal the difference, if any, between the Class
B Formula Distribution Amount (equal to accrued
and unpaid interest on the Class B
Certificates, plus % of the Formula Principal
Distribution Amount, plus any Unpaid Class B
Principal Shortfall for such Distribution Date,
and plus any Class B Principal Liquidation Loss
not previously paid (as described under
"Description of the Certificates--Losses on
Liquidated Contracts" herein) and the remaining
Amount Available in the Collection Account
after distribution of all interest and
principal payable on the Class A-4
Certificates.
The Trust Property............ The Trust's assets (the "Trust Property") will
include, among other things, a pool (the
"Contract Pool") of retail installment sales
contracts and promissory notes (the
"Contracts") for the purchase of a variety of
consumer products (the "Products"), and all
payments due thereon on or after February 1,
1996 (the "Cutoff Date"). The Trust Property
will also include an assignment of Green Tree's
security interests in the Products and of the
right to receive proceeds from claims on
certain insurance policies covering the
Products or the Obligors, the Collection
Account, including all investments therein, all
income from the investment of funds therein and
all proceeds thereof, a security interest in
the funds in the Spread Account, and certain
other rights under the Agreement. The Contracts
will be transferred by Green Tree to the Trust
pursuant to the Agreement, and Green Tree will
be obligated to repurchase Contracts upon the
occurrence of certain breaches of
representations and warranties thereunder (a
"Repurchase Event"). See "The Trust" herein.
Contracts..................... The Contracts were originated or purchased by
Green Tree in the ordinary course of business.
As of the Cutoff Date, the Contract Pool had a
weighted average annual percentage rate of
13.01% and a weighted average remaining
maturity of 75 months. As of the Cutoff Date,
no Contract had a scheduled maturity prior to
March 1996 and no Contract was more than 59
days past due. The final scheduled payment date
on the Contract with the latest maturity occurs
in January 2016. The Contracts are prepayable
at any time without penalty to the purchaser or
co-purchasers of the Product or other person or
persons who are obligated to make
S-8
<PAGE>
payments thereunder (each, an "Obligor"). See
"The Contract Pool" herein and "The Contracts"
in the accompanying Prospectus.
Optional Purchase of
Contracts..................... Green Tree or the Servicer may purchase all the
Contracts on any Distribution Date following
the first Monthly Period as of which the Pool
Scheduled Principal Balance has declined to 10%
or less of the Cutoff Date Principal Balance,
subject to certain provisions in the Agreement.
See "Description of the Trust Documents--
Termination" in the accompanying Prospectus.
Tax Status.................... In the opinion of counsel to Green Tree, the
Trust will be classified as a grantor trust for
federal income tax purposes and not as an
association which is taxable as a corporation.
Each
Certificateholder will be treated for such
purposes as the owner of an undivided interest
in the Contracts and other Trust Property.
Accordingly, each Certificateholder must report
on its federal income tax return its share of
the income from the Contracts and other Trust
Property and, subject to limitations on
deductions by individuals, estates and trusts,
may deduct its share of the reasonable fees
paid by the Trust, determined in accordance
with such Certificateholder's tax accounting
method. In addition, it is anticipated that the
Certificates may constitute stripped bonds
within the meaning of the Code. See "Certain
Federal Income Tax Consequences" herein and in
the accompanying Prospectus.
ERISA Considerations.......... Subject to the conditions described herein, the
Class A-1 Certificates may be purchased by
employee benefit plans that are subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"). No transfer of a
Class A-2, Class A-3, Class A-4 or Class B
Certificate will be permitted to be made to any
employee benefit plan subject to ERISA or to
the Internal Revenue Code of 1986, as amended
(the "Code"), unless the opinion of counsel
described under "ERISA Considerations" herein
is delivered to the Trustee. See "ERISA
Considerations" herein and in the Prospectus.
Ratings....................... It is a condition to the issuance of the
Certificates that:
the Class A-1 Certificates be rated "Aaa" by
Moody's Investors Service, Inc. ("Moody's"),
"AAA" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
("S&P"), and "AAA" by Fitch Investors Service,
L.P. ("Fitch") (together, the "Rating
Agencies");
the Class A-2 Certificates be rated at least
"Aa3" by Moody's, at least "AA" by S&P, and at
least "AA" by Fitch;
the Class A-3 Certificates be rated at least
"A3" by Moody's, at least "A+" by S&P, and at
least "A" by Fitch;
the Class A-4 Certificates be rated at least
"Baa3" by Moody's, at least "BBB" by S&P, and
at least "BBB-" by Fitch; and
the Class B Certificates be rated at least
"Baa1" by Moody's, at least "A-" by S&P, and at
least "A" by Fitch.
A security rating is not a recommendation to
buy, sell or hold securities and may be subject
to revision or withdrawal at any time by the
Rating Agency. The rating of the Class B
Certificates will be based in part on an
assessment of Green Tree's ability to make
payments under the Limited Guaranty. Any
reduction in the Rating Agency's rating of
Green Tree's debt securities may result in a
similar reduction in the rating of the Class B
Certificates.
S-9
<PAGE>
RISK FACTORS
Prospective Certificateholders should consider, in addition to the factors
described under "Risk Factors" in the Prospectus, the following factors in
connection with the purchase of the Certificates:
DELINQUENCY, LOAN LOSS AND REPOSSESSION EXPERIENCE
Green Tree began originating conditional sale contracts for recreational
vehicles in 1985 and for motorcycles in May 1988, but has less extensive
underwriting and servicing experience with other types of products financed by
the Contracts. Although Green Tree has calculated and presented herein its
delinquency and net loss experience with respect to its servicing portfolio of
consumer and equipment contracts, there can be no assurance that the
information presented will reflect actual experience with respect to the
Contracts. In addition, there can be no assurance that the future delinquency,
loan loss or repossession experience of the Trust with respect to the
Contracts will be better or worse than that set forth herein with respect to
Green Tree's servicing portfolio. See "The Contract Pool--Delinquency, Loan
Loss and Repossession Information" and "--Selection Criteria" herein.
GEOGRAPHIC CONCENTRATION OF CONTRACTS
As of the Cutoff Date the Obligors on approximately 24.16%, 10.88% and 8.64%
of the Contracts (based on principal balance and billing address of the
Obligor) were located in California, Texas and Florida, respectively. See "The
Contract Pool" herein. Accordingly, adverse economic conditions or other
factors particularly affecting any of these states could adversely affect the
delinquency, loan loss or repossession experience of the Trust with respect to
the Contracts.
THE TRUST
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying
Prospectus. Prospective Certificateholders should consider, in addition to the
information below, the information under "The Trusts" in the accompanying
Prospectus.
Green Tree will establish the Trust pursuant to the Agreement, by selling
and assigning the Contracts and the other Trust Property to the Trustee in
exchange for the Certificates. Prior to such sale and assignment, the Trust
will have no assets or obligations. The Trust will not engage in any business
activity other than acquiring and holding the Trust Property, issuing the
Certificates and distributing payments thereon.
Each Certificate will represent a fractional undivided interest in the
Trust. The Trust Property will include, among other things, (i) the Contract
Pool; (ii) all payments due thereon on or after the Cutoff Date (excluding
certain insurance premiums, late fees and other servicing charges); (iii) such
amounts as from time to time may be held in the Collection Account (including
all investments in the Collection Account and all income from the investment
of funds therein and all proceeds thereof); (iv) a security interest in the
funds in the Spread Account; (v) an assignment of the security interests of
Green Tree in the Products; (vi) an assignment of the right to receive
proceeds from claims on certain insurance policies covering the Products or
the Obligors; and (vii) certain other rights under the Agreement. See "The
Contracts" and "Description of the Trust Documents--Collections" in the
accompanying Prospectus.
Green Tree, as custodian on behalf of the Trust, will hold the original
installment sales contract or promissory note as well as copies of documents
and instruments relating to each Contract and evidencing the security interest
in the Product securing each Contract (the "Contract Files"). In order to
protect the Trust's ownership interest in the Contracts, Green Tree will file
a UCC-1 financing statement in Minnesota to give notice of the Trust's
ownership of the Contracts and the related Trust Property.
S-10
<PAGE>
THE TRUSTEE
First Trust National Association is the Trustee under the Agreement. First
Trust is a national banking association the principal offices of which are
located at 180 East Fifth Street, St. Paul, Minnesota 55101.
THE CONTRACT POOL
GENERAL
The Contract Pool consists of Contracts having an aggregate principal balance
as of the Cutoff Date of $431,146,642.43 (the "Cutoff Date Pool Principal
Balance"). The Contracts were originated between February 1985 and January
1996. All of the Contracts are retail installment sales contracts and
promissory notes purchased by Green Tree from Dealers who regularly originate
and sell such contracts to Green Tree, or originated by Green Tree directly.
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Green Tree's
delinquency, loan loss and repossession experience for each period indicated
with respect to all consumer product and equipment contracts it has purchased
and continues to service. This information includes the experience with respect
to all consumer product contracts in Green Tree's portfolio of consumer product
contracts serviced during each such period, including consumer product and
equipment contracts which do not meet the criteria for selection as a Contract.
Green Tree began originating conditional sale contracts for recreational
vehicles in 1985 and for motorcycles in 1988, but has less extensive
underwriting and servicing experience with other types of products financed by
the Contracts. Accordingly, the delinquency, loan loss and repossession
experience presented below largely represents experience only with recreational
vehicle and motorcycle contracts. In addition, because of the rapid growth of
Green Tree's portfolio of consumer product and equipment contracts, the
experience shown in more recent periods may not be indicative of the experience
to be expected from a more seasoned portfolio.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31, AT
---------------------- SEPT. 30,
1992 1993 1994 1995
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Number of Contracts Outstanding (1)......... 16,215 16,386 21,137 43,304
Number of Contracts Delinquent (2)..........
30-59 Days................................ 136 151 181 369
60-89 Days................................ 34 34 50 128
90 Days or More........................... 107 108 134 231
------ ------ ------ ------
Total Contracts Delinquent.................. 277 293 365 728
====== ====== ====== ======
Delinquencies as a Percentage of Contracts
Outstanding (3)............................ 1.71% 1.79% 1.73% 1.68%
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(3) By number of contracts.
S-11
<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------- NINE MONTHS ENDED
1992 1993 1994 SEPT. 30, 1995
-------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Number of Contracts Serviced
(1).......................... 16,257 16,415 21,184 43,470
Principal Balance of Contracts
(1).......................... $128,561 $113,391 $148,734 $413,977
Contract Liquidations
Units....................... 269 175 160 178
Percentage (2).............. 1.65% 1.07% 0.76% 0.41%
Net Losses:
Dollars (3)................. $ 1,867 $ 981 $ 884 $ 537
Percentage (4).............. 1.45% 0.87% 0.59% 0.13%
</TABLE>
- --------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts being serviced as of
period end.
The consumer product contracts in Green Tree's servicing portfolio include
consumer product contracts other than the Contracts, including consumer
product contracts which do not meet the criteria for selection as a Contract.
There can be no assurance that the delinquency, loan loss or repossession
experience of the Trust with respect to the Contracts will be better than,
worse than or comparable to the experience set forth above. See "Risk
Factors--Delinquency, Loan Loss and Repossession Experience" herein.
CERTAIN OTHER CHARACTERISTICS
The Contracts (i) had a remaining maturity, as of the Cutoff Date, of at
least 2 months, but not more than 240 months, (ii) had an original maturity of
at least 12 months, but not more than 240 months, (iii) had an original
principal balance of at least $1,050.00 and not more than $398,050.00, (iv)
had a remaining principal balance as of the Cutoff Date of at least $1,001.15
and not more than $395,934.27 and (v) had a contractual rate of interest
("Contract Rate") of at least 6.56% and not more than 25.37%. Neither Green
Tree nor the Servicer may substitute other consumer product contracts for the
Contracts at any time during the term of the Agreement.
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED
CUTOFF WEIGHTED AVERAGE WEIGHTED AVERAGE
% OF SCHEDULED DATE POOL AVERAGE AVERAGE ORIGINAL AVERAGE LOAN-TO-
NUMBER OF CONTRACT PRINCIPAL PRINCIPAL PRINCIPAL CONTRACT SCHEDULED REMAINING VALUE
ASSET TYPE CONTRACTS POOL BALANCE BALANCE BALANCE RATE TERM TERM (1) RATIO
---------- --------- -------- --------------- --------- ---------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Horse Trailers......... 2,793 6.21% $ 24,209,957.70 5.62% $ 8,668.08 11.258% 114.9 106.0 82%
Marine................. 5,180 11.53 76,096,943.56 17.65 14,690.53 10.981 141.2 132.4 83
Motorcycle............. 22,830 50.79 145,222,361.71 33.68 6,361.03 14.275 58.3 48.7 79
Trucks................. 2,267 5.04 85,626,952.77 19.86 37,771.04 13.351 48.1 43.4 86
Aircraft............... 578 1.29 26,540,204.72 6.16 45,917.31 11.307 154.2 149.8 85
Sport Vehicles......... 8,713 19.39 41,361,373.16 9.59 4,747.09 15.419 54.7 47.9 84
Keyboard Instruments... 1,241 2.76 15,615,216.72 3.62 12,582.77 10.746 80.3 74.2 82
Recreational Vehicles.. 1,343 2.99 16,473,632.09 3.82 12,266.29 10.938 148.7 101.0 77
------ ------ --------------- ------ ---------- ------ ----- ----- ---
Total................. 44,945 100.00% $431,146,642.43 100.00% $ 9,592.76 13.012% 83.9 74.7 82%
====== ====== =============== ====== ========== ====== ===== ===== ===
</TABLE>
- --------
(1) Based on scheduled payments due after the Cutoff Date and assuming no
prepayments on the Contracts.
S-12
<PAGE>
GEOGRAPHIC CONCENTRATION OF THE CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF NUMBER PERCENT OF CUTOFF DATE
STATE (1) CONTRACTS OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------- --------- ----------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
Alaska.................. 26 .06% $ 453,495.64 .11%
Arkansas................ 145 .32 3,043,484.71 .71
Arizona................. 2,239 4.98 20,674,012.37 4.80
California.............. 13,115 29.17 104,189,023.58 24.16
Colorado................ 337 .75 5,263,250.36 1.22
Connecticut............. 798 1.78 4,852,998.88 1.13
District of Columbia.... 33 .07 563,080.71 .13
Delaware................ 117 .26 1,262,143.04 .29
Florida................. 3,325 7.40 37,264,239.48 8.64
Georgia................. 813 1.81 9,738,053.22 2.26
Hawaii.................. 77 .17 1,080,777.81 .25
Iowa.................... 125 .28 2,644,841.32 .61
Idaho................... 45 .10 1,278,897.88 .30
Illinois................ 816 1.82 8,064,606.56 1.87
Indiana................. 215 .48 2,550,166.22 .59
Kansas.................. 158 .35 2,763,114.38 .64
Kentucky................ 177 .39 2,968,127.08 .69
Louisiana............... 250 .56 3,679,741.43 .85
Massachusetts........... 1,054 2.35 7,192,083.63 1.67
Maryland................ 1,715 3.82 13,887,486.71 3.22
Maine................... 155 .34 1,300,967.52 .30
Michigan................ 487 1.08 5,657,846.68 1.31
Minnesota............... 765 1.70 10,787,385.13 2.50
Missouri................ 499 1.11 7,566,118.51 1.75
Mississippi............. 251 .56 3,382,383.28 .78
Montana................. 43 .10 841,424.82 .20
North Carolina.......... 1,546 3.44 10,785,824.83 2.50
North Dakota............ 18 .04 270,016.67 .06
Nebraska................ 42 .09 927,576.45 .22
New Hampshire........... 417 .93 2,617,164.60 .61
New Jersey.............. 2,262 5.03 15,120,223.43 3.51
New Mexico.............. 326 .73 4,316,737.65 1.00
Nevada.................. 703 1.56 7,506,352.30 1.74
New York................ 1,642 3.65 13,581,606.23 3.15
Ohio.................... 430 .96 7,212,787.73 1.67
Oklahoma................ 385 .86 5,775,821.72 1.34
Oregon.................. 436 .97 5,279,830.43 1.22
Pennsylvania............ 1,124 2.50 10,376,906.80 2.41
Rhode Island............ 90 .20 592,949.15 .14
South Carolina.......... 327 .73 3,999,633.96 .93
South Dakota............ 29 .06 339,347.08 .08
Tennessee............... 634 1.41 9,469,599.92 2.20
Texas................... 4,844 10.77 46,920,760.61 10.88
Utah.................... 143 .32 3,807,602.39 .88
Virginia................ 750 1.67 7,739,920.21 1.80
Vermont................. 75 .17 538,768.75 .12
Washington.............. 645 1.44 6,448,934.14 1.50
Wisconsin............... 157 .35 2,067,581.52 .48
West Virginia........... 74 .16 1,771,976.47 .41
Wyoming................. 36 .08 527,942.82 .12
Non-U.S. based service
personnel.............. 30 .07 201,025.62 .05
------ ------ --------------- ------
Total................. 44,945 100.00% $431,146,642.43 100.00%
====== ====== =============== ======
</TABLE>
- --------
(1) Based on the address of the Obligor set forth in Green Tree's records.
S-13
<PAGE>
DISTRIBUTION OF ORIGINAL CONTRACT AMOUNTS
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL % OF
BALANCE CONTRACT POOL
NUMBER OF OUTSTANDING BY OUTSTANDING
CONTRACTS AS OF CUTOFF PRINCIPAL BALANCE
ORIGINAL CONTRACT AMOUNT AS OF CUTOFF DATE DATE AS OF CUTOFF DATE
------------------------ ----------------- --------------- -----------------
<S> <C> <C> <C>
Less than $10,000......... 29,723 $141,989,299.35 32.93%
Between $10,000 and
$19,999.................. 10,652 121,341,768.15 28.14
Between $20,000 and
$29,999.................. 1,963 41,118,912.55 9.54
Between $30,000 and
$39,999.................. 988 28,388,370.81 6.58
Between $40,000 and
$49,999.................. 573 21,724,501.09 5.04
Between $50,000 and
$59,999.................. 282 14,304,721.34 3.32
Between $60,000 and
$69,999.................. 181 11,045,989.46 2.56
Between $70,000 and
$79,999.................. 208 14,579,985.45 3.38
Between $80,000 and
$89,999.................. 196 15,543,071.28 3.61
Between $90,000 and
$99,999.................. 64 5,653,257.19 1.31
Between $100,000 and
$109,999................. 37 3,738,804.09 .87
Between $110,000 and
$119,999................. 20 2,169,010.34 .50
Between $120,000 and
$129,999................. 14 1,715,287.59 .40
Between $130,000 and
$139,999................. 5 654,142.14 .15
Between $140,000 and
$149,999................. 9 1,271,972.20 .30
Between $150,000 and
$159,999................. 5 760,440.92 .18
Between $160,000 and
$169,999................. 5 818,205.19 .19
Between $170,000 and
$179,999................. 6 1,035,512.40 .24
Between $180,000 and
$189,999................. 4 722,170.83 .17
Between $190,000 and
$199,999................. 3 581,782.52 .13
Between $200,000 and
$249,999................. 2 228,987.48 .05
Between $250,000 and
$299,999................. 1 252,529.18 .06
Between $300,000 and
$349,999................. 1 340,355.47 .08
Between $350,000 and
$399,999................. 3 1,167,565.41 .27
------ --------------- ------
Total................... 44,945 $431,146,642.43 100.00%
====== =============== ======
</TABLE>
YEAR OF ORIGINATION OF CONTRACTS
<TABLE>
<CAPTION>
% OF
AGGREGATE CONTRACT POOL
NUMBER OF PRINCIPAL BALANCE BY OUTSTANDING
YEAR OF CONTRACTS OUTSTANDING PRINCIPAL BALANCE
OIGINATIONR AS OF CUTOFF DATE AS OF CUTOFF DATE AS OF CUTOFF DATE
- ----------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
1985.................... 25 $ 167,411.55 .04%
1986.................... 159 664,689.21 .15
1987.................... 405 3,420,030.90 .79
1988.................... 407 3,495,448.10 .81
1989.................... 1 4,675.04 *
1990.................... 0 .00 .00
1991.................... 200 339,763.71 .08
1992.................... 432 1,498,652.89 .35
1993.................... 2,550 11,917,060.14 2.76
1994.................... 7,199 51,961,023.94 12.05
1995.................... 33,321 354,589,193.40 82.25
1996.................... 246 3,088,693.55 .72
------ --------------- ------
Total................. 44,945 $431,146,642.43 100.00%
====== =============== ======
</TABLE>
- --------
*Indicates an amount greater than zero but less than .005% of the Cutoff
Date Pool Principal Balance.
S-14
<PAGE>
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL % OF CONTRACT POOL BY
NUMBER OF CONTRACTS BALANCE OUTSTANDING OUTSTANDING PRINCIPAL
LOAN-TO-VALUE RATIO AS OF CUTOFF DATE AS OF CUTOFF DATE BALANCE AS OF CUTOFF DATE
------------------- ------------------- ------------------- -------------------------
<S> <C> <C> <C>
Less than 61%............. 3,907 $ 21,659,547.82 5.02%
From 61 to 65%............ 1,598 11,164,103.62 2.59
From 66 to 70%............ 2,629 19,294,073.44 4.48
From 71 to 75%............ 3,710 29,895,077.57 6.93
From 76 to 80%............ 6,593 55,426,167.70 12.86
From 81 to 85%............ 7,225 73,743,582.83 17.10
From 86 to 90%............ 16,222 175,241,139.92 40.64
From 91 to 95%............ 2,435 34,698,017.23 8.05
Over 95%.................. 626 10,024,932.30 2.33
------ --------------- ------
Total................... 44,945 $431,146,642.43 100.00%
====== =============== ======
CONTRACT RATES
<CAPTION>
AGGREGATE PRINCIPAL % OF CONTRACT POOL BY
NUMBER OF CONTRACTS BALANCE OUTSTANDING OUTSTANDING PRINCIPAL
CONTRACT RATE AS OF CUTOFF DATE AS OF CUTOFF DATE BALANCE AS OF CUTOFF DATE
------------- ------------------- ------------------- -------------------------
<S> <C> <C> <C>
Less than 9.00000%....... 313 $ 7,598,766.43 1.76%
9.00001%-10.00000%....... 2,270 43,422,884.89 10.07
10.00001%-11.00000%....... 4,564 74,660,467.28 17.33
11.00001%-12.00000%....... 4,431 60,865,963.18 14.12
12.00001%-13.00000%....... 5,423 63,176,297.74 14.65
13.00001%-14.00000%....... 9,282 68,957,652.96 15.99
14.00001%-15.00000%....... 5,377 40,110,886.34 9.30
15.00001%-16.00000%....... 4,537 31,728,444.89 7.36
16.00001%-17.00000%....... 3,971 19,570,571.43 4.54
Over 17.00000%............ 4,777 21,054,707.29 4.88
------ --------------- ------
Total................... 44,945 $431,146,642.43 100.00%
====== =============== ======
REMAINING MONTHS TO MATURITY
<CAPTION>
AGGREGATE PRINCIPAL % OF CONTRACT POOL BY
NUMBER OF CONTRACTS BALANCE OUTSTANDING OUTSTANDING PRINCIPAL
REMAINING MONTHS TO MATURITY AS OF CUTOFF DATE AS OF CUTOFF DATE BALANCE AS OF CUTOFF DATE
- ---------------------------- ------------------- ------------------- -------------------------
<S> <C> <C> <C>
Fewer than 16............. 1,730 $ 4,192,535.10 .97%
16- 30................... 7,174 37,091,363.18 8.60
31- 45................... 12,350 95,622,817.65 22.18
46- 60................... 14,803 132,879,980.43 30.83
61- 75................... 2,571 31,258,947.17 7.25
76- 90................... 928 15,796,113.09 3.66
91-105................... 694 10,352,188.59 2.40
106-120................... 2,018 27,337,330.95 6.34
121-135................... 472 8,454,860.67 1.96
136-150................... 665 13,468,775.72 3.12
151-165................... 143 4,592,851.97 1.07
166-180................... 1,327 44,315,790.65 10.28
181-195................... 0 .00 .00
196-210................... 0 .00 .00
211-225................... 0 .00 .00
226-240................... 70 5,783,087.26 1.34
------ --------------- ------
Total................... 44,945 $431,146,642.43 100.00%
====== =============== ======
</TABLE>
S-15
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements the information in the Prospectus
under the heading "Yield and Prepayment Considerations."
The Servicer and Green Tree each have the option to purchase from the Trust
all remaining Contracts, and thereby effect early retirement of the
Certificates, on any Distribution Date when the Pool Scheduled Principal
Balance is less than 10% of the Cutoff Date Pool Principal Balance. See
"Description of the Trust Documents--Termination" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments on the Contracts on the weighted average life of the Certificates
under the stated assumptions and is not a prediction of the prepayment rate
that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Certificates will be
influenced by the rate at which principal on the Contracts is paid. Principal
payments on the Contracts may be in the form of scheduled amortization or
prepayments (including, for this purpose, liquidations due to default).
The "Base Case" prepayment model used in the table below represents Green
Tree management's best estimate of the weighted average projected prepayment
speed of the Contracts. This estimate was prepared based on Green Tree's and
industry prepayment experience with contracts financing the purchase of each
type of Product. Based on this experience, Green Tree management's best
estimate of projected prepayment speeds varied by the type of Product
financed, both as to relative prepayment rate and the appropriate model of
prepayment rate:
<TABLE>
<CAPTION>
BASE CASE
PRODUCT PREPAYMENT RATE
------- ---------------
<S> <C>
Horse Trailers, Aircraft, Sport Vehicles and Keyboard
Instruments........................................... 18% CPR
Marine................................................. 325% SPA
Motorcycles and Recreational Vehicles.................. 28% CPR
Trucks................................................. 1% ABS
</TABLE>
The models used in this Prospectus Supplement are the Constant Prepayment
Rate ("CPR"), the Standard Prepayment Assumption ("SPA") and the Absolute
Prepayment Model ("ABS"). The CPR represents an assumed constant rate of
prepayment each month, expressed as a per annum percentage of the outstanding
principal balance of the Contracts related to all Products other than marine
products and trucks. The SPA represents an assumed rate of prepayment each
month of the outstanding principal balance of the Contracts related to marine
products. The ABS represents an assumed rate of prepayment each month relative
to the original number of Contracts related to trucks in the pool of
Contracts. For example, assuming the pool originally contained 10,000
Contracts related to trucks, a 1.0% ABS rate means that 100 Contracts related
to trucks prepay each month.
As used in the following table, the columns headed 80%, 90%, 100%, 110% and
120% assume that prepayments on the Contracts are made at Base Case Prepayment
Rates of 80%, 90%, 100%, 110% and 120%, respectively. For example, 80% Base
Case Prepayment Rate and 120% Base Case Prepayment Rate mean that Contracts
related to Horse Trailers, Aircraft, Sport Vehicles and Keyboard Instruments
have been assumed to have a prepayment rate equal to 14.4% CPR and 21.6% CPR,
respectively; Contracts related to marine products have been assumed to have a
prepayment rate equal to 260% SPA and 390% SPA, respectively; Contracts
related to motorcycles and recreational vehicles have been assumed to have a
prepayment rate equal to 22.4% CPR and 33.6% CPR, respectively; and Contracts
related to trucks have been assumed to have a prepayment rate equal to 0.8%
ABS and 1.2% ABS, respectively. NONE OF CPR, SPA OR ABS PURPORT TO BE A
HISTORICAL
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<PAGE>
DESCRIPTION OF PREPAYMENT EXPERIENCE OR A PREDICTION OF THE ANTICIPATED RATE OF
PREPAYMENT OF ANY POOL OF CONTRACTS, INCLUDING THE CONTRACTS.
The Base Case prepayment model is Green Tree management's best estimate of
the prepayment rates that may be experienced on the Contracts. Because Green
Tree began originating and servicing contracts for many of the Products only
recently, such estimate is based in part on industry experience with similar
contracts rather than Green Tree's experience. There can be no assurance that
Contracts for the purchase of any type of Product will experience prepayments
at such projected rates or in the manner assumed by the prepayment model used
for that type of Contract, or that the Contracts in the aggregate will
experience prepayments similar to the overall prepayment rate or in the manner
projected in the Base Case.
The weighted average lives in the following table were determined assuming
that (i) scheduled interest and principal payments on the Contracts are
received in a timely manner and prepayments are made at the percentages of the
Base Case prepayment model set forth in the table; (ii) either Green Tree or
the Servicer exercises its right of optional termination described above; (iii)
the Cutoff Date Pool Principal Balance is $431,146,642.43 and the Contracts
have the characteristics described under "The Contract Pool"; (iv) no interest
shortfalls will arise in connection with prepayments in full of the Contracts;
(v) distributions are made on the Certificates on the 15th day of each month
commencing in March 1996; and (vi) the Certificates are issued on January ,
1996. No representation is made that the Contracts will not experience
delinquencies or losses.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed herein.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
80% 90% 100% 110% 120%
--- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Weighted Average Life (years)...................... 2.3 2.2 2.1 2.0 1.9
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying Prospectus.
Prospective Certificateholders should consider, in addition to the information
below, the information in the accompanying Prospectus under "The Certificates,"
"Certain Information Regarding the Securities," and "Description of the Trust
Documents."
The Certificates offered hereby will be issued pursuant to the Agreement, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement forms a part. The following summary of the
Certificates and the Agreement does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all of the provisions of
the Certificates, the Agreement and the Prospectus. Where particular provisions
of or terms used in the Agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary. Capitalized terms used in this summary of the Agreement and not
defined herein or in the Prospectus have the meanings assigned in the
Agreement.
DISTRIBUTIONS
On each Distribution Date, distributions on the Certificates will be made
from the Amount Available in the Collection Account first to the holders of the
Class A-1 Certificates, then to the holders of the Class A-2 Certificates, then
to the holders of the Class A-3 Certificates, then to the holders of the Class
A-4 Certificates and then to the holders of the Class B Certificates, in the
manner and order of priority described below.
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<PAGE>
CLASS A-1 INTEREST
Interest on the outstanding Class A-1 Principal Balance will accrue at the
Class A-1 Pass-Through Rate from January , 1996, or from the most recent
Distribution Date on which interest has been paid to but excluding the
following Distribution Date. The "Class A-1 Principal Balance" as of any
Distribution Date will be the Original Class A-1 Principal Balance minus all
amounts previously distributed to the Class A-1 Certificateholders in respect
of principal, and minus any Class A-1 Principal Liquidation Loss (described
below under "--Losses on Liquidated Contracts").
Interest will be paid on the Class A-1 Certificates to the extent of the
Amount Available in the Collection Account on such Distribution Date. In the
event the Amount Available in the Collection Account is not sufficient to make
a full distribution of interest on the Class A-1 Certificates, the amount of
the shortfall will be carried forward and added to the amount of interest
payable on the next Distribution Date. Any amount so carried forward will bear
interest at the Class A-1 Pass-Through Rate, to the extent legally permissible.
CLASS A-1 PRINCIPAL
Class A-1 Certificateholders will be entitled to receive on each Distribution
Date as payment of principal, to the extent of the Amount Available in the
Collection Account after payment of all interest payable on the Class A-1
Certificates, an amount equal to the sum of % of the Formula Principal
Distribution Amount for such Distribution Date plus the Unpaid Class A-1
Principal Shortfall, if any, for such Distribution Date. The "Formula Principal
Distribution Amount" with respect to any Distribution Date will be an amount
equal to the sum of the following amounts with respect to the related Monthly
Period, in each case computed in accordance with the method specified in each
Contract: (i) all scheduled payments of principal due on each outstanding
Contract during the related Monthly Period, (ii) the Scheduled Principal
Balance (as defined below) of each Contract which, during the related Monthly
Period, was purchased by Green Tree pursuant to the Agreement on account of a
breach of a representation or warranty, (iii) all Partial Principal Prepayments
applied and all Principal Prepayments in Full received during the related
Monthly Period, and (iv) the Scheduled Principal Balance of each Contract that
became a Liquidated Contract (as defined below) during the related Monthly
Period. A "Monthly Period" with respect to a Distribution Date is the calendar
month immediately preceding the month in which the Distribution Date occurs.
The Scheduled Principal Balance of a Contract for any Monthly Period is its
principal balance as specified in its amortization schedule, after giving
effect to any previous Partial Principal Prepayments and to the scheduled
payment due on its scheduled payment date (the "Due Date") in that month, but
without giving effect to any adjustments due to bankruptcy or similar
proceedings. A Liquidated Contract is a defaulted Contract as to which all
amounts that the Servicer expects to recover through the date of disposition of
the Product securing such Contract have been recovered. The "Unpaid Class A-1
Principal Shortfall" for any Distribution Date will equal any amount required
to be paid in respect of principal on the Class A-1 Certificates on any prior
Distribution Date but not paid on any intervening Distribution Date, less any
Class A-1 Principal Liquidation Loss.
CLASS A-2 INTEREST
Interest on the outstanding Class A-2 Principal Balance will accrue at the
Class A-2 Pass-Through Rate from January , 1996, or from the most recent
Distribution Date on which interest has been paid to but excluding the
following Distribution Date. The "Class A-2 Principal Balance" as of any
Distribution Date will be the Original Class A-2 Principal Balance minus all
amounts previously distributed to the Class A-2 Certificateholders in respect
of principal, and minus any Class A-2 Principal Liquidation Loss (described
below under "--Losses on Liquidated Contracts").
Interest will be paid on the Class A-2 Certificates to the extent of the
Amount Available in the Collection Account on such Distribution Date, after
payment of all interest and principal then payable on the Class A-1
Certificates. In the event such remaining Amount Available in the Collection
Account is not sufficient to make a full distribution of interest on the Class
A-2 Certificates, the amount of the shortfall will be carried forward and added
to the amount of interest payable on the next Distribution Date. Any amount so
carried forward will bear interest at the Class A-2 Pass-Through Rate, to the
extent legally permissible.
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<PAGE>
CLASS A-2 PRINCIPAL
Class A-2 Certificateholders will be entitled to receive on each Distribution
Date as payment of principal, to the extent of the Amount Available in the
Collection Account after payment of all interest and principal payable on the
Class A-1 Certificates and after payment of all interest payable on the Class
A-2 Certificates, the sum of % of the Formula Principal Distribution Amount
for such Distribution Date, plus any Unpaid Class A-2 Principal Shortfall (as
defined below) for such Distribution Date.
The "Unpaid Class A-2 Principal Shortfall" for any Distribution Date will
equal any amount required to be paid in respect of principal on the Class A-2
Certificates on any prior Distribution Date but not paid on any intervening
Distribution Date, less any Class A-2 Principal Liquidation Loss.
CLASS A-3 INTEREST
Interest on the outstanding Class A-3 Principal Balance will accrue at the
Class A-3 Pass-Through Rate from January , 1996, or from the most recent
Distribution Date on which interest has been paid to but excluding the
following Distribution Date. The "Class A-3 Principal Balance" as of any
Distribution Date will be the Original Class A-3 Principal Balance minus all
amounts previously distributed to the Class A-3 Certificateholders in respect
of principal, and minus any Class A-3 Principal Liquidation Loss (described
below under "--Losses on Liquidated Contracts").
Interest will be paid on the Class A-3 Certificates to the extent of the
Amount Available in the Collection Account on such Distribution Date, after
payment of all interest and principal then payable on the Class A-2
Certificates. In the event such remaining Amount Available in the Collection
Account is not sufficient to make a full distribution of interest on the Class
A-3 Certificates, the amount of the shortfall will be carried forward and added
to the amount of interest payable on the next Distribution Date. Any amount so
carried forward will bear interest at the Class A-3 Pass-Through Rate, to the
extent legally permissible.
CLASS A-3 PRINCIPAL
Class A-3 Certificateholders will be entitled to receive on each Distribution
Date as payment of principal, to the extent of the Amount Available in the
Collection Account after payment of all interest and principal payable on the
Class A-2 Certificates and after payment of all interest payable on the Class
A-3 Certificates, the sum of % of the Formula Principal Distribution Amount
for such Distribution Date, plus any Unpaid Class A-3 Principal Shortfall (as
defined below) for such Distribution Date.
The "Unpaid Class A-3 Principal Shortfall" for any Distribution Date will
equal any amount required to be paid in respect of principal on the Class A-3
Certificates on any prior Distribution Date but not paid on any intervening
Distribution Date, less any Class A-3 Principal Liquidation Loss.
CLASS A-4 INTEREST
Interest on the outstanding Class A-4 Principal Balance will accrue at the
Class A-4 Pass-Through Rate from January , 1996, or from the most recent
Distribution Date on which interest has been paid to but excluding the
following Distribution Date. The "Class A-4 Principal Balance" as of any
Distribution Date will be the Original Class A-4 Principal Balance minus all
amounts previously distributed to the Class A-4 Certificateholders in respect
of principal, and minus any Class A-4 Principal Liquidation Loss (described
below under "--Losses on Liquidated Contracts").
Interest will be paid on the Class A-4 Certificates to the extent of the
Amount Available in the Collection Account on such Distribution Date, after
payment of all interest and principal then payable on the Class A-3
Certificates. In the event such remaining Amount Available in the Collection
Account is not sufficient to make a full distribution of interest on the Class
A-4 Certificates, the amount of the shortfall will be carried forward and added
to the amount of interest payable on the next Distribution Date. Any amount so
carried forward will bear interest at the Class A-4 Pass-Through Rate, to the
extent legally permissible.
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CLASS A-4 PRINCIPAL
Class A-4 Certificateholders will be entitled to receive on each
Distribution Date as payment of principal, to the extent of the Amount
Available in the Collection Account after payment of all interest and
principal payable on the Class A-3 Certificates and after payment of all
interest payable on the Class A-4 Certificates, the sum of % of the Formula
Principal Distribution Amount for such Distribution Date, plus any Unpaid
Class A-4 Principal Shortfall (as defined below) for such Distribution Date.
The "Unpaid Class A-4 Principal Shortfall" for any Distribution Date will
equal any amount required to be paid in respect of principal on the Class A-4
Certificates on any prior Distribution Date but not paid on any intervening
Distribution Date, less any Class A-4 Principal Liquidation Loss.
CLASS B INTEREST
Interest on the outstanding Class B Principal Balance will accrue at the
Class B Pass-Through Rate from January , 1996, or from the most recent
Distribution Date on which interest has been paid to but excluding the
following Distribution Date. The "Class B Principal Balance" as of any
Distribution Date will be the Original Class B Principal Balance minus all
amounts previously distributed to the Class B Certificateholders in respect of
principal, and minus any Class B Principal Liquidation Loss (described below
under "--Losses on Liquidated Contracts").
Interest will be paid on the Class B Certificates to the extent of the
Amount Available in the Collection Account on such Distribution Date, after
payment of all interest and principal then payable on the Class A-4
Certificates. In the event such remaining Amount Available in the Collection
Account is not sufficient to make a full distribution of interest on the Class
B Certificates and Green Tree for any reason fails to pay such amount under
the Limited Guaranty, the amount of the shortfall will be carried forward and
added to the amount of interest payable on the next Distribution Date. Any
amount so carried forward will bear interest at the Class B Pass-Through Rate,
to the extent legally permissible.
CLASS B PRINCIPAL
Class B Certificateholders will be entitled to receive on each Distribution
Date as payment of principal, to the extent of the Amount Available in the
Collection Account after payment of all interest and principal payable on the
Class A Certificates and after payment of all interest payable on the Class B
Certificates, the sum of % of the Principal Payment for such Distribution
Date, plus any Unpaid Class B Principal Shortfall (as defined below) for such
Distribution Date.
The "Unpaid Class B Principal Shortfall" for any Distribution Date will
equal any amount required to be paid in respect of principal on the Class B
Certificates on any prior Distribution Date but not paid by Green Tree under
the Limited Guaranty or out of the Amount Available on such prior Distribution
Date or any intervening Distribution Date, less any Class B Principal
Liquidation Loss.
THE SPREAD ACCOUNT
The Class A-1, Class A-2, Class A-3 and Class A-4 Certificateholders will
have the benefit of a Spread Account to be held in a segregated trust account
by the Trustee. On any Distribution Date, if the Amount Available in the
Collection Account (after making all distributions on each Class of
Certificates with a prior numeric designation) is insufficient to distribute
all interest and principal then payable on any such Class of Certificates, the
Trustee will withdraw the amount of the deficiency (or the amount on deposit
in the Spread Account, if less) and deposit such amount in the Collection
Account. On any Distribution Date, an amount of funds in the Spread Account
equal to .2% of the aggregate principal balance of the Class A-2, Class A-3
and Class A-4 Certificates will not be available to cover a shortfall in
principal distributable on any Class of Certificates, but would only be
available to cover a shortfall in interest distributable on the Class A-1,
Class A-2, Class A-3 and Class A-4 Certificates. The remainder of the funds in
the Spread Account would be available to cover any shortfall in interest or
principal on the Class A-1, Class A-2, Class A-3 or Class A-4 Certificates.
S-20
<PAGE>
On the Closing Date, the amount on deposit in the Spread Account will be
zero. On each Distribution Date the Trustee will deposit all funds remaining in
the Collection Account, after distribution of all interest and principal then
payable on the Certificates, in the Spread Account, unless the amount on
deposit in the Spread Account equals $ (subject to reduction as provided
in, and to the other terms and conditions contained in, the Agreement). Funds
in the Spread Account will be invested in Eligible Investments that mature no
later than the next Distribution Date, and earnings on such investments will be
distributed monthly to the owner of the Spread Account, which will be a
subsidiary of Green Tree. The Spread Account is not, and shall not under any
circumstances be deemed to be, included in the Trust. Accordingly, any amount
remaining in the Spread Account upon termination of the Trust will be
distributed to the owner of the Spread Account.
At any time after the first Distribution Date on which the funds in the
Spread Account equal or exceed $ , the owner of the Spread Account may
obtain the release of all or a portion of the cash on deposit in the Spread
Account by delivering to the Trustee or its agent a letter of credit or other
form of credit enhancement that satisfies the conditions set forth in the
Pledge Agreement relating to the Spread Account (including the requirement that
any such substitution will not result in a reduction or withdrawal of any
Rating Agency's rating of the Certificates). The cost of obtaining or
maintaining any such credit enhancement will be borne solely by the owner of
the Spread Account.
LIMITED GUARANTY
In order to mitigate the effect of the subordination of the Class B
Certificates and the effect of liquidation losses and delinquencies on the
Contracts, the Class B Certificateholders are entitled to receive on each
Distribution Date the amount equal to the Guaranty Payment, if any, under Green
Tree's Limited Guaranty. The Guaranty Payment for any Distribution Date will
equal the difference, if any, between the Class B Formula Distribution Amount
(equal to accrued and unpaid interest on the Class B Certificates, plus % of
the Formula Principal Distribution Amount for such Distribution Date, plus any
Unpaid Class B Principal Shortfall, plus any Class B Principal Liquidation
Loss) and the remaining Amount Available in the Collection Account after
distribution of all interest and principal payable on the Class A-4
Certificates.
The Limited Guaranty will be an unsecured general obligation of Green Tree
and will not be supported by any letter of credit or other credit enhancement
arrangement. The Limited Guaranty will not benefit in any way, or result in any
payment to, the Class A-1, Class A-2, Class A-3 or Class A-4
Certificateholders.
As compensation for servicing the Contracts and providing the Limited
Guaranty, Green Tree will be entitled to receive the Monthly Servicing and
Guaranty Fee on each Distribution Date, equal to the Amount Available remaining
after payment of the Class B Formula Distribution Amount and any deposit into
the Spread Account required on that Distribution Date.
LOSSES ON LIQUIDATED CONTRACTS
As described above, the distribution of principal to each Class of
Certificates is intended to equal such Class's percentage of the Formula
Principal Distribution Amount, which in turn includes the Scheduled Principal
Balance of each Contract that became a Liquidated Contract during the month
preceding the month of such distribution. If the Net Liquidation Proceeds from
such Liquidated Contract are less than the Scheduled Principal Balance of such
Liquidated Contract, the deficiency will, in effect, be absorbed first by the
Monthly Servicing and Guaranty Fee otherwise payable to Green Tree, then by the
Class B Certificateholders (although Green Tree will be obligated to make a
Guaranty Payment equal to any shortfall in the distribution to the Class B
Certificateholders), and then by each other Class of Certificates in inverse
numerical order.
If the Amount Available in the Collection Account for any Distribution Date,
after making all required distributions of interest and principal to more
senior Classes of Certificates, is insufficient to make a full distribution of
interest and/or principal to a Class of Certificates, such deficiency will be
carried forward and added to the amount to be distributed to such Class on the
following Distribution Date.
S-21
<PAGE>
If the Pool Scheduled Principal Balance for any Distribution Date is less
than the aggregate Certificate Balance after giving effect to all
distributions of principal on such Distribution Date, then the Class B
Certificate Balance will be reduced by the amount of such deficiency (a "Class
B Principal Liquidation Loss"). Green Tree will be obligated to pay the amount
of any such Class B Principal Liquidation Loss under the Limited Guaranty. If
Green Tree should fail to pay such amount, however, the amount distributable
on the Class B Certificates on future Distribution Dates would include
interest on any such Class B Principal Liquidation Loss at the Class B Pass-
Through Rate (and, to the extent legally permissible, interest on any unpaid
interest at the Class B Pass-Through Rate) accrued from the date such Class B
Principal Liquidation Loss was incurred, and the amount of such Class B
Principal Liquidation Loss.
Similarly, if the Class B Principal Balance were reduced to zero (which
would be caused only by Class B Principal Liquidation Losses, whether or not
Green Tree makes any required payments under the Limited Guaranty) and the
Pool Scheduled Principal Balance on any Distribution Date were less than the
aggregate Certificate Balance after giving effect to distributions of
principal on such Distribution Date, then the Class A-4 Certificate Balance
would be reduced by the amount of such deficiency (a "Class A-4 Principal
Liquidation Loss"). The amount distributable on the Class A-4 Certificates on
future Distribution Dates would include interest on any such Class A-4
Principal Liquidation Loss at the Class A-4 Pass-Through Rate (and, to the
extent legally permissible, interest on such unpaid interest at the Class A-4
Pass-Through Rate) accrued from the date such Class A-4 Principal Liquidation
Loss was incurred, and the amount of such Class A-4 Principal Liquidation
Loss. Each more senior Class of Certificates would similarly be subject to
reduction in its Certificate Balance if the aggregate Certificate Balance of
all more junior Classes of Certificates were reduced to zero and the Pool
Scheduled Principal Balance were less than the aggregate Certificate Balance,
and would similarly be entitled on future Distribution Dates to receive
interest on any such Principal Liquidation Loss at the applicable Pass-Through
Rate, and the amount of such Principal Liquidation Loss. The respective
percentages of the Formula Principal Distribution Amount distributable to each
Class of Certificates on each Distribution Date will not be affected by any
Principal Liquidation Loss experienced by a Class of Certificates.
Accordingly, even if a Class of Certificates has experienced a Principal
Liquidation Loss, such Class will continue to be entitled to receive its
respective percentage of the Formula Principal Distribution Amount (or, if the
Amount Available in the Collection Account is insufficient to make such
distribution, such Class will be entitled to receive the amount of such
deficiency on subsequent Distribution Dates as an Unpaid Principal Shortfall).
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with the distribution to
each Certificateholder a statement (based on the information in the Servicer's
Certificate), setting forth the following information for the related Monthly
Period:
(i) the amount of the distribution allocable to interest for each Class;
(ii) the amount of the distribution allocable to principal for each
Class;
(iii) the Certificate Balance and the Pool Factor for each Class after
giving effect to the amounts distributed in respect of principal on such
Distribution Date;
(iv) the Unpaid Principal Shortfall, if any, and the Principal
Liquidation Loss, if any, for each Class;
(v) the amount of the Monthly Servicing and Guaranty Fee paid to the
Servicer with respect to such Monthly Period; and
(vi) the amount of Advances made by the Servicer with respect to such
Distribution Date, and the amount paid to the Servicer on such Distribution
Date as reimbursement of Advances made on previous Distribution Dates.
The amounts set forth pursuant to clauses (i) and (ii) above will be expressed
as a dollar amount per $1,000 of original principal balance of a Certificate.
Unless and until Definitive Certificates are issued, such reports will be
sent on behalf of the Trust to the Trustee and 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
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the Trustee. See "Reports to Certificateholders" herein and "Reports to
Securityholders" and "Certain Information Regarding the Securities--Statements
to Securityholders" in the accompanying Prospectus.
Within the required period of time after the end of each calendar year, the
Trustee will furnish to each person who at any time during such calendar year
was a Certificateholder, a statement as to the aggregate amounts of interest
and principal paid to such Certificateholder, information regarding the amount
of servicing compensation received by the Servicer and such other information
as the Seller deems necessary to enable such Certificateholder to prepare its
tax returns. See "Certain Federal Income Tax Consequences" in the accompanying
Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In addition to the opinions of counsel described under "Certain Federal
Income Taxes" in the Prospectus, Dorsey & Whitney P.L.L.P., counsel to the
Seller, will deliver its opinion that, assuming ongoing compliance with the
terms of the Pooling and Servicing Agreement, the Trust will be classified as a
grantor trust for federal income tax purposes and not as an association which
is taxable as a corporation.
For further information regarding federal income tax consequences of
investing in the Certificates, see "Certain Federal Income Tax Consequences--
Grantor Trust Series" in the Prospectus. Specifically, because the Certificates
may constitute stripped bonds, within the meaning of the Code, potential
investors should review the discussion under "Certain Federal Income Tax
Consequences--GRANTOR TRUST SERIES--Stripped Certificates" in the Prospectus.
ERISA CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "ERISA
Considerations."
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans that are subject to
ERISA ("Plans") and on persons who are fiduciaries with respect to such Plans.
Employee benefit plans that are governmental plans (as defined in section 3(32)
of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are
not subject to ERISA requirements. Accordingly, assets of such plans may be
invested in the Class A Certificates without regard to the ERISA restrictions
described above, subject to applicable provisions of other federal and state
laws. However, any such governmental or church plan which is qualified under
section 401(a) of the Code and exempt from taxation under section 501(a) of the
Code is subject to the prohibited transaction rules set forth in section 503 of
the Code.
The U.S. Department of Labor ("DOL") has granted substantially identical
administrative exemptions to Lehman Brothers Inc. (Prohibited Transaction
Exemption 91-14; Exemption Application No. D-7958, 56 Fed. Reg. 7413 (1991))
and to Morgan Stanley & Co. Incorporated (Prohibited Transaction Exemption 90-
24, Exemption Application No. D-8019, 55 Fed. Reg. 20548 (1990)) (collectively
referred to as the "Exemption") from certain of the prohibited transaction
rules of ERISA and the Code with respect to the initial purchase, the holding
and the subsequent resale by Plans of certificates representing interests in
asset-backed pass-through trusts that consist of certain receivables, loans and
other obligations that meet the conditions and requirements of the Exemption.
The receivables covered by the Exemption include consumer installment sales,
contracts and installment loan agreements such as the Contracts. The Exemption
will apply to the acquisition, holding, and resale of the Class A-1
Certificates by a Plan, provided that specified conditions (certain of which
are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the Class A-1 Certificates are the following:
(1) The acquisition of the Class A-1 Certificates by a Plan is on terms
(including the price for the Class A-1 Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction with
an unrelated party;
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<PAGE>
(2) The rights and interests evidenced by the Class A-1 Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Class A-1 Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Moody's, S&P, Fitch or Duff & Phelps
Credit Rating Co.;
(4) The trustee of the Plan is not an affiliate of any member of the
Restricted Group (as defined below);
(5) The sum of all payments made to the Underwriters in connection with
the distribution of the Class A-1 Certificates represents not more than
reasonable compensation for underwriting the Class A-1 Certificates. The
sum of all payments made to and retained by Green Tree pursuant to the sale
of the Contracts to the Trust represents not more than the fair market
value of such Contracts. The sum of all payments made to and retained by
the Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
(6) The Plan investing in the Class A-1 Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Class A-1 Certificates in
connection with the initial issuance, at least fifty (50) percent of the Class
A-1 Certificates are acquired by persons independent of the Restricted Group
(as defined below), (ii) the Plan's investment in Class A-1 Certificates does
not exceed twenty-five (25) percent of all of the Class A-1 Certificates
outstanding at the time of the acquisition and (iii) immediately after the
acquisition, no more than twenty-five (25) percent of the assets of the Plan
are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by Green Tree, the Underwriters, the Trustee, the
Servicer, any obligor with respect to Contracts included in the Trust
constituting more than five (5) percent of the aggregate unamortized principal
balance of the assets in the Trust or any affiliate of such parties (the
"Restricted Group").
Green Tree believes that the Exemption will apply to the acquisition and
holding of Class A-1 Certificates sold by the Underwriters and by Plans and
that all conditions of the Exemption other than those within the control of the
investors have been met. In addition, as of the date hereof, no obligor with
respect to Contracts included in the Trust constitutes more than five (5)
percent of the aggregate unamortized principal balance of the assets of the
Trust. Any Plan fiduciary who proposes to cause a Plan to purchase Class A
Certificates should consult with its own counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership
of the Class A-1 Certificates. Assets of a Plan or individual retirement
account should not be invested in the Class A-1 Certificates unless it is clear
that the assets of the Trust will not be plan assets or unless it is clear that
the Exemption or a prohibited transaction class exemption will apply and exempt
all potential prohibited transactions. See "ERISA Considerations" in the
Prospectus.
No transfer of Class A-2, Class A-3, Class A-4 or Class B Certificates will
be permitted to be made to a Plan unless such Plan, at its expense, delivers to
the Trustee and Green Tree an opinion of counsel (in form satisfactory to the
Trustee and Green Tree) to the effect that the purchase or holding of a Class
A-2, Class A-3, Class A-4 or Class B Certificate by such Plan will not result
in the assets of the Trust being deemed to be "plan assets" and subject to the
prohibited transaction provisions of ERISA and the Code and will not subject
the Trustee, Green Tree or the Servicer to any obligation or liability in
addition to those undertaken in the Agreement. Unless such opinion is
delivered, each person acquiring a Class A-2, Class A-3, Class A-4 or Class B
Certificate or any interest therein will be deemed to represent to the Trustee,
Green Tree and the Servicer that such person is neither a Plan, nor acting on
behalf of a Plan, subject to ERISA or to Section 4975 of the Code.
S-24
<PAGE>
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from Green Tree the
respective principal amounts of Certificates set forth opposite their names
below:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS B
UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Lehman Brothers Inc. ... $ $ $ $ $
Morgan Stanley & Co.
Incorporated...........
----- ----- ----- ----- -----
Total............... $ $ $ $ $
===== ===== ===== ===== =====
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Certificates offered hereby, if any of such Certificates
are purchased.
Green Tree has been advised by Lehman Brothers Inc., the Representative of
the several Underwriters, that the Underwriters propose initially to offer the
Certificates to the public at the public offering price set forth on the cover
page of this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Class A-1
Certificates, % of the Class A-2 Certificates, % of the Class A-3
Certificates, % of the Class A-4 Certificates and % of the Class B
Certificates, and that the Underwriters and such dealers may reallow a discount
of not in excess of % of the principal amount of the Class A-1 Certificates,
% of the Class A-2 Certificates, % of the Class A-3 Certificates, % of
the Class A-4 Certificates and % of the Class B Certificates, to other
dealers. The public offering price and the concession and discount to dealers
may be changed by the Representative after the initial public offering of the
Certificates offered hereby.
Green Tree has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
Green Tree does not intend to apply for listing of the Certificates on a
national securities exchange, but has been advised by the Underwriters that the
Underwriters currently intend to make a market in the Certificates, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Certificates and any such market
may be discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Certificates.
LEGAL MATTERS
Certain matters with respect to the legality of the Certificates and with
respect to the federal income tax matters discussed under "Certain Federal
Income Tax Consequences" will be passed upon for Green Tree by Dorsey & Whitney
P.L.L.P., Minneapolis, Minnesota. The validity of the Certificates will be
passed upon for the Underwriters by Brown & Wood, New York, New York.
S-25
<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, DATED JANUARY 16, 1996
PROSPECTUS
GREEN TREE RECREATIONAL, EQUIPMENT & CONSUMER TRUSTS
ASSET-BACKED CERTIFICATES
ASSET-BACKED NOTES
-----------
GREEN TREE FINANCIAL CORPORATION
(SELLER AND SERVICER)
-----------
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed Notes
(the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include either one or more classes of
Certificates or, if Notes are issued as part of a series, one or more classes
of Notes and one or more classes of Certificates, as set forth in the related
Prospectus Supplement.
The Certificates and the Notes, if any, of any series of Securities will be
issued by a trust (a "Trust") to be formed with respect to such series by Green
Tree Financial Corporation ("Green Tree"). The assets of each Trust (the "Trust
Property") will include a pool of retail installment sales contracts and
promissory notes (the "Contracts") for the purchase of a variety of consumer
products, as further described under "Green Tree Financial Corporation" herein
(collectively, the "Products"). The Trust Property will also include certain
monies paid or payable under the Contracts after the Cutoff Date set forth in
the related Prospectus Supplement (the "Cutoff Date"), an assignment of Green
Tree's security interests in the Products financed thereby, and certain other
property, as more fully described herein and in the related Prospectus
Supplement. In addition, if so specified in the related Prospectus Supplement,
the Trust Property will include monies on deposit in one or more trust accounts
to be established with an Indenture Trustee, which may include a Pre-Funding
Account which would be used to purchase additional Contracts (the "Subsequent
Contracts") from the Seller from time to time during the Pre-Funding Period
specified in the related Prospectus Supplement.
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into between
Green Tree, as Seller and Servicer, and the Trustee specified in the related
Prospectus Supplement (the "Trustee") or (ii) a Trust Agreement (the "Trust
Agreement") to be entered into among the Seller, the Trustee and certain other
parties as specified in the related Prospectus Supplement. If the Trust is
formed pursuant to a Trust Agreement, a Sale and Servicing Agreement (the "Sale
and Servicing Agreement") will be entered into among Green Tree, as Seller and
Servicer and the Trustee. The Pooling and Servicing Agreement or the Trust
Agreement and the Sale and Servicing Agreement are collectively referred to
herein as the "Trust Documents." The Notes, if any, of a series will be issued
and secured pursuant to an Indenture (the "Indenture") between the Trust and
the Indenture Trustee specified in the related Prospectus Supplement (the
"Indenture Trustee").
Except as otherwise provided in the related Prospectus Supplement, each class
of Securities of any series will represent the right to receive a specified
amount of payments of principal and interest on the related Contracts in the
manner described herein and in the related Prospectus Supplement. The right of
each class of Securities to receive payments may be senior or subordinate to
the rights of one or more of the other classes of such series. A series may
include two or more classes of Certificates or Notes which differ as to the
timing and priority of payment, interest rate or amount of distributions in
respect of principal or interest or both. A series may include one or more
classes of Certificates or Notes entitled to distributions in respect of
principal, with disproportionate, nominal or no interest distributions, or to
interest distributions, with disproportionate, nominal or no distributions in
respect of principal. Distributions on Certificates of any series will be
subordinated in priority to payments due on the related Notes, if any, to the
extent described herein and in the related Prospectus Supplement. The
Certificates will represent fractional undivided interests in the related
Trust.
Each class of Securities will represent the right to receive distributions or
payments in the amounts, at the rates, and on the dates set forth in the
related Prospectus Supplement. The rate of distributions in respect of
principal on Certificates and payment in respect of principal on Notes, if any,
of any class will depend on the priority of payment of such class and the rate
and timing of payments (including prepayments, liquidations and repurchases of
Contracts) on the related Contracts.
If specified in the related Prospectus Supplement, a financial guaranty
insurance policy, letter of credit, surety bond, Green Tree guaranty, cash
reserve fund, or other form of credit enhancement, or any combination thereof,
may be provided with respect to a Trust or any class of Securities.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates and the Notes, if any, of any series initially will be represented
by certificates and notes registered in the name of Cede & Co., the nominee of
The Depository Trust Company ("DTC"). The interests of beneficial owners of the
Securities will be represented by book entries on the records of the
participating members of DTC. Definitive Securities will be available only
under limited circumstances.
There currently is no secondary market for the Securities. There can be no
assurance that any such market will develop or, if it does develop, that it
will continue. The Securities will not be listed on any securities exchange.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" AT PAGE 11 HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT.
-----------
THE CERTIFICATES REPRESENT INTERESTS IN AND THE NOTES REPRESENT OBLIGATIONS
OF THE RELATED TRUST AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF GREEN
TREE (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN AND IN THE RELATED
PROSPECTUS SUPPLEMENT) OR ANY AFFILIATE OF GREEN TREE.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
AVAILABLE INFORMATION
Green Tree, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement which is available for
inspection without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission at
Seven World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of which may be obtained from the Commission
at prescribed rates.
REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, unless and
until Definitive Certificates or Definitive Notes are issued, unaudited
monthly and annual reports, containing information concerning each Trust and
prepared by the Servicer, will be sent on behalf of the Trust to the Trustee
for the Certificateholders, the Indenture Trustee for the Noteholders and Cede
& Co., as registered holder of the Certificates and the Notes and the nominee
of DTC. See "Certain Information Regarding the Securities--Statements to
Securityholders" and "--Book-Entry Registration." Certificateholders and
Noteholders are collectively referred to herein as the "Securityholders."
Certificate Owners or Note Owners may receive such reports, upon written
request, together with a certification that they are Certificate Owners or
Note Owners and payment of reproduction and postage expenses associated with
the distribution of such reports, from the Trustee, with respect to
Certificate Owners, or the Indenture Trustee, with respect to Note Owners, at
the addresses specified in the related Prospectus Supplement. Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles. Green Tree does not intend to send any of its
financial reports to Securityholders. The Servicer, on behalf of each Trust,
will file with the Commission periodic reports concerning each Trust to the
extent required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
However, in accordance with the Exchange Act and the rules and regulations of
the Commission thereunder, Green Tree expects that each Trust's obligation to
file such reports will be terminated following the end of the year in which
such Trust is formed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Green Tree's Annual Report on Form 10-K for the year ended December 31,
1994, and Quarterly Reports on Form 10-Q for the periods ended March 31, June
30 and September 30, 1995, which have been filed with the Commission, are
hereby incorporated by reference in this Prospectus and the related Prospectus
Supplement.
All documents filed by the Servicer on behalf of each Trust pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the related
Securities shall be deemed to be incorporated by reference into this
Prospectus and the related Prospectus Supplement and to be a part hereof and
thereof from the respective dates of filing of such documents. Any statement
contained herein or in a document all or any portion of which is deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the related Prospectus Supplement to the
extent that a statement contained herein or in any other subsequently filed
document which also is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or the related Prospectus Supplement.
Green Tree will provide without charge to any person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any
or all of the foregoing documents incorporated herein by reference (other than
certain exhibits to such documents). Requests for such copies should be
directed to Chief Financial Officer, Green Tree Financial Corporation, 1100
Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota 55102-1639,
telephone number (612) 293-3400.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of each series of Securities. Certain capitalized terms used in this
Prospectus Summary are defined elsewhere in this Prospectus and in the related
Prospectus Supplement.
<TABLE>
<S> <C>
Issuer.............................. With respect to each series of Securities,
a trust (the "Trust") will be formed by
Green Tree pursuant to either a Pooling and
Servicing Agreement between Green Tree, in
its capacity as Seller and as Servicer (in
such capacity referred to herein as the
"Servicer"), and the Trustee specified in
the related Prospectus Supplement (each
such trust, a "grantor trust"), or a Trust
Agreement between the Seller, the Trustee
specified in the related Prospectus
Supplement and certain other parties as
specified in the related Prospectus
Supplement (each such trust, an "owner
trust").
Seller and Servicer................. Green Tree Financial Corporation. See
"Green Tree Financial Corporation."
Trustee............................. The Trustee for a grantor trust or the
Owner Trustee for an owner trust, in each
case as specified in the related Prospectus
Supplement. The Trustee or Owner Trustee
for any Trust will be referred to in this
Prospectus as the "Trustee," although the
Prospectus Supplement relating to an owner
trust that issues Notes will refer to the
Trustee as the "Owner Trustee" in order to
distinguish the Owner Trustee and the
Indenture Trustee for such Series. See
"Description of the Trust Documents--The
Trustee."
Indenture Trustee................... With respect to any Series of Securities
including one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture
Trustee").
The Certificates.................... Each series of Securities will include one
or more classes of Certificates which will
be issued pursuant to the related Trust
Documents.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in denominations of
$1,000 and in integral multiples thereof
and will be available in book-entry form
only. Unless otherwise specified in the
related Prospectus Supplement, beneficial
owners of Certificates ("Certificate
Owners") will be able to receive Definitive
Certificates only in the limited
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities--Book-
Entry Registration."
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated Certificate
Balance (as defined in the related
Prospectus Supplement) and will accrue
interest on such Certificate Balance at a
specified rate (with respect to each class
of Certificates, the "Pass-Through Rate").
Each class of Certificates may have a
different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through
Rate, or any combination of the foregoing.
The related Prospectus Supplement will
specify the Pass-Through Rate for each
class of Certificates, or the initial Pass-
Through Rate and the method for determining
subsequent changes to the Pass-Through
Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority
of payment, seniority, allocation of loss,
Pass-Through Rate or amount of
distributions in respect of principal or
interest, or as to which distributions in
respect of principal or interest on any
class may or may not be made upon the
occurrence of specified events or on the
basis of collections from designated
portions of the Contract Pool. In addition,
a series may include one or more classes of
Certificates ("Stripped Certificates")
entitled to (i) distributions in respect of
principal with disproportionate, nominal or
no interest distributions, or (ii) interest
distributions, with disproportionate,
nominal or no distributions in respect of
principal.
With respect to any series of Securities
including one or more classes of Notes,
distributions in respect of the
Certificates may be subordinated in
priority of payment to payments on the
Notes, to the extent specified in the
related Prospectus Supplement.
If the Seller or Servicer exercises its
option to purchase the Contracts of a Trust
on the terms and conditions described below
under "Description of the Trust Documents--
Termination," Certificate Owners will
receive an amount in respect of the
Certificates as specified in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that
the property of a Trust will include a Pre-
Funding Account (as such term is defined in
the related Prospectus Supplement, the
"Pre-Funding Account"),
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Certificate Owners will receive a
distribution in respect of principal on or
immediately following the end of the
funding period specified in the related
Prospectus Supplement (the "Pre-Funding
Period") in an amount and manner specified
in the related Prospectus Supplement.
The Notes........................... With respect to any series of Securities
including one or more classes of Notes,
such Notes will be issued pursuant to an
Indenture.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be
available for purchase in denominations of
$1,000 and integral multiples thereof, and
will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, beneficial owners of
Notes ("Note Owners") will be able to
receive Definitive Notes only in the
limited circumstances described herein or
in the related Prospectus Supplement. See
"Certain Information Regarding the
Securities--Book-Entry Registration."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes
will have a stated principal amount and
will bear interest at a specified rate or
rates (with respect to each class of Notes,
the "Interest Rate"). Each class of Notes
may have a different Interest Rate, which
may be a fixed, variable or adjustable
Interest Rate, or any combination of the
foregoing. The related Prospectus
Supplement will specify the Interest Rate
and the method for determining subsequent
changes to the Interest Rate.
A series may include two or more classes of
Notes which differ as to the timing and
priority of payment, seniority, allocations
of loss, Interest Rate or amount of
payments of principal or interest, or as to
which payments of principal or interest may
or may not be made upon the occurrence of
specified events or on the basis of
collections from designated portions of the
Contract Pool. In addition, a series may
include one or more classes of Notes
("Stripped Notes") entitled to (i)
principal payments with disproportionate,
nominal or no interest payments or (ii)
interest payments with disproportionate,
nominal or no principal payments.
If the Seller or the Servicer exercises its
option to purchase the Contracts of a Trust
on the terms and conditions described below
under "Description of the Trust Documents--
Termination," the outstanding Notes, if
any, of such series will be redeemed as set
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
forth in the related Prospectus Supplement.
In addition, if the related Prospectus
Supplement provides that the property of a
Trust will include a Pre-Funding Account,
the outstanding Notes, if any, of such
series will be subject to partial
redemption on or immediately following the
end of the Pre-Funding Period in an amount
and manner specified in the related
Prospectus Supplement. In the event of such
partial redemption, the Note Owners may be
entitled to receive a prepayment premium
from the Trust, in the amount and to the
extent provided in the related Prospectus
Supplement.
Trust Property...................... Each Certificate will represent a
fractional undivided interest in, and each
Note, if any, will represent an obligation
of, the related Trust. The assets of each
Trust (the "Trust Property") will include,
among other things, a pool (the "Contract
Pool") of retail installment sales
contracts and promissory notes (the
"Contracts") for the purchase of a variety
of consumer products as further described
under "Green Tree Financial Corporation"
herein (collectively, the "Products"),
certain monies paid or payable thereunder
on or after the Cutoff Date (as specified
in the related Prospectus Supplement), an
assignment of Green Tree's security
interests in the Products and of the right
to receive proceeds from claims on certain
insurance policies covering the Products or
the Obligors, the assignment of certain
rights of Green Tree against the Dealers
originating such Contracts, the Collection
Account, including all investments therein,
all income from the investment of funds
therein and all proceeds thereof, certain
other accounts and the proceeds thereof and
certain other rights under the Trust
Documents. In addition, if so specified in
the related Prospectus Supplement, the
Trust Property will include monies on
deposit in a Pre-Funding Account to be
established with the Indenture Trustee or
the Trustee, which will be used to purchase
Subsequent Contracts (as defined below)
from the Seller from time to time during
the Pre-Funding Period specified in the
related Prospectus Supplement, as well as
any Subsequent Contracts so purchased. See
"The Trusts."
If and to the extent provided in the
related Prospectus Supplement, the related
Trust will be obligated to purchase from
Green Tree (subject to the satisfaction of
certain conditions described in the
applicable Sale and Servicing Agreement),
additional Contracts (the "Subsequent
Contracts") from time to time (as
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
frequently as daily) during the Pre-Funding
Period specified in the related Prospectus
Supplement having an aggregate principal
balance approximately equal to the amount
on deposit in the Pre-Funding Account (the
"Pre-Funded Amount") on such Closing Date.
Green Tree will be obligated to repurchase
Contracts upon the occurrence of certain
breaches of representations and warranties
(a "Repurchase Event"). See "Description of
the Trust Documents--Sale and Assignment of
the Contracts" and "--Servicing
Procedures."
Enhancement......................... If and to the extent specified in the
related Prospectus Supplement, enhancement
with respect to a Trust or any class of
Securities may include any one or more of
the following: a financial guaranty
insurance policy, letter of credit, Green
Tree guaranty, cash reserve fund,
derivative product, or other form of credit
enhancement, or any combination thereof.
The enhancement with respect to any Trust
or any class of Securities may be
structured to provide protection against
delinquencies and/or losses on the
Contracts, against changes in interest
rates, or other risks, to the extent and
under the conditions specified in the
related Prospectus Supplement. Unless
otherwise specified in the related
Prospectus Supplement, any form of
enhancement will have certain limitations
and exclusions from coverage thereunder,
which will be described in the related
Prospectus Supplement. Further information
regarding any provider of credit
enhancement, including financial
information when material, will be included
in the related Prospectus Supplement. See
"Description of the Trust Documents--
Enhancement."
Servicing........................... The Servicer will be responsible for
managing, administering, servicing and
making collections on the Contracts held by
each Trust. Unless otherwise specified in
the related Prospectus Supplement, with
respect to each series of Securities
compensation to the Servicer will include a
monthly fee (the "Servicing Fee") which
will be payable from the related Trust to
the Servicer on each Distribution Date, in
an amount equal to the product of one-
twelfth of .75% per annum multiplied by the
aggregate principal balance of the
Contracts (the "Aggregate Principal
Balance") as of the first day of the prior
calendar month, plus any late fees and
other administrative fees and expenses or
similar charges collected with respect to
the Contracts during such Monthly Period.
See "Description of the Trust Documents--
Servicing Compensation."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Advances............................ Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
obligated to make Advances each month of
any scheduled payments on the Contracts
that were due but not received during the
prior Due Period. The Servicer will be
entitled to reimbursement of an Advance
from Available Funds in the Collection
Account for the related Trust. The Servicer
will be obligated to make an Advance only
to the extent that it determines that such
Advance will be recoverable from subsequent
funds available therefor in the Collection
Account for the related Trust. See
"Description of the Trust Documents--
Advances."
Contracts........................... The Contracts forming part of the Trust
Property of each Trust were or will have
been originated by
Dealers and sold by the Dealers to Green
Tree in the ordinary course of business.
The Contracts will generally be prepayable
at any time without penalty to the
purchaser of the related Product or other
person or persons who are obligated to make
payments thereunder (each, an "Obligor").
See "The Contracts." Information with
respect to each Contract Pool, including
the proportions of each type of Product
financed, the weighted average annual
percentage rate and the weighted average
remaining maturity, will be set forth in
the related Prospectus Supplement.
Collection Account.................. With respect to each series of Securities,
the Servicer will establish and maintain
one or more separate accounts (the
"Collection Account") in the name of the
Trustee or, in the case of any series
including one or more classes of Notes, in
the name of the Indenture Trustee for the
benefit of the Certificate Owners and the
Note Owners. All payments from Obligors
that are received by the Servicer on behalf
of each Trust will be deposited in the
related Collection Account no later than
one Business Day after receipt thereof.
Unless otherwise specified in the related
Prospectus Supplement, all payments from
Obligors and all proceeds (net of
reasonable expenses of collection) with
respect to Liquidated Contracts
("Liquidation Proceeds") that are received
by the Servicer will be deposited in the
related Collection Account no later than
one Business Day after receipt thereof.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
permitted to use any alternative remittance
schedule acceptable to the Rating Agencies
(as defined below). See "Description of the
Trust Documents--Collections."
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<S> <C>
Mandatory Purchase of Certain
Contracts........................ With respect to each series of Securities,
Green Tree will make certain representations
and warranties relating to the Contracts held
by the related Trust to the Trustee for the
benefit of the related Trust and if such
series of Securities includes one or more
classes of Notes, the Trustee will assign its
right to enforce such representations and
warranties to the related Indenture Trustee
as collateral for the Notes. The Trustee and
the Indenture Trustee, if any, will be
entitled to require that Green Tree
repurchase any Contract if the interests of
the Certificate Owners, the Note Owners, if
any, or the related Trust therein are
materially and adversely affected by a breach
of any such representation or warranty (a
"Repurchase Event"). See "Description of the
Trust Documents--Sale and Assignment of the
Contracts."
Optional Purchase of Contracts.... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, the Seller or the
Servicer may purchase all the Contracts held
by the related Trust on any Distribution Date
following the first Monthly Period as of
which the Aggregate Principal Balance has
declined to 10% or less (or such other
percentage as may be specified in the related
Prospectus Supplement) of the Cutoff Date
Principal Balance, subject to certain
provisions in the related Trust Documents.
See "Description of the Trust Documents--
Termination."
Tax Status........................ If the Trust is structured as an owner
trust, in the opinion of Counsel to the
Seller, for federal income tax purposes,
the Notes will be characterized as debt and
the Trust will not be characterized as an
association or a publicly traded
partnership taxable as a corporation. Each
Noteholder, by the acceptance of a Note,
will agree to treat the Notes as debt. Each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust
as a partnership in which the
Certificateholders are partners for federal
income tax purposes. Alternative
characterizations of the Trust, the Notes
and the Certificates are possible,
but would not result in materially adverse
tax consequences to Noteholders or
Certificateholders. See "Certain Federal
Income Tax Consequences--Owner Trust
Series" herein.
If the Trust is structured as a grantor
trust, in the opinion of Counsel to the
Seller, for federal income tax purposes,
the Trust will be classified as a grantor
trust and not as an association which is
taxable as a
</TABLE>
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<TABLE>
<S> <C>
corporation. Each Certificateholder will be
treated as the owner of an undivided
interest in the Contracts and other Trust
Property. See "Certain Federal Income Tax
Consequences--Grantor Trust Series" herein.
ERISA Considerations .............. Subject to the considerations discussed
under "ERISA Considerations" herein and in
the related Prospectus Supplement, and
unless otherwise specified in the related
Prospectus Supplement, the Notes will be
eligible for purchase by employee benefit
plans. The related Prospectus Supplement
will provide further information with
respect to the eligibility of a class of
Certificates for purchase by employee
benefit plans. See "ERISA Considerations"
herein and in the related Prospectus
Supplement.
Rating............................. As a condition of issuance, the Securities
of each series offered pursuant to this
Prospectus will be rated in one of the four
highest rating categories by at least one
nationally recognized rating agency (a
"Rating Agency"). There is no assurance
that the rating initially assigned to such
Securities will not be subsequently lowered
or withdrawn by the Rating Agency. In the
event the rating initially assigned to any
Securities is subsequently lowered for any
reason, no person or entity will be
obligated to provide any credit enhancement
in addition to the credit enhancement, if
any, specified in the related Prospectus
Supplement.
Registration of Certificates....... Unless otherwise specified in the related
Prospectus Supplement, the Certificates and
the Notes, if any, of each series will be
registered in the name of Cede & Co., as
the nominee of DTC, and will be available
for purchase only in book-entry form on the
records of DTC and participating members
thereof. Certificates and Notes will be
issued in definitive form only under the
limited circumstances described herein. All
references herein to "Holders" or
"Certificateholders" or "Noteholders" shall
reflect the rights of beneficial owners of
Certificates (the "Certificate Owners") or
of Notes ("Note Owners"), as the case may
be, as they may indirectly exercise such
rights through DTC and participating
members thereof, except as otherwise
specified herein or in the related
Prospectus Supplement. See "Description of
the Trust Documents--Book-Entry
Registration."
</TABLE>
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RISK FACTORS
CERTAIN LEGAL ASPECTS RELATING TO THE OWNERSHIP AND ENFORCEABILITY OF THE
CONTRACTS
With respect to each series of Securities, the transfer of the Contracts to
the related Trust will be subject to the requirements of the Uniform
Commercial Code (the "UCC") as in effect in Minnesota. The Seller will take or
cause to be taken such action as is required to perfect the Trust's rights in
the Contracts.
Unless otherwise provided in the related Prospectus Supplement, Green Tree
will hold the Contract Files (as defined below) on behalf of each Trust. To
facilitate servicing and save administrative costs, the documents will not be
physically segregated from other similar documents that are in Green Tree's
possession. UCC financing statements will be filed in Minnesota reflecting the
sale and assignment of the Contracts to the Trustee, and Green Tree's
accounting records and computer systems will also reflect such sale and
assignment. In addition, the Contracts will be stamped or otherwise marked to
indicate that such Contracts have been sold to the related Trust. Despite
these precautions, if, through inadvertence or otherwise, any of the Contracts
were sold to another party (or a security interest therein were granted to
another party) that purchased (or took such security interest in) any of such
Contracts in the ordinary course of its business and took possession of such
Contracts, the purchaser (or secured party) would acquire an interest in the
Contracts superior to the interest of the related Trust if the purchaser (or
secured party) acquired (or took a security interest in) the Contracts for new
value and without actual knowledge of such Trust's interest.
Due to the administrative burden and expense, the documents reflecting Green
Tree's security interest in the Products will not be amended to reflect the
assignment of the security interests in the Products by Green Tree to the
Trustee. In the absence of such an amendment, the Trustee may not have a
perfected security interest in the Products. Moreover, statutory liens for
repairs or unpaid taxes may have priority even over perfected security
interests in the Products. See "Description of the Trust Documents--Sale and
Assignment of the Contracts" and "Certain Legal Aspects of the Contracts."
GREEN TREE'S EXPERIENCE WITH THE PRODUCTS
Green Tree began originating and servicing retail installment contracts for
recreational vehicles in 1985 and for motorcycles in 1988 but has less
extensive underwriting and servicing experience with the other types of
products financed by Contracts that will be included in a Trust. Green Tree's
extensive experience in originating and servicing consumer financing contracts
for certain types of products, including manufactured housing, may not be
directly applicable to the servicing of consumer financing contracts secured
by other types of products.
RISKS TO INVESTORS UPON ANY INSOLVENCY OF GREEN TREE
Green Tree intends that any transfer of Contracts to the related Trust will
constitute a sale, rather than a pledge of the Contracts to secure
indebtedness of Green Tree. However, if Green Tree were to become a debtor
under the federal bankruptcy code or similar applicable state laws
(collectively, "Insolvency Laws"), a creditor or trustee in bankruptcy of
Green Tree or Green Tree as debtor-in-possession might argue that such sale of
Contracts by Green Tree was a pledge of the Contracts rather than a sale. This
position, if presented to or accepted by a court, could cause the related
Trust to experience a delay in or reduction of collections on the Contracts.
A case decided by the United States Court of Appeals for the Tenth Circuit,
Octagon Gas Systems, Inc. v. Rimmer, contains language to the effect that
accounts sold by an entity that subsequently became bankrupt remained property
of the debtor's bankruptcy estate. Although the Contracts constitute chattel
paper rather than accounts under the UCC, sales of chattel paper, like sales
of accounts, are governed by Article 9 of the UCC. If Green Tree were to
become a debtor under any Insolvency Law and a court were to follow the
reasoning of the Tenth Circuit Court of Appeals and apply such reasoning to
chattel paper, a Trust could experience a delay in or reduction of collections
on the Contracts.
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SUBORDINATION OF CERTAIN CLASSES OF SECURITIES; LIMITED ASSETS
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on some or all classes of Securities of a series may
be subordinated in priority of payment to interest and principal due on the
Notes (if any) of such series and/or to distributions of interest and
principal on other classes of Securities of such series. In addition, holders
of certain classes of Securities of any series may have the right to take
actions that are detrimental to the interests of the holders of Securities of
certain other classes of Securities of such series. For example, holders of a
class of more senior Securities may be entitled to instruct the Indenture
Trustee or Trustee to liquidate the Trust Property when it is not in the
interest of holders of more junior classes of Securities of such series to do
so. Conversely, certain actions may require the consent of a majority of
Security Owners of all classes of a series, which may mean that Security
Owners of more junior classes can prevent the Security Owners of more senior
classes of such series from taking action. Moreover, no Trust will have any
significant assets or sources of funds other than the Contracts and, to the
extent provided in the related Prospectus Supplement, a Pre-Funding Account
and any credit enhancement specified in the related Prospectus Supplement. The
Notes, if any, of any series will represent obligations solely of, and the
Certificates of such series will represent interests solely in, the related
Trust, and, except as specified in the related Prospectus Supplement, neither
the Notes nor the Certificates of any such series will be insured or
guaranteed by Green Tree, the Servicer, the applicable Owner Trustee, the
applicable Indenture Trustee or any other person or entity. Consequently,
holders of the Securities of any series must rely for payment upon payments on
the related Contracts and, if and to the extent available, amounts on deposit
in the Pre-Funding Account, if any, and any credit enhancement, if any, as
specified in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, credit enhancement for a class of Securities of a
series may cover one or more other classes of Securities of such series, and
accordingly may be exhausted for the benefit of some classes and thereafter be
unavailable for such other classes.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Securities will be reduced by full or
partial prepayments on the Contracts. The Contracts will generally be
prepayable at any time without penalty. Prepayments (or, for this purpose,
equivalent payments to the related Trust) may result from payments by
Obligors, liquidations due to default, the receipt of proceeds from physical
damage or credit insurance, repurchases by Green Tree as a result of certain
uncured breaches of the warranties made by it with respect to the Contracts,
purchases by the Servicer as a result of certain uncured breaches of the
covenants with respect to the Contracts made by it in the related Agreement,
or Green Tree or the Servicer exercising its option to purchase all of the
remaining Contracts.
Unless otherwise specified in the related Prospectus Supplement, the amounts
paid to Securityholders in respect of principal on any Distribution Date will
include all prepayments on the Contracts during the corresponding Monthly
Periods. The Certificate Owners and the Note Owners will bear all reinvestment
risk resulting from the timing of payments of principal on the Securities.
LIMITED LIQUIDITY OF THE SECURITIES
There is currently no market for the Securities of any series. Although
Green Tree expects that the underwriters of any particular series will intend
to make a secondary market for such Securities, they will have no obligation
to do so. There can be no assurance that any such market will develop or, if
it does develop, that it will provide Certificate Owners or Note Owners with
liquidity of investment or will continue for the life of the Securities. The
Securities will not be listed on any securities exchange.
Unless otherwise specified in the related Prospectus Supplement, the
Securities will be issued in book-entry, rather than physical, form and, as a
result, in certain circumstances, the liquidity of the Securities in the
secondary market and the ability of the Certificate Owners and Note Owners to
pledge them may be adversely affected. See "Plan of Distribution" and "Certain
Information Regarding the Securities--Book-Entry Registration."
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<PAGE>
THE TRUSTS
With respect to each series of Securities, Green Tree will establish a Trust
pursuant to the related Trust Documents. Prior to the sale and assignment of
the related Contracts pursuant to the related Trust Documents, the Trust will
have no assets or obligations. The Trust will not engage in any business
activity other than acquiring and holding the Trust Property, issuing the
Certificates and the Notes, if any, of such series and distributing payments
thereon.
Each Certificate will represent a fractional undivided interest in, and each
Note, if any, will represent an obligation of, the related Trust. The Trust
Property of each Trust will include, among other things, (i) a Contract Pool;
(ii) all monies paid or payable thereon on or after the Cutoff Date (as
specified in the related Prospectus Supplement); (iii) such amounts as from
time to time may be held in the Collection Account (including all investments
in the Collection Account and all income from the investment of funds therein
and all proceeds thereof) and certain other accounts (including the proceeds
thereof); (iv) an assignment of the security interests of Green Tree in the
Products securing the related Contracts; (v) an assignment of the right to
receive proceeds from claims on certain insurance policies covering the
related Products or Obligors; and (vi) certain other rights under the related
Trust Documents. See "The Contracts" and "Description of the Trust Documents--
Collections." The Trust Property will also include, if so specified in the
related Prospectus Supplement, monies on deposit in a Pre-Funding Account to
be established with the Indenture Trustee or the Trustee, which will be used
to purchase Subsequent Contracts from the Seller from time to time (and as
frequently as daily) during the Pre-Funding Period specified in the related
Prospectus Supplement. Any Subsequent Contracts so purchased will be included
in the related Contract Pool forming part of the Trust Property, subject to
the prior rights of the related Indenture Trustee and the Noteholders therein.
In addition, to the extent specified in the related Prospectus Supplement, a
form of credit enhancement may be issued to or held by the Trustee or the
Indenture Trustee for the benefit of holders of one or more classes of
Securities.
The Servicer will service the Contracts held by each Trust and will receive
fees for such services. See "Description of the Trust Documents--Servicing
Compensation." Unless otherwise specified in the related Prospectus
Supplement, Green Tree, on behalf of each Trust, will hold the original
installment sales contract or promissory note as well as copies of documents
and instruments relating to each Contract and evidencing the security interest
in the Product securing each Contract (the "Contract Files"). In order to
protect the Trust's ownership interest in the Contracts, Green Tree will file
a UCC-1 financing statement in Minnesota to give notice of such Trust's
ownership of the related Contracts and the related Trust Property.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the Securities of such series will be limited solely to the express
obligations of such Trustee set forth in the related Trust Documents. A
Trustee may resign at any time, in which event the General Partner (if the
related Trust is structured as an owner trust) or the Servicer or its
successor (if the related Trust is structured as a grantor trust) will be
obligated to appoint a successor trustee. The General Partner (if the related
Trust is structured as an owner trust) or the Servicer (if the related Trust
is structured as a grantor trust) may also remove the Trustee if the Trustee
ceases to be eligible to continue as Trustee under the related Trust Documents
or if the Trustee becomes insolvent. In such circumstances, the General
Partner (if the related Trust is structured as an owner trust) or the Servicer
(if the related Trust is structured as a grantor trust) will be obligated to
appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will be subject to any conditions or
approvals specified in the related Prospectus Supplement and will not become
effective until acceptance of the appointment by the successor trustee.
THE CONTRACTS
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of retail installment sales contracts and promissory notes
(collectively, the "Contracts") to finance the purchase of Products (described
below). The Contracts will be originated or purchased by Green Tree on an
individual basis in the ordinary course of business. Except as otherwise
specified in the related Prospectus Supplement, the Contracts will be fully
amortizing and will bear interest at a fixed or variable rate (the "Contract
Rate").
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The Products financed by the Contracts included in a Contract Pool are
expected to include all the types of consumer products Green Tree is then
financing for retail customers (subject to the availability of such contracts
and subject to any eligibility criteria specified in the Trust Documents).
Currently, Green Tree provides financing for the purchase of motorcycles;
marine products (including boats, boat trailers and outboard motors); pianos
and organs; horse trailers; sport vehicles (including snowmobiles, personal
watercraft and all-terrain vehicles); trucks; personal aircraft; and
recreational vehicles. Any Trust whose Securities are offered pursuant to this
Prospectus will include only Contracts secured by the foregoing types of
Products. The types of Products securing a Contract Pool and the relative
concentrations of each such type will be specified in the related Prospectus
Supplement. Because Green Tree has less extensive experience in underwriting
and servicing retail installment sales contracts for items such as the
Products, Green Tree has no basis upon which to distinguish the expected
delinquency, default or prepayment experience of Contracts secured by
different types of Products.
GREEN TREE FINANCIAL CORPORATION
GENERAL
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 conditional
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 manufactured housing dealers for purposes of
purchasing manufactured home inventory from manufacturers. Green Tree conducts
its business throughout the United States through 50 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, 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 and
annual reports are available from Green Tree upon written request.
PURCHASE OF CONTRACTS
Green Tree arranges to purchase certain contracts originated by dealers of
Products located throughout the United States ("Dealers"). Green Tree's
personnel contact dealers and explain Green Tree's available financing plans,
terms, prevailing rates and credit and financing policies. If the dealer
wishes to utilize Green Tree's available customer financing, the dealer must
make an application for dealer approval.
All contracts that Green Tree purchases are written on forms provided or
approved by Green Tree and are purchased on an individually approved basis in
accordance with Green Tree's guidelines. The dealer submits the customer's
credit application and purchase order to Green Tree's office where an analysis
of the creditworthiness of the proposed buyer is made. The analysis includes a
review of the applicant's paying habits, length and likelihood of continued
employment and certain other procedures. Green Tree's underwriting guidelines
for consumer products focus primarily on the obligor's ability to repay the
loan rather than the collateral value of the product financed. The maximum
loan amount for an obligor will depend on a variety of factors, including the
type of product, whether the product is new or used, the obligor's debt-to-
income ratio, and the manufacturer's invoice price of the product (plus
certain dealer-installed accessories, sales taxes, title fees, registration
fees, and certain other items). For products other than airplanes and trucks,
the maximum permissible debt-to-income ratio (based on the monthly loan
payments) is between 55% and 65%, the maximum loan-to-invoice ratio (for new
products) ranges from 100% to 125%, and the maximum loan-to-sales-price ratio
(for used products) is typically 90% (subject to further limitation based on a
standard assumed value for such a used product). Green Tree's underwriting
guidelines for truck loans emphasize the trucking experience of the obligor
and the projected operating revenues of the truck, rather than the obligor's
current income, because the obligor's income as owner-operator of the truck is
generally expected to be the source of funds to make payments on the contract
and because Green Tree believes that the obligor's past trucking experience is
the best predictor of
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success as an owner-operator of the truck. A loan for the purchase of an
airplane is generally subject to limitations of a 45% debt-to-income ratio and
a maximum loan amount of $10,000,000, although most airplane loans are not
expected to exceed $200,000. Green Tree management may revise these guidelines
from time to time, and the underwriting guidelines may be exceeded in certain
cases with the approval of Green Tree management. Accordingly, some of the
Contracts included in a Trust may not conform in all respects to the criteria
described above. Green Tree will generally finance premiums for the term of
the contract on optional credit life, accident and health and extended
warranty insurance, up to 20% of the sales price of the Product, and may
finance premiums for required physical damage insurance on the product. If the
application meets Green Tree's guidelines and the credit is approved, Green
Tree purchases the contract when the customer accepts delivery of the Product.
Currently, Green Tree's consumer finance and equipment finance divisions
finance the purchase of motorcycles; marine products (including boats, boat
trailers and outboard motors); pianos and organs; horse trailers; sport
vehicles (including snowmobiles, personal watercraft and all-terrain
vehicles); trucks; personal aircraft; and recreational vehicles. The Products
financed by Contracts included in any Trust whose Securities are offered
pursuant to this Prospectus will include only the products listed above.
LOSS AND DELINQUENCY INFORMATION
Each Prospectus Supplement will include Green Tree's loss and delinquency
experience with respect to its entire servicing portfolio of consumer product
contracts. However, there can be no assurance that such experience will be
indicative of the performance of the Contracts included in a particular
Contract Pool.
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, many of the
Contracts will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the period will be less than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly greater, and the principal balance will be amortized
more rapidly than scheduled. Conversely, if an Obligor pays an installment
after its due date, the portion of the payment allocable to interest will be
greater than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly less,
and the principal balance will be amortized slower than scheduled, in which
case a larger portion of the principal balance may be due on the final
scheduled payment date. Any interest shortfalls resulting from early payment
or prepayment of a Contract will be funded by collections on other Contracts
or, to the extent collections are insufficient, by payments under the
applicable form of credit enhancement, if any, described in the related
Prospectus Supplement.
The Contracts will be prepayable, without premium or penalty, by Obligors at
any time. Prepayments (or, for this purpose, equivalent payments to a Trust)
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by Green Tree due to breach of a
representation or warranty, or as a result of Green Tree or the Servicer
exercising its option to purchase the Contract Pool. See "Description of the
Trust Documents." The rate of prepayments on the Contracts may be influenced
by a variety of economic, social and other factors. No assurance can be given
that prepayments on the Contracts will conform to any estimated or actual
historical experience, and no prediction can be made as to the actual
prepayment rates which will be experienced on the Contracts.
Certificateholders and Noteholders will bear all reinvestment risk resulting
from the timing of payments of principal on the Certificates or the Notes, as
the case may be.
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POOL FACTOR
The "Certificate Pool Factor" for each class of Certificates will be an
eight-digit decimal which the Servicer will compute indicating the Certificate
Balance with respect to such Certificates as of each Distribution Date (after
giving effect to all distributions of principal made on such Distribution
Date), as a fraction of the Original Principal Balance of such Certificates.
The "Note Pool Factor" for each class of Notes, if any, will be an eight-digit
decimal which the Servicer will compute indicating the remaining outstanding
principal balance with respect to such Notes as of each Distribution Date
(after giving effect to all distributions of principal on such Distribution
Date) as a fraction of the initial outstanding principal balance of such class
of Notes. Each Certificate Pool Factor and each Note Pool Factor will
initially be 1.00000000; thereafter, the Certificate Pool Factor and the Note
Pool Factor will decline to reflect reductions in the Certificate Balance of
the applicable class of Certificates or reductions in the outstanding
principal balance of the applicable class of Notes, as the case may be. The
amount of a Certificateholder's pro rata share of the Certificate Balance for
the related class of Certificates can be determined by multiplying the
original denomination of the Certificateholder's Certificate by the then
applicable Certificate Pool Factor. The amount of a Noteholder's pro rata
share of the aggregate outstanding principal balance of the applicable class
of Notes can be determined by multiplying the original denomination of such
Noteholder's Note by the then applicable Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents, on
each Distribution Date or Payment Date, as the case may be, the related
Certificateholders and Noteholders will receive periodic reports from the
Trustee stating the Certificate Pool Factor or the Note Pool Factor, as the
case may be, and containing various other items of information. Unless and
until Definitive Certificates or Definitive Notes are issued, such reports
will be sent on behalf of the Trust to the Trustee and the Indenture Trustee
(if any) and Cede & Co., as registered holder of the Certificates and the
Notes and the nominee of DTC. Certificate Owners and Note Owners may receive
such reports, upon written request, together with a certification that they
are Certificate Owners or Note Owners and payment of any expenses associated
with the distribution of such reports, from the Trustee and the Indenture
Trustee (if any) at the addresses specified in the related Prospectus
Supplement. See "Certain Information Regarding the Securities--Statements to
Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds to be received by the Trust from the sale of each series of
Securities will be used to pay to Green Tree the purchase price for the
Contracts and to make the deposit of the Pre-Funded Amount into the Pre-
Funding Account, if any, to repay warehouse lenders and/or to provide for
other forms of credit enhancement specified in the related Prospectus
Supplement. The net proceeds to be received by Green Tree will be used to pay
its warehouse loans, and any additional proceeds will be added to Green Tree's
general funds and used for its general corporate purposes.
THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to Trust Documents to be entered into between
Green Tree, as Seller and as Servicer, and the Trustee, forms of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
material provisions of the Trust Documents. Where particular provisions of or
terms used in the Trust Documents are referred to, the actual provisions
(including definitions of terms) are incorporated by reference as part of this
summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Certificates will initially be represented by a single Certificate
registered in the name of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository"). See "Certain Information
Regarding the Securities--Book-
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Entry Registration." Unless otherwise specified in the related Prospectus
Supplement, the Certificates evidencing interests in a Trust will be available
for purchase in denominations of $1,000 initial principal amount and integral
multiples thereof, except that one Certificate evidencing an interest in such
Trust may be issued in a denomination that is less than $1,000 initial
principal amount. Certificates may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge
payable in connection with such transfer or exchange. Unless otherwise
specified in the related Prospectus Supplement, the Owner Trustee will
initially be designated as the registrar for the Certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The timing and priority of distributions, seniority, allocations of loss,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest (or, where applicable, with respect to
principal only or interest only) on the Certificates of any series will be
described in the related Prospectus Supplement. Distributions of interest on
the Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and, unless otherwise specified in
the related Prospectus Supplement, will be made prior to distributions with
respect to principal. A series may include one or more classes of Stripped
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distribution, or (ii) interest
distributions, with disproportionate, nominal or no distributions in respect
of principal. Each class of Certificates may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate (and
which may be zero for certain classes of Stripped Certificates), or any
combination of the foregoing. The related Prospectus Supplement will specify
the Pass-Through Rate for each class of Certificate, or the initial Pass-
Through Rate and the method for determining the Pass-Through Rate. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Unless otherwise specified in the related Prospectus
Supplement, distributions in respect of the Certificates will be subordinate
to payments in respect of the Notes, if any, as more fully described in the
related Prospectus Supplement. Distributions in respect of principal of any
class of Certificates will be made on a pro rata basis among all of the
Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount
of distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall
be as set forth in the related Prospectus Supplement.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Unless otherwise specified in the related Prospectus Supplement, no Notes will
be issued as a part of any series. The following summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Notes and the Indenture, and the following
summary will be supplemented in whole or in part by the related Prospectus
Supplement. Where particular provisions of or terms used in the Indenture are
referred to, the actual provisions (including definition of terms) are
incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by a single Note registered in the name
of the nominee of the Depository. See "Certain Information Regarding the
Securities--Book-Entry Registration." Unless otherwise specified in the
related Prospectus Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof. Notes may be
transferred or exchanged without the payment of any service charge other than
any tax or governmental charge payable in connection with such transfer or
exchange. Unless otherwise provided in the related Prospectus Supplement, the
Indenture Trustee will initially be designated as the registrar for the Notes.
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PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on the Notes will be described in the related Prospectus Supplement. The right
of holders of any class of Notes to receive payments of principal and interest
may be senior or subordinate to the rights of holders of any class or classes
of Notes of such series, or any class of Certificates, as described in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, payments of interest on the Notes will be made prior to
payments of principal thereon. A series may include one or more classes of
Stripped Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payment, or (ii) interest payments with
disproportionate, nominal or no principal payments. Each class of Notes may
have a different Interest Rate, which may be a fixed, variable or adjustable
Interest Rate (and which may be zero for certain classes of Stripped Notes),
or any combination of the foregoing. The related Prospectus Supplement will
specify the Interest Rate for each class of Notes, or the initial Interest
Rate and the method for determining the Interest Rate. One or more classes of
Notes of a series may be redeemable under the circumstances specified in the
related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement
(each, a "Payment Date"), in which case each class of Noteholders will receive
their ratable share (based upon the aggregate amount of interest due to such
class of Noteholders) of the aggregate amount available to be distributed in
respect of interest on the Notes.
In the case of a series of Securities which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal
and interest, and any schedule or formula or other provisions applicable to
the determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, payments in respect of principal and interest of any class of
Notes will be made on a pro rata basis among all of the Notes of such class.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Green Tree will provide a
copy of the applicable Indenture (without exhibits) upon request to a holder
of Notes issued thereunder.
Modification of Indenture Without Noteholder Consent. Each Trust and related
Indenture Trustee (on behalf of such Trust) may, without consent of the
related Noteholders, enter into one or more supplemental indentures for any of
the following purposes: (i) to correct or amplify the description of the
collateral or add additional collateral; (ii) to provide for the assumption of
the Note and the Indenture obligations by a permitted successor to the Trust;
(iii) to add additional covenants for the benefit of the related Noteholders;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee; (v) to cure any ambiguity or correct or supplement any
provision in the Indenture or in any supplemental indenture; (vi) to provide
for the acceptance of the appointment of a successor Indenture Trustee or to
add to or change any of the provisions of the Indenture or any supplemental
indenture which may be inconsistent with any other provision of the Indenture
as shall be necessary and permitted to facilitate the administration by more
than one trustee; (vii) to modify, eliminate or add to the provisions of the
Indenture in order to comply with the Trust Indenture Act of 1939, as amended;
and (viii) to add any provisions to, change in any manner, or eliminate any of
the provisions of, the Indenture or modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in this
clause (viii) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any related Noteholder unless
Noteholder consent is otherwise obtained as described below.
Modifications of Indenture With Noteholder Consent. With respect to each
Trust, with the consent of the holders representing a majority of the
principal balance of the outstanding related Notes (a "Note Majority"), the
Owner Trustee and the Indenture Trustee may execute a supplemental indenture
to add provisions, to change in any manner or eliminate any provisions of, the
related Indenture, or modify in any manner the rights of the related
Noteholders.
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Without the consent of the holder of each outstanding related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of
any installment of principal of or interest on any Note or reduce the
principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change the manner of calculating any
such payment, any place of payment where, or the coin or currency in which any
Note or any interest thereon is payable; (ii) impair the right to institute
suit for the enforcement of certain provisions of the Indenture regarding
payment; (iii) reduce the percentage of the aggregate amount of the
outstanding Notes the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture; (iv) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the related Trust, any other obligor on the Notes, the
Seller or an affiliate of any of them; (v) reduce the percentage of the
aggregate outstanding amount of the Notes the consent of the holders of which
is required to direct the Indenture Trustee to sell or liquidate the Contracts
if the proceeds of such sale would be insufficient to pay the principal amount
and accrued but unpaid interest on the outstanding Notes; (vi) decrease the
percentage of the aggregate principal amount of the Notes required to amend
the sections of the Indenture which specify the applicable percentage of
aggregate principal amount of the Notes necessary to amend the Indenture or
certain other related agreements; or (vii) permit the creation of any lien
ranking prior to or on a parity with the lien of the Indenture with respect to
any of the collateral for the Notes or, except as otherwise permitted or
contemplated in the Indenture, terminate the lien of the Indenture on any such
collateral or deprive the holder of any Note of the security afforded by the
lien of the Indenture.
Events of Default; Rights Upon Event of Default. With respect to each Trust,
unless otherwise specified in the related Prospectus Supplement, "Events of
Default" under the Indenture will consist of: (i) a default for five days or
more in the payment of any interest on any Note; (ii) a default in the payment
of the principal of or any installment of the principal of any Note when the
same becomes due and payable; (iii) a default in the observance or performance
in any material respect of any covenant or agreement of the Trust made in the
Indenture, or any representation or warranty made by the Trust in the
Indenture or in any certificate delivered pursuant thereto or in connection
therewith having been incorrect as of the time made, and the continuation of
any such default or the failure to cure such breach of a representation or
warranty for a period of 30 days after notice thereof is given to the Trust by
the Indenture Trustee or to the Trust and the Indenture Trustee by the holders
of at least 25% in principal amount of the Notes then outstanding; or (iv)
certain events of bankruptcy, insolvency, receivership or liquidation of the
Trust. However, the amount of principal due and payable on any class of Notes
on any Payment Date (prior to the Final Scheduled Payment Date, if any, for
such class) will generally be determined by amounts available to be deposited
in the Note Distribution Account for such Payment Date. Therefore, unless
otherwise specified in the related Prospectus Supplement, the failure to pay
principal on a class of Notes generally will not result in the occurrence of
an Event of Default unless such class of Notes has a Final Scheduled Payment
Date, and then not until such Final Scheduled Payment Date for such class of
Notes.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or a Note Majority may declare the
principal of the Notes to be immediately due and payable. Such declaration
may, under certain circumstances, be rescinded by a Note Majority.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series have been declared due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust Property, exercise
remedies as a secured party, sell the related Contracts or elect to have the
Trust maintain possession of such Contracts and continue to apply collections
on such Contracts as if there had been no declaration of acceleration. Unless
otherwise specified in the related Prospectus Supplement, the Indenture
Trustee, however, will be prohibited from selling the related Contracts
following an Event of Default, unless (i) the holders of all the outstanding
related Notes consent to such sale; (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale; or (iii) the Indenture Trustee
determines that the proceeds of the
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Contracts would not be sufficient on an ongoing basis to make all payments on
the Notes as such payments would have become due if such obligations had not
been declared due and payable, and the Indenture Trustee obtains the consent
of the holders of 66 2/3% of the aggregate outstanding amount of the Notes.
Unless otherwise specified in the related Prospectus Supplement, following a
declaration upon an Event of Default that the Notes are immediately due and
payable, (i) Note Owners will be entitled to ratable repayment of principal on
the basis of their respective unpaid principal balances and (ii) repayment in
full of the accrued interest on and unpaid principal balances of the Notes
will be made prior to any further payment of interest or principal on the
Certificates.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with
respect to a series of Notes, the Indenture Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of such Notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying
with such request. Subject to the provisions for indemnification and certain
limitations contained in the Indenture, a Note Majority in a series will have
the right to direct the time, method and place of conducting any proceeding or
any remedy available to the Indenture Trustee, and a Note Majority may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or
consent of all of the holders of such outstanding Notes.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in principal amount of
the outstanding Notes of such series have made written request of the
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered the Indenture Trustee
reasonable indemnity, (iv) the Indenture Trustee has for 60 days failed to
institute such proceeding, and (v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice
of the Event of Default within 90 days after it occurs. Except in the case of
a failure to pay principal of or interest on any Note, the Indenture Trustee
may withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the Seller or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee nor the Trustee in its individual capacity,
nor any holder of a Certificate including, without limitation, the Seller, nor
any of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of an
express agreement to the contrary, be personally liable for the payment of the
related Notes or for any agreement or covenant of the related Trust contained
in the Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the
laws of the United States or any state, (ii) such entity expressly assumes the
Trust's obligation to make due and punctual payments upon the Notes and the
performance or observance of every agreement and covenant of the Trust under
the Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Trustee has been
advised that the then current rating of the related Notes or Certificates then
in effect would not be reduced or withdrawn by the Rating Agencies as a result
of such merger or consolidation, (v) the Trustee has received an opinion of
counsel to the effect that such consolidation or merger would have no material
adverse tax consequence to the Trust or to any related Note Owner or
Certificate Owner.
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Each Trust will not, among other things, (i) except as expressly permitted
by the Indenture, the Trust Documents or certain related documents for such
Trust (collectively, the "Related Documents"), sell, transfer, exchange or
otherwise dispose of any of the assets of the Trust, (ii) claim any credit on
or make any deduction from the principal and interest payable in respect of
the related Notes (other than amounts withheld under the Code or applicable
state law) or assert any claim against any present or former holder of such
Notes because of the payment of taxes levied or assessed upon the Trust, (iii)
dissolve or liquidate in whole or in part, (iv) permit the validity or
effectiveness of the related Indenture to be impaired or permit any person to
be released from any covenants or obligations with respect to the related
Notes under such Indenture except as may be expressly permitted thereby, or
(v) except as expressly permitted by the Related Documents, permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance to be
created on or extend to or otherwise arise upon or burden the assets of the
Trust or any part thereof, or any interest therein or proceeds thereof.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust
will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture or otherwise
in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment
of its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required to
mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the Trust to
the Indenture Trustee in its individual capacity, the property and funds
physically held by the Indenture Trustee as such and any action taken by it
that materially affects the Notes and that has not been previously reported.
Note Owners may receive such reports upon written request, together with a
certification that they are Note Owners and payment of reproduction and
postage expenses associated with the distribution of such reports, from the
Indenture Trustee at the address specified in the related Prospectus
Supplement.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all of such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee may resign at any time, in which
event the Seller will be obligated to appoint a successor trustee. Green Tree
may also remove the Indenture Trustee if the Indenture Trustee ceases to be
eligible to continue as such under the Indenture or if the Indenture Trustee
becomes insolvent. In such circumstances, Green Tree will be obligated to
appoint a successor trustee. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee will be subject to any
conditions or approvals, if any, specified in the related Prospectus
Supplement and will not become effective until acceptance of the appointment
by a successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise provided in the related Prospectus Supplement, the
Securities of each series will be registered in the name of Cede & Co., the
nominee of DTC. DTC is a limited-purpose trust company organized under the
laws of the State of New York, 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
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to the provisions of Section 17A of the Exchange Act. DTC accepts securities
for deposit from its participating organizations ("Participants") and
facilitates the clearance and settlement of securities transactions between
Participants in such securities through electronic book-entry changes in
accounts of Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks
and trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants").
Certificate Owners and Note Owners who are not Participants but desire to
purchase, sell or otherwise transfer ownership of Securities may do so only
through Participants (unless and until Definitive Certificates or Definitive
Notes, each as defined below, are issued). In addition, Certificate Owners and
Note Owners will receive all distributions of principal of, and interest on,
the Securities from the Trustee or the Indenture Trustee, as applicable,
through DTC and Participants. Certificate Owners and Note Owners will not
receive or be entitled to receive certificates representing their respective
interests in the Securities, except under the limited circumstances described
below and such other circumstances, if any, as may be specified in the related
Prospectus Supplement.
Unless and until Definitive Securities are issued, it is anticipated that
the only Certificateholder of the Certificates and the only Noteholder of the
Notes, if any, will be Cede & Co., as nominee of DTC. Certificate Owners and
Note Owners will not be recognized by the Trustee as Certificateholders or by
the Indenture Trustee as Noteholders as those terms are used in the related
Trust Documents or Indenture. Certificate Owners and Note Owners will be
permitted to exercise the rights of Certificateholders or Noteholders, as the
case may be, only indirectly through Participants and DTC.
With respect to any series of Securities, while the Securities are
outstanding (except under the circumstances described below), under the rules,
regulations and procedures creating and affecting DTC and its operations (the
"Rules"), DTC is required to make book-entry transfers among Participants on
whose behalf it acts with respect to the Securities and is required to receive
and transmit distributions of principal of, and interest on, the Securities.
Participants with whom Certificate Owners or Note Owners have accounts with
respect to Securities are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Certificate Owners and Note Owners. Accordingly, although Certificate Owners
and Note Owners will not possess Securities, the Rules provide a mechanism by
which Certificate Owners and Note Owners will receive distributions and will
be able to transfer their interests.
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, Certificates and Notes (if any) will be issued
in registered form to Certificate Owners and Note Owners, or their nominees,
rather than to DTC (such Certificates and Notes being referred to herein as
"Definitive Certificates" and "Definitive Notes," respectively), only if (i)
DTC, the Seller or the Servicer advises the Trustee or the Indenture Trustee,
as the case may be, in writing that DTC is no longer willing or able to
discharge properly its responsibilities as nominee and depository with respect
to the Certificates or the Notes, and the Seller, the Servicer, the Trustee or
the Indenture Trustee, as the case may be, is unable to locate a qualified
successor, (ii) the Seller or the Administrator (if any) at its sole option
has advised the Trustee or the Indenture Trustee, as the case may be, in
writing that it elects to terminate the book-entry system through DTC and
(iii) after the occurrence of a Servicer Termination Event, the holders
representing a majority of the Certificate Balance (a "Certificate Majority")
or a Note Majority advises the Trustee or the Indenture Trustee, as the case
may be, through DTC, that continuation of a book-entry system is no longer in
their best interests. Upon issuance of Definitive Certificates or Definitive
Notes to Certificate Owners or Note Owners, such Certificates or Notes will be
transferable directly (and not exclusively on a book-entry basis) and
registered holders will deal directly with the Trustee or the Indenture
Trustee, as the case may be, with respect to transfers, notices and
distributions.
DTC has advised the Seller that, unless and until Definitive Certificates or
Definitive Notes are issued, DTC will take any action permitted to be taken by
a Certificateholder or a Noteholder under the related Trust
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Documents or Indenture only at the direction of one or more Participants to
whose DTC accounts the Certificates or Notes are credited. DTC has advised the
Seller that DTC will take such action with respect to any fractional interest
of the Certificates or the Notes only at the direction of and on behalf of
such Participants beneficially owning a corresponding fractional interest of
the Certificates or the Notes. DTC may take actions, at the direction of the
related Participants, with respect to some Certificates or Notes which
conflict with actions taken with respect to other Certificates or Notes.
Issuance of Certificates and Notes in book-entry form rather than as
physical certificates or notes may adversely affect the liquidity of
Certificates or Notes in the secondary market and the ability of the
Certificate Owners or Note Owners to pledge them. In addition, since
distributions on the Certificates and the Notes will be made by the Trustee or
the Indenture Trustee to DTC and DTC will credit such distributions to the
accounts of its Participants, with the Participants further crediting such
distributions to the accounts of indirect participants or Certificate Owners
or Note Owners, Certificate Owners and Note Owners may experience delays in
the receipt of such distributions.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Trustee a statement to be delivered to the related Certificateholders
on such Distribution Date. On or prior to each Distribution Date, the Servicer
will prepare and provide to the Indenture Trustee a statement to be delivered
to the related Noteholders on such Distribution Date. Such statements will be
based on the information in the related Servicer's Certificate setting forth
certain information required under the Trust Documents (the "Servicer's
Certificate"). Unless otherwise specified in the related Prospectus
Supplement, each such statement to be delivered to Certificateholders will
include the following information as to the Certificates with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable, and each such statement to be delivered to Noteholders will
include the following information as to the Notes with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to interest on or with
respect to each class of Securities;
(ii) the amount of the distribution allocable to principal on or with
respect to each class of Securities;
(iii) the Certificate Balance and the Certificate Pool Factor for each
class of Certificates and the aggregate outstanding principal balance and
the Note Pool Factor for each class of Notes, after giving effect to all
payments reported under (ii) above on such date;
(iv) the amount of the Servicing Fee paid to the Servicer with respect to
the related Monthly Period or Periods, as the case may be;
(v) the Pass-Through Rate or Interest Rate for the next period for any
class of Certificates or Notes with variable or adjustable rates;
(vi) the amount of Advances made by the Servicer with respect to such
Distribution Date, and the amount paid to the Servicer on such Distribution
Date as reimbursement of Advances made on previous Distribution Dates;
(vii) the amount, if any, distributed to Certificateholders and
Noteholders applicable to payments under the related form of credit
enhancement, if any; and
(viii) such other information as may be specified in the related
Prospectus Supplement.
Each amount set forth pursuant to subclauses (i), (ii), (iv) and (vi) with
respect to Certificates or Notes will be expressed as a dollar amount per
$1,000 of the initial Certificate Balance or the initial principal balance of
the Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustee, the Indenture Trustee and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of DTC.
Certificate Owners and Note Owners may receive copies of such reports upon
written request, together with a certification that they are Certificate
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Owners or Note Owners, as the case may be, and payment of reproduction and
postage expenses associated with the distribution of such reports, from the
Trustee or the Indenture Trustee, as applicable. See "Reports to
Securityholders" and "--Book-Entry Registration" above.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of a Trust, the Trustee and the
Indenture Trustee, as applicable, will mail to each holder of a class of
Securities who at any time during such calendar year has been a
Securityholder, and received any payment thereon, a statement containing
certain information for the purposes of such Securityholder's preparation of
federal income tax returns. DTC will convey such information to its
Participants, who in turn will convey such information to their related
indirect participants in accordance with arrangements among DTC and such
participants. Certificate Owners and Note Owners may receive such reports upon
written request, together with a certification that they are Certificate
Owners or Note Owners and payment of reproduction and postage expenses
associated with the distribution of such information, from the Trustee, with
respect to Certificate Owners, or from the Indenture Trustee, with respect to
Note Owners, at the addresses specified in the related Prospectus Supplement.
See "Certain Federal Income Tax Consequences."
LISTS OF SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Certificates, at such time, if any, as Definitive
Certificates have been issued, the Trustee will, upon written request by three
or more Certificateholders or one or more holders of Certificates evidencing
not less than 25% of the Certificate Balance, within five Business Days after
provision to the Trustee of a statement of the applicants' desire to
communicate with other Certificateholders about their rights under the related
Trust Documents or the Certificates and a copy of the communication that the
applicants propose to transmit, afford such Certificateholders access during
business hours to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Trust Documents. Unless otherwise specified in the related Prospectus
Supplement, the Trust Documents will not provide for holding any annual or
other meetings of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Notes, if any, at such time, if any, as Definitive Notes
have been issued, the Indenture Trustee will, upon written request by three or
more Noteholders or one or more holders of Notes evidencing not less than 25%
of the aggregate principal balance of the related Notes, within five Business
Days after provision to the Indenture Trustee of a statement of the
applicants' desire to communicate with other Noteholders about their rights
under the related Indenture or the Notes and a copy of the communication that
the applicants propose to transmit, afford such Noteholders access during
business hours to the current list of Noteholders for purposes of
communicating with other Noteholders with respect to their rights under the
Indenture. Unless otherwise specified in the related Prospectus Supplement,
the Indenture will not provide for holding any annual or other meetings of
Noteholders.
DESCRIPTION OF THE TRUST DOCUMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of either (i) the Pooling and
Servicing Agreements or (ii) the Sale and Servicing Agreements and the Trust
Agreements (in either case collectively referred to as the "Trust Documents")
pursuant to which Green Tree will sell and assign such Contracts to a Trust
and the Servicer will agree to service such Contracts on behalf of the Trust,
and pursuant to which such Trust will be created and Certificates will be
issued. Forms of the Trust Documents have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. Green Tree will
provide a copy of such agreements (without exhibits) upon request to a holder
of Securities described therein. This summary does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of the Trust Documents. Where particular provisions or terms used
in the Trust Documents are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
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SALE AND ASSIGNMENT OF THE CONTRACTS
On the Closing Date, Green Tree will sell and assign to the Trustee, without
recourse, Green Tree's entire interest in the related Contracts and the
proceeds thereof, including its security interests in the related Products.
Each Contract transferred by Green Tree to the Trust will be identified in a
schedule appearing as an exhibit to the related Trust Documents (the "Schedule
of Contracts"). Concurrently with such sale and assignment, the Trustee will
execute and deliver the related certificates representing the Certificates to
or upon the order of the Seller, and the Trustee will execute and the
Indenture Trustee will authenticate and deliver the Notes, if any, to or upon
the order of the Seller.
Except as otherwise specified in the related Prospectus Supplement, Green
Tree will make certain warranties in the Trust Documents with respect to each
Contract as of the Closing Date, including that: (a) as of the Cutoff Date,
the most recent scheduled payment was made or was not delinquent more than 59
days; (b) no provision of a Contract has been waived, altered or modified in
any respect, except by instruments or documents contained in the Contract
file; (c) each Contract is a legal, valid and binding obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by laws affecting creditors' rights generally); (d) no Contract is
subject to any right of rescission, set-off, counterclaim or defense; (e) for
Contracts with an original balance greater than $7,500, the related Product is
covered by insurance naming Green Tree as an additional insured party; (f)
each Contract has been originated by a dealer or Green Tree in the ordinary
course of such dealer's or Green Tree's business and, if originated by a
dealer, was purchased by Green Tree in the ordinary course of business; (g) no
Contract was originated in or is subject to the laws of any jurisdiction whose
laws would make the transfer of the Contract or an interest therein to the
Trustee pursuant to the Trust Documents or pursuant to the Notes or
Certificates unlawful; (h) each Contract complies with all requirements of
law; (i) no Contract has been satisfied, subordinated in whole or in part or
rescinded and the Product securing the Contract has not been released from the
lien of the Contract in whole or in part; (j) each Contract creates a valid
and enforceable first priority security interest in favor of Green Tree in the
Product covered thereby and such security interest has been assigned by Green
Tree to the Trustee; (k) all parties to each Contract had capacity to execute
such Contract; (l) no Contract has been sold, assigned or pledged to any other
person and prior to the transfer of the Contracts by Green Tree to the
Trustee, Green Tree had good and marketable title to each Contract free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest, and was the sole owner and had full right to transfer such Contract
to the Trustee; (m) as of the Cutoff Date, there was no default, breach,
violation or event permitting acceleration under any Contract (except for
payment delinquencies permitted by clause (a) above), no event which with
notice and the expiration of any grace or cure period would constitute a
default, breach, violation or event permitting acceleration under such
Contract, and Green Tree has not waived any of the foregoing; (n) as of the
Closing Date there were, to the best of Green Tree's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the
Product securing a Contract, which are or may be liens prior or equal to the
lien of the Contract; (o) each Contract is a fully-amortizing loan with a
fixed Contract Rate and provides for level payments over the term of such
Contract; (p) each Contract contains customary and enforceable provisions such
as to render the rights and remedies of the Holder thereof adequate for
realization against the collateral of the benefits of the security; (q) the
description of each Contract set forth in the list delivered to the Trustee is
true and correct; and (r) there is only one original of each Contract (other
than the copy in the possession of the Obligor).
The warranties of Green Tree will be made as of the execution and delivery
of the related Trust Documents and will survive the sale, transfer and
assignment of the related Contracts and other Trust Property to the Trust but
will speak only as of the date made.
Green Tree will be obligated to repurchase for the Repurchase Price (as
defined below) any Contract on the first business day after the first
Determination Date which is more than 90 days after Green Tree becomes aware,
or should have become aware, or Green Tree's receipt of written notice from
the Trustee or the Servicer, of a breach of any representation or warranty of
Green Tree in the Trust Documents that materially adversely affects the
Trust's interest in any Contract if such breach has not been cured. The
Repurchase Price for any Contract
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will be the remaining principal amount outstanding on such Contract on the
date of repurchase plus accrued and unpaid interest thereon at its Contract
Rate to the date of such repurchase. This repurchase obligation constitutes
the sole remedy available to the Trust and the Securityholders for a breach of
a warranty under the Trust Documents with respect to the Contracts (but not
with respect to any other breach by Green Tree of its obligations under the
Trust Documents).
Upon the purchase by Green Tree of a Contract due to a breach of a
representation or warranty, the Trustee will convey such Contract and the
related Trust Property to Green Tree.
CUSTODY OF CONTRACT FILES
Unless otherwise specified in the related Prospectus Supplement, Green Tree
initially will be appointed to act as custodian for the Contract Files of each
Trust. Prior to the appointment of any custodian other than Green Tree, the
Trust and such institution specified in the related Prospectus Supplement
shall enter into a custodian agreement pursuant to which such institution will
agree to hold the Contract Files on behalf of the related Trust. Any such
custodian agreement may be terminated by the Trust on 30 days' notice to such
institution.
To facilitate servicing and save administrative costs, the documents will
not be physically segregated from other similar documents that are in Green
Tree's possession. UCC financing statements will be filed in Minnesota
reflecting the sale and assignment of the Contracts to the Trustee, and Green
Tree's accounting records and computer systems will also reflect such sale and
assignment. In addition, the Contracts will be stamped or otherwise marked to
indicate that such Contracts have been sold to the related Trust. Despite
these precautions, if, through inadvertence or otherwise, any of the Contracts
were sold to another party (or a security interest therein were granted to
another party) that purchased (or took such security interest in) any of such
Contracts in the ordinary course of its business and took possession of such
Contracts, the purchaser (or secured party) would acquire an interest in the
Contracts superior to the interest of the related Trust if the purchaser (or
secured party) acquired (or took a security interest in) the Contracts for new
value and without actual knowledge of such Trust's interest. See "Certain
Legal Aspects of the Contracts--Rights in the Contracts."
COLLECTIONS
With respect to each Trust, the Servicer will establish one or more
Collection Accounts in the name of the Trustee or, in the case of any series
including one or more classes of Notes, in the name of the Indenture Trustee
for the benefit of the related Securityholders. If so specified in the related
Prospectus Supplement, the Trustee will establish and maintain for each series
an account, in the name of the Trustee on behalf of the related
Certificateholders, in which amounts released from the Collection Account and
any Pre-Funding Account and any amounts received from any source of credit
enhancement for distribution to such Certificateholders will be deposited and
from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With respect to any series including one
or more classes of Notes, the Indenture Trustee will establish and maintain
for each series an account, in the name of the Indenture Trustee on behalf of
the related Noteholders, in which amounts released from the Collection Account
and any Pre-Funding Account and any amounts received from any source of credit
enhancement for payment to such Noteholders will be deposited and from which
all distributions to such Noteholders will be made (the "Note Distribution
Account"). The Collection Account, the Certificate Distribution Account (if
any), and the Note Distribution Account (if any), are referred to herein
collectively as the "Designated Accounts." Any other accounts to be
established with respect to a Trust will be described in the related
Prospectus Supplement.
Each Designated Account will be an Eligible Account maintained with the
Trustee, the Indenture Trustee and/or other depository institutions. "Eligible
Account" means any account which is (i) an account maintained with an Eligible
Institution (as defined below); (ii) an account or accounts the deposits in
which are fully insured by either the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC; (iii) a "segregated trust account"
maintained with the corporate trust department of a federal or state chartered
depository institution
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or trust company with trust powers and acting in its fiduciary capacity for
the benefit of the Trustee, which depository institution or trust company has
capital and surplus (or, if such depository institution or trust company is a
subsidiary of a bank holding company system, the capital and surplus of the
bank holding company) of not less than $50,000,000 and the securities of such
depository institution (or, if such depository institution is a subsidiary of
a bank holding company system and such depository institution's securities are
not rated, the securities of the bank holding company) has a credit rating
from each rating agency rating such series of Notes and/or Certificates (a
"Rating Agency") in one of its generic credit rating categories which
signifies investment grade; or (iv) an account that will not cause any Rating
Agency to downgrade or withdraw its then-current rating assigned to the
Certificates, as confirmed in writing by each Rating Agency. "Eligible
Institution" means any depository institution organized under the laws of the
United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund (currently administered by
the Federal Deposit Insurance Corporation), whose short-term deposits have
been rated in one of the two highest rating categories or such other rating
category as will not adversely affect the ratings assigned to the Notes and/or
Certificates of such series. On the Closing Date specified in the related
Prospectus Supplement, the Servicer will cause to be deposited in the
Collection Account all payments on the Contracts received by the Servicer
after the Cutoff Date and on or prior to the second Business Day preceding the
Closing Date.
The Servicer will deposit all payments on the Contracts held by any Trust
received directly by the Servicer from Obligors and all proceeds of Contracts
collected directly by the Servicer during each Monthly Period into the
Collection Account no later than one Business Day after receipt.
Notwithstanding the foregoing and unless otherwise provided in the related
Prospectus Supplement, the Servicer may utilize an alternative remittance
schedule, if the Servicer provides to the Trustee and the Indenture Trustee
written confirmation from each Rating Agency that such alternative remittance
schedule will not result in the downgrading or withdrawal by such Rating
Agency of the rating(s) then assigned to the Securities. Green Tree will also
deposit into the Collection Account on or before the Deposit Date the Purchase
Amount of each Contract to be purchased by it for breach of a representation
or warranty.
For any series of Securities, funds in the Designated Accounts and any other
accounts identified in the related Prospectus Supplement will be invested, as
provided in the related Trust Documents, at the direction of the Servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related Trust Documents ("Eligible
Investments"). Eligible Investments shall mature no later than the Business
Day preceding the applicable Distribution Date for the Monthly Period to which
such amounts relate. Investments in Eligible Investments will be made in the
name of the Trustee or the Indenture Trustee, as the case may be, and such
investments will not be sold or disposed of prior to their maturity.
Unless otherwise specified in the related Prospectus Supplement, collections
or recoveries on a Contract (other than late fees or certain other similar
fees or charges) received during a Monthly Period and Purchase Amounts
deposited with the Trustee prior to a Distribution Date will be applied first
to any outstanding Monthly Advances made by the Servicer with respect to such
Contract, and then to interest and principal on the Contract in accordance
with the terms of the Contract.
SERVICING PROCEDURES
The Servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the Servicer with respect to Contracts owned
or serviced by it, to collect all payments due with respect to the Contracts
held by any Trust and, in a manner consistent with the Trust Documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the Trust Documents, the Servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
Product securing a Contract with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on such Contract. The Servicer is authorized to follow such of
its normal collection practices and procedures as it deems
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necessary or advisable to realize upon any Contract. The Servicer may
repossess and sell the Product securing such Contract at judicial sale, or
take any other action permitted by applicable law. See "Certain Legal Aspects
of the Contracts." The Servicer will be entitled to recover all reasonable
expenses incurred by it in connection therewith. The proceeds of such
realization (net of such expenses) will be deposited in the Collection Account
at the time and in the manner described above under "--Collections."
The Trust Documents will provide that the Servicer will indemnify and defend
the Trustee, the Indenture Trustee, the Trust and the Securityholders against,
among other things, any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, or in respect of any action taken or failed to be taken by the
Servicer with respect to any portion of the Trust Property in violation of the
provisions of the Trust Documents. The Servicer's obligations to indemnify the
Trustee, the Indenture Trustee, the Trust and the Securityholders for the
Servicer's actions or omissions will survive the removal of the Servicer but
will not apply to any action or omission of a successor Servicer.
SERVICING COMPENSATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Servicer will be entitled to receive
the Servicing Fee for each Monthly Period in an amount equal to the product of
one-twelfth of the Servicing Rate and the Aggregate Principal Balance as of
the first day of such Monthly Period. The Servicer also will be entitled to
collect and retain any late fees or other administrative fees or similar
charges allowed by the terms of the Contracts or applicable law. Unless
otherwise provided in the related Prospectus Supplement, the "Servicing Rate"
will equal .75% per annum calculated on the basis of a 360-day year consisting
of twelve 30-day months. As long as Green Tree is the Servicer, the Servicing
Fee and any additional servicing compensation will be paid out of collections
on or with respect to the Contracts after the required distributions to
Noteholders and Certificateholders. If Green Tree is no longer the Servicer,
the Servicing Fee and any additional servicing compensation will be paid out
of collections on or with respect to the Contracts prior to distributions to
Certificateholders and Noteholders. Unless otherwise specified in the related
Prospectus Supplement, a "Monthly Period" with respect to any Distribution
Date is the calendar month immediately preceding the month in which the
Distribution Date occurs.
Green Tree, as Servicer, will be required to pay all expenses incurred by it
in connection with its servicing activities (including fees, expenses and
disbursements of the Trustee, the Indenture Trustee, the Custodian and
independent accountants, taxes imposed on the Servicer and expenses incurred
in connection with distributions and reports to Certificateholders and
Noteholders), except certain expenses incurred in connection with realizing
upon the Contracts.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest
(or, where applicable, of principal or interest only) on each class of
Securities entitled thereto will be made by the Trustee or the Indenture
Trustee, as applicable, to the Certificateholders and the Noteholders. The
timing, calculation, allocation, order, source, priorities of and requirements
for all distributions to each class of Certificateholders and all payments to
each class of Noteholders will be set forth in the related Prospectus
Supplement.
Except as otherwise specified in the related Prospectus Supplement, on the
third Business Day prior to each Distribution Date (the "Determination Date"),
the Servicer will determine the Amount Available and the amounts to be
distributed on the Notes and Certificates for such Distribution Date. Except
as otherwise specified in the related Prospectus Supplement, the "Amount
Available" for any Distribution Date will be equal to (i) the funds on deposit
in the Collection Account at the close of business on the last day of the
related Monthly Period, plus (ii) any Advances to be made by the Servicer with
respect to delinquent payments, plus (iii) any Repurchase Amounts to be
deposited by Green Tree with respect to Contracts to be repurchased due to a
breach of a
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representation or warranty, minus (iv) any amounts paid by Obligors in the
related Monthly Period, but to be applied in respect of a regular monthly
payment due in a subsequent Monthly Period (an "Advance Payment"), minus (v)
any amounts incorrectly deposited in the Collection Account.
Except as otherwise specified in the related Prospectus Supplement, on each
Distribution Date, prior to making distributions in respect of the Notes and
Certificates, the Amount Available will be applied, first, if Green Tree is no
longer the Servicer, to pay the servicing fee to the successor Servicer, and
second, to reimburse the Servicer (including Green Tree) for any Advances made
with respect to a prior Monthly Period and subsequently recovered and for any
Advances previously made that the Servicer has determined are Uncollectible
Advances.
ENHANCEMENT
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, with respect to each class of Securities will be set forth in
the related Prospectus Supplement. If and to the extent provided in the
related Prospectus Supplement, enhancement may be in the form of a financial
guaranty insurance policy, letter of credit, Green Tree guaranty, cash reserve
fund, derivative product, or other form of enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If
specified in the applicable Prospectus Supplement, enhancement for a class of
Securities of a Series may cover one or more other classes of Securities in
such Series, and accordingly may be exhausted for the benefit of a particular
class and thereafter be unavailable to such other classes. Further information
regarding any provider of enhancement, including financial information when
material, will be included in the related Prospectus Supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the Certificateholders and the Noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
Certificateholders and the Noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the enhancement for a class of Securities will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal and interest thereon. If losses occur which exceed the amount
covered by any enhancement or which are not covered by any enhancement,
Securityholders will bear their allocable share of deficiencies. In addition,
if a form of enhancement covers more than one class of Securities of a Series,
Securityholders of any such class will be subject to the risk that such
enhancement will be exhausted by the claims of Securityholders of other
classes.
ADVANCES
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be obligated to make Advances each month of any scheduled
payments on the Contracts included in a Trust that were due but not received
during the prior Monthly Period. The Servicer will be entitled to
reimbursement of an Advance from Available Funds in the Collection Account for
the related Trust (i) when the delinquent payment is recovered by the Trust,
or (ii) when the Servicer has determined that such Advance has become an
Uncollectible Advance. The Servicer will be obligated to make an Advance only
to the extent that it determines that such Advance will be recoverable from
subsequent funds available therefor in the Collection Account for the related
Trust.
EVIDENCE AS TO COMPLIANCE
On or before May 1 of each year the Servicer will deliver to each Trustee
and each Indenture Trustee a report of a nationally recognized accounting firm
stating that such firm has examined certain documents and records relating to
the servicing of secured consumer contracts serviced by the Servicer under
pooling and servicing agreements or sale and servicing agreements similar to
the Trust Documents and stating that, on the basis of such procedures, such
servicing has been conducted in compliance with the applicable Trust
Documents, except for any exceptions set forth in such report. A copy of such
statement may be obtained by any Certificate Owner or Note Owner upon
compliance with the requirements described above. See "Certain Information
Regarding the Securities--Statements to Securityholders" above.
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CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise provided in the related Prospectus Supplement, Green Tree's
appointment as Servicer under the related Trust Documents will continue until
such time as it resigns or is terminated as Servicer, or until such time, if
any, as a Servicer Termination Event shall have occurred under the related
Trust Documents. The related Trust Documents will provide that the Servicer
may not resign from its obligations and duties as Servicer thereunder, except
upon a determination (as evidenced by an opinion of independent counsel,
delivered and acceptable to the Trustee and the Indenture Trustee), that by
reason of a change in legal requirements its performance of such duties would
cause it to be in violation of such legal requirements in a manner which would
result in a material adverse effect on the Servicer. No such resignation will
become effective until a successor Servicer has assumed the servicing
obligations and duties under the related Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, resulting from any merger or consolidation to which the Servicer
is a party, which acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer or succeeds to all or substantially all the
business of the Servicer, where the Servicer is not the surviving entity,
which corporation or other entity assumes every obligation of the Servicer
under each Trust Document, will be the successor to the Servicer under the
related Trust Documents; provided, however, that (i) such entity is an
Eligible Servicer, and (ii) immediately after giving effect to such
transaction, no Servicer Termination Event and no event which, after notice or
lapse of time, or both, would become a Servicer Termination Event shall have
occurred and be continuing.
INDEMNIFICATION AND LIMITS ON LIABILITY
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will be liable only to the extent of
the obligations specifically undertaken by it under the Trust Documents and
will have no other obligations or liabilities thereunder. The Trust Documents
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will have any liability to the Trust, the
Certificateholders or the Noteholders, except as provided in the Trust
Documents, for any action taken or for refraining from taking any action
pursuant to the Trust Documents, other than any liability that would otherwise
be imposed by reason of the Servicer's breach of the Trust Documents or
willful misfeasance, bad faith or negligence (including errors in judgment) in
the performance of its duties, or by reason of reckless disregard of
obligations and duties under the Trust Documents or any violation of law.
The Servicer may, with the prior consent of the Trustee and the Indenture
Trustee, if any, delegate duties under the related Trust Documents to any of
its affiliates. In addition, the Servicer may at any time perform the specific
duty of repossessing Products through subcontractors who are in the business
of servicing consumer receivables. The Servicer may also perform other
specific duties through subcontractors; provided, however, that no such
delegation of such duties by the Servicer shall relieve the Servicer of its
responsibility with respect thereto.
SERVICER TERMINATION EVENTS
Except as otherwise specified in the related Prospectus Supplement, Servicer
Termination Events under the Trust Documents will include (i) any failure by
the Servicer to deliver to the Indenture Trustee for distribution to the
Noteholders or to the Trustee for distribution to the Certificateholders any
required payment which continues unremedied for 5 days (or such other period
specified in the related Prospectus Supplement) after the giving of written
notice; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the Trust
Documents that materially and adversely affects the interests of
Securityholders, which, in either case, continues unremedied for 30 days after
the giving of written notice of such failure of breach; (iii) any assignment
or delegation by the Servicer of its duties or rights under the Trust
Documents, except as specifically permitted under the Trust Documents, or any
attempt to make such an assignment or delegation; (iv) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings regarding the Servicer; and (v) the Servicer is no longer
an eligible Servicer (as defined in the Trust Documents). Notice as used
herein shall mean notice to the Servicer by the Trustee or Green
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Tree, or to Green Tree, the Servicer, if any, and the Trustee by the holders
of Securities representing interests aggregating not less than 25% of the
outstanding principal balance of the Securities issued by such Trust.
Unless otherwise specified in the related Prospectus Supplement, if a
Servicer Termination Event occurs and is continuing, the Trustee, the
Indenture Trustee (if any), or the holders of at least 25% in aggregate
principal balance of the outstanding Securities issued by such Trust, by
notice then given in writing to the Servicer (and to the Trustee and the
Indenture Trustee if given by the Securityholders) may terminate all of the
rights and obligations of the Servicer under the Trust Documents. Immediately
upon the giving of such notice, and, in the case of a successor Servicer other
than the Trustee, the acceptance by such successor Servicer of its
appointment, all authority of the Servicer will pass to the Trustee or other
successor Servicer. The Trustee, the Indenture Trustee and the successor
Servicer may set off and deduct any amounts owed by the Servicer from any
amounts payable to the outgoing Servicer.
On and after the time the Servicer receives a notice of termination, the
Trustee or other successor Servicer specified in the related Prospectus
Supplement (the "Backup Servicer") will be the successor in all respects to
the Servicer and will be subject to all the responsibilities, restrictions,
duties and liabilities of the Servicer under the related Trust Documents;
provided, however, that the successor Servicer shall have no liability with
respect to any obligation which was required to be performed by the prior
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party (including a Securityholder) based on any alleged
action or inaction of the prior Servicer. Notwithstanding such termination,
the Servicer shall be entitled to payment of certain amounts payable to it
prior to such termination, for services rendered prior to such termination. No
such termination will affect in any manner Green Tree's obligation to
repurchase certain Contracts for breaches of representations or warranties
under the Trust Documents. In the event that the Trustee would be obligated to
succeed the Servicer but is unwilling or unable so to act, it may appoint, or
petition to a court of competent jurisdiction for the appointment of a
Servicer. Pending such appointment, the Trustee is obligated to act in such
capacity. The Trustee and such successor may agree upon the servicing
compensation to be paid, which in no event may be greater than the
compensation to the Servicer under the Trust Documents.
Upon any termination of, or appointment of a successor to, the Servicer, the
Trustee and the Indenture Trustee (if any) will each give prompt written
notice thereof to Certificateholders and Noteholders, respectively, at their
respective addresses appearing in the Certificate Register or the Note
Register and to each Rating Agency.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, the Trust
Documents may be amended by the Seller, the Servicer, the Trustee and the
Indenture Trustee, if any, but without the consent of any of the
Securityholders, to cure any ambiguity or to correct or supplement any
provision therein, provided that such action will not, in the opinion of
counsel (which may be internal counsel to Green Tree or the Servicer)
reasonably satisfactory to the Trustee and the Indenture Trustee, materially
and adversely affect the interests of the Securityholders. The Trust Documents
may also be amended by Green Tree, the Servicer and the Trustee and the
Indenture Trustee (if any), and a Certificate Majority and a Note Majority (if
applicable), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Trust Documents or of
modifying, in any manner, the rights of the Certificateholders or the
Noteholders. No such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
the related Contracts or distributions that are required to be made on any
related Certificate or Note or the related Pass-Through Rate or Interest Rate
or (ii) reduce the percentage of the Certificate Balance evidenced by
Certificates or of the aggregate principal amount of Notes then outstanding
required to consent to any such amendment, without the consent of the holders
of all Certificates or all Notes, as the case may be, then outstanding.
TERMINATION
The obligations created by the Trust Documents will terminate upon the date
calculated as specified in the Trust Documents, generally upon (i) the later
of the final payment or other liquidation of the last Contract subject thereto
and the disposition of all property acquired upon repossession of any Product
and (ii) the payment to the
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Securityholders of all amounts held by the Servicer or the Trustee and
required to be paid to the Securityholders pursuant to the Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Securities, in order to avoid excessive administrative
expense, Green Tree and the Servicer each will be permitted, at its option, to
purchase from the Trust, on any Distribution Date immediately following any
Monthly Period as of the last day of which the Aggregate Principal Balance is
equal to or less than 10% (or such other percentage as may be specified in the
related Prospectus Supplement) of the Cutoff Date Principal Balance, all
remaining Contracts in the related Trust and the other remaining Trust
Property at a price equal to the aggregate of the Purchase Amounts therefor
and the appraised value of any other remaining Trust Property. The exercise of
this right will effect an early retirement of the related Certificates and
Notes.
If a General Partner is named in the related Prospectus Supplement, unless
otherwise specified in the related Prospectus Supplement, the Trust Agreement
will provide that, in the event that the General Partner becomes insolvent,
withdraws or is expelled as a General Partner or is terminated or dissolved,
the Trust will terminate in 90 days and effect redemption of the Notes (if
any) and prepayment of the Certificates following the winding-up of the
affairs of the related Trust, unless within such 90 days the remaining General
Partner, if any, and holders of a majority of the Certificates of such series
agree in writing to the continuation of the business of the Trust and to the
appointment of a successor to the former General Partner, and the Owner
Trustee is able to obtain an opinion of counsel to the effect that the Trust
will not thereafter be an association (or publicly traded partnership) taxable
as a corporation for federal income tax purposes.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Trustee will give written notice of
the final distribution with respect to the Certificates to each
Certificateholder of record and the Indenture Trustee will give written notice
of the final payment with respect to the Notes (if any), to each Noteholder of
record. The final distribution to any Certificateholder and the final payment
to any Noteholder will be made only upon surrender and cancellation of such
holder's Certificate or Note at the office or agency of the Trustee, with
respect to Certificates, or of the Indenture Trustee, with respect to Notes,
specified in the notice of termination. Any funds remaining in the Trust,
after the Trustee or the Indenture Trustee has taken certain measures to
locate a Certificateholder or Noteholder, as the case may be, and such
measures have failed, will be distributed to The United Way, and the
Certificateholders and Noteholders, by acceptance of their Certificates and
Notes, will waive any rights with respect to such funds.
THE TRUSTEE
The Trustee or Owner Trustee, as applicable, for each Trust will be
specified in the related Prospectus Supplement. The Trustee, in its individual
capacity or otherwise, and any of its affiliates may hold Certificates or
Notes in their own names or as pledgee. In addition, for the purpose of
meeting the legal requirements of certain jurisdictions, the Trustee, with the
consent of the Servicer, shall have the power to appoint co-trustees or
separate trustees of all or any part of the related Trust. In the event of
such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Trustee by the related Trust Documents will be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, or,
in any jurisdiction where the Trustee is incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee of any Trust may resign at any time, in which event the General
Partner, if any, specified in the related Prospectus Supplement or, if no such
General Partner is specified, the Servicer or its successor will be obligated
to appoint a successor trustee. The General Partner, if any, specified in the
related Prospectus Supplement (or, if no such General Partner is specified,
the Servicer) may also remove the Trustee, if the Trustee ceases to be
eligible to serve, becomes legally unable to act, is adjudged insolvent or is
placed in receivership or similar proceedings. In such circumstances, the
General Partner, if any, specified in the related Prospectus Supplement or, if
no such General Partner is specified, the Servicer will be obligated to
appoint a successor trustee. Any resignation or removal of the Trustee and
appointment of a successor trustee will not become effective until acceptance
of the appointment by the successor trustee.
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DUTIES OF THE TRUSTEE
The Trustee will make no representation as to the validity or sufficiency of
any Trust Document, the Certificates or the Notes (other than its execution of
the Certificates and the Notes), the Contracts or any related documents, and
will not be accountable for the use or application by the Servicer of any
funds paid to the Servicer in respect of the Certificates, the Notes or the
Contracts prior to deposit in the related Collection Account.
The Trustee will be required to perform only those duties specifically
required of it under the Trust Documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the Servicer to the Trustee under the
Trust Documents, in which case it will only be required to examine such
certificates, reports or instruments to determine whether they conform
substantially to the requirements of the Trust Documents.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Trust Documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders or Noteholders, unless such
Certificateholders or Noteholders have offered the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No Certificateholder nor any Noteholder will have any
right under the Trust Documents to institute any proceeding with respect to
such Trust Documents, unless such holder has given the Trustee written notice
of default and unless the holders of Certificates evidencing not less than 25%
of the Certificate Balance or the holders of Notes evidencing not less than
25% of the aggregate principal balance of the Notes then outstanding, as the
case may be, have made written request to the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity, and the Trustee for 30 days after the receipt of
such notice, request and offer to indemnify has neglected or refused to
institute any such proceedings.
ADMINISTRATOR
If an Administrator is specified in the related Prospectus Supplement, such
Administrator will enter into an agreement (the "Administration Agreement")
pursuant to which such Administrator will agree, to the extent provided in
such Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture and the Trust
Agreement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
RIGHTS IN THE CONTRACTS
The Contracts are "chattel paper" as defined in the UCC as in effect in the
State of Minnesota. Pursuant to the UCC, an ownership interest in chattel
paper may be perfected by possession or by filing a UCC-1 financing statement
in the state where the seller's principal executive office is located.
Accordingly, financing statements covering the Contracts will be filed by
Green Tree in Minnesota.
The Servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each Trust's interest in the related
Contracts and the proceeds thereof. Green Tree will warrant in the Trust
Documents with respect to the Contracts held by the related Trust and the
Trustee will pledge the right to enforce such warranty to the Indenture
Trustee as collateral for the Notes, if any, that, as of the Closing Date,
such Contracts have not been sold, pledged or assigned by Green Tree to any
other person, and that it has good and indefeasible title thereto and is the
sole owner thereof free of any Liens and that, immediately upon the transfer
of the Contracts to such Trust pursuant to the related Trust Document, the
Trust will have good and indefeasible title to and will be the sole owner of
the Contracts, free of any Liens. In the event of an uncured breach of any of
such warranties in the Trust Documents that materially and adversely affects
the related Trust's, Certificateholders' or Noteholders' interest in any
Contract (a "Repurchase Event"), Green Tree will be obligated to repurchase
such Contract.
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Unless otherwise provided in the related Prospectus Supplement, Green Tree
will hold the Contract Files on behalf of each Trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in Green Tree's possession. UCC
financing statements will be filed in Minnesota reflecting the sale and
assignment of the Contracts to the Trustee, and Green Tree's accounting
records and computer systems will also reflect such sale and assignment. In
addition, the Contracts will be stamped or otherwise marked to indicate that
such Contracts have been sold to the related Trust. Despite these precautions,
if, through inadvertence or otherwise, any of the Contracts were sold to
another party (or a security interest therein were granted to another party)
that purchased (or took such security interest in) any of such Contracts in
the ordinary course of its business and took possession of such Contracts, the
purchaser (or secured party) would acquire an interest in the Contracts
superior to the interest of the related Trust if the purchaser (or secured
party) acquired (or took a security interest in) the Contracts for new value
and without actual knowledge of such Trust's interest. See "Description of the
Trust Documents--Custody of Contract Files."
SECURITY INTERESTS IN THE PRODUCTS (OTHER THAN AIRCRAFT)
Security interests in some Products must be perfected by notation of the
secured party's lien on the certificate of title or by actual possession of
the certificate of title, depending on the law of the state wherein the
purchaser resides. Security interests in certain other Products must be
perfected by the filing of a UCC financing statement, naming the Obligor as
debtor and Green Tree as secured party. The practice of Green Tree is to take
such action as is required to perfect its security interest under the laws of
the state in which the Product is located. In the event of clerical errors,
administrative delays or otherwise, such actions may not have been taken with
respect to a Product and such security interest may be subordinate to the
interests of, among others, subsequent purchasers of the Products, holders of
perfected security interests in the Product, and the trustee in bankruptcy of
the Obligor. However, such failure would give rise to a Repurchase Event and
obligate Green Tree to repurchase the affected Contract if the interests of
the related Certificateholders, Noteholders or Trust were materially and
adversely affected.
Pursuant to the related Trust Document, Green Tree will assign the security
interests in the Products to the Owner Trustee on behalf of the related Trust.
However, because of the administrative burden and expense that would be
entailed in doing so, none of Green Tree, the Seller, the Trustee or the
Servicer will be required, except to the extent provided below, to amend the
certificates of title or UCC financing statements to identify the Trustee as
the new secured party and, accordingly, Green Tree will continue to be named
as the secured party on the certificates of title or UCC financing statements
relating to the Products. The Servicer will be required to note the interest
of the related Trust on the certificates of title for the Products or to amend
the UCC financing statements only upon a Servicer Termination Event. In most
states, an assignment such as that under the related Trust Documents should be
an effective transfer of a security interest without amendment of any lien
noted on the related certificate of title or financing statement, and the
assignee should succeed to the assignor's status as the secured party. In the
absence of fraud or forgery by the Obligor or administrative error by state
recording officials, the notation of the lien of Green Tree on the certificate
of title or the UCC financing statement should be sufficient to protect the
related Trust against the rights of subsequent purchasers of a Product or
subsequent lenders who take a security interest in the related Product.
However, in the absence of such an amendment, the security interest of the
related Trust in the related Products might be defeated by, among others, the
trustee in bankruptcy of Green Tree or the Obligor. However, such failure
would give rise to a Repurchase Event and obligate Green Tree to repurchase
the affected Contract if the interests of the related Certificateholders,
Noteholders or Trust were materially and adversely affected.
In most states, a perfected security interest in a Product subject to
certificate of title or a financing statement continues for four months after
the Product is moved to a different state and thereafter until the owner re-
registers the Product in the new state, but in no event beyond the surrender
of the certificate of title. A majority of states require surrender of a
certificate of title to re-register a Product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to such
Product. In the case of Products registered in states which provide for
notation of a lien but not possession of the certificate of title by the
holder of the security interest in the related Product, the secured party
should receive notice of surrender if the security interest in the Product is
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noted on the certificate of title. Accordingly, the secured party should have
the opportunity to re-perfect its security interest in the Product in the
state of relocation. In states that do not require a certificate of title for
registration of a Product, re-registration could defeat perfection.
In the ordinary course of servicing its secured consumer contract portfolio,
it is the practice of Green Tree to effect such re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Product subject to a certificate of title,
Green Tree must surrender possession of the certificate of title or receive
notice as a result of its lien noted thereon and accordingly should have an
opportunity to require satisfaction of the related Contract before release of
the lien.
Under the laws of most states, liens for repairs performed on a Product and
liens for unpaid taxes take priority over even a perfected security interest
in a Product. Green Tree in the related Trust Document will represent that,
immediately prior to the sale, assignment and transfer thereof to the related
Trust, each Contract held by such Trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in favor of Green Tree,
as secured party. However, liens for taxes, judicial liens or liens arising by
operation of law could arise at any time during the term of a Contract. In
addition, the laws of certain states and federal law permit the confiscation
of motor vehicles and certain other consumer products by governmental
authorities under certain circumstances if used in unlawful activities, which
may result in the loss of a secured party's perfected security interest in the
confiscated product. No notice will be given to the Owner Trustee, Indenture
Trustee, Certificateholders or Noteholders in the event such a lien or
confiscation arises, and if such lien arises or confiscation occurs after the
date of issuance of any series of Certificates and Notes, neither Green Tree
nor the Servicer will be required to repurchase or purchase the related
Contract.
SECURITY INTERESTS IN AIRCRAFT
In order for a security interest in a United States-registered aircraft to
be valid, it must be perfected in accordance with the Federal Aviation Act.
The UCC has been preempted by the Federal Aviation Act with respect to the
method and location of filing against goods such as aircraft, engines,
propellers, appliances and certain spare parts to the extent that it is
possible to record against them at the Federal Aviation Administration ("FAA")
Aircraft Registry located in Oklahoma City, Oklahoma (the "Registry").
If the aircraft is registered with the FAA, the mortgage or other security
agreement must be filed for recordation with the Registry in order to be
perfected against third parties, including a trustee in bankruptcy. Despite
the Federal Aviation Act's preemption of the UCC, it is customary to sign and
file UCC financing statements in addition to filing at the Registry because
any de-registration of the aircraft (which can occur automatically in certain
circumstances) may result in the applicability of the UCC to perfection of
such liens.
Security interests perfected by filing with the Registry may nevertheless be
subject to (1) purchase money security interests which may be filed up to ten
days (21 days in some states) after a debtor receives possession and which
will then have, in most states, priority in the aircraft (unless it is
property held as inventory) over a conflicting security interest in the same
aircraft, and (2) the rights of buyers in the ordinary course of business from
persons in the business of selling goods of that kind.
Exceptions also include possessory mechanic's and storage liens, which may
or may not need to be filed and which usually have priority over a mortgage,
whether or not such liens are incurred before or after the mortgage is
recorded. Non-possessory mechanic's liens, which exist under many state laws,
probably do not take priority over mortgages previously filed with the
Registry. In some states, a non-possessory mechanic's lien on an aircraft is
required to be filed at the Registry.
Federal tax liens are filed according to Federal law in the appropriate
location in each state and cannot be filed at the Registry. When so filed,
Federal tax liens can have priority over subsequent FAA recorded mortgages in
aircraft with many exceptions, including the exception of a purchase money
security interest. It is an open issue whether unrecorded liens arising out of
FAA penalties have priority over filed security interests in a registered
aircraft.
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The principal effect of recordation is that each mortgage or other
conveyance that is filed with the Registry for recordation affecting the
applicable aircraft, engine, propeller, appliance or spare parts (so long as
they are maintained at any designated locations) is valid and perfected from
the time of filing as to all persons with whatever priority is given by state
law. If not filed for recordation, such a mortgage or other conveyance will
not be valid against third persons except persons having actual notice
thereof. The date of filing for recordation at the Registry is the date of
validity and perfection of the mortgage or other conveyance, even though
recordation by the Registry may not occur for several weeks or months after
delivery to the Registry. The case law is not clear as to the effect of a
rejection of the documents when they are examined by the Registry several
weeks after filing. The usual practice is to retain expert FAA counsel to
ensure, among other things, that the documents are in due form for recording,
that the record is free and clear of liens and that the documents are filed
correctly. Title companies are also available to check the FAA records and
file documents.
If the laws of a state govern the validity of the mortgage or other security
agreement and the aircraft is not registered with the Registry, under the UCC,
the perfection of the mortgage or any security interest in other collateral
would be made according to, and with the effect given by, the law (including
the conflict of laws rules) of the jurisdiction in which the debtor is
located.
REPOSSESSION
In the event of default by an Obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. The
remedies of a secured party under the UCC include the right to repossession by
self-help means, unless such means would constitute a breach of the peace.
Self-help repossession is the method employed by Green Tree in most cases and
is accomplished simply by taking possession of the Product. In the event of
default by the Obligor, some jurisdictions require that the Obligor be
notified of the default and be given a time period within which the Obligor
may cure the default prior to repossession. In cases where the Obligor objects
or raises a defense to repossession, or if otherwise required by applicable
state law, a court order must be obtained from the appropriate state court,
and the Product must then be repossessed in accordance with that order. If a
breach of the peace cannot be avoided, judicial action is required. A secured
party may be held responsible for damages caused by a wrongful repossession of
a Product, including a wrongful repossession conducted by an agent of the
secured party. In many states, a Product may be repossessed without notice to
the Obligor, but only if the repossession can be accomplished without a breach
of the peace.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
has the right to redeem the collateral prior to actual sale by paying the
secured party the entire unpaid time balance of the obligation (less any
unaccrued finance charges) plus accrued default charges, reasonable expenses
for repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, to the extent provided in the financing
documents, reasonable attorneys' fees, or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the
related Contract. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in other
states that do not prohibit or limit such judgments, subject to satisfaction
of statutory procedural requirements by the holder of the obligation. However,
any deficiency judgment would be a personal judgment against the Obligor for
the shortfall, and a defaulting Obligor can be expected to have very little
capital or sources of income available following repossession. Therefore, in
many
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cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or not paid at all.
Green Tree generally seeks to recover any deficiency existing after
repossession and sale of a Product.
Occasionally, after resale of a repossessed Products, and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the law
of most states requires the secured party to remit the surplus to any holder
of another lien with respect to the Product, if proper notification of demand
for proceeds is received prior to distribution, or, if no such lienholder
exists, to remit the surplus to the former owner of the Product.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
The Relief Act imposes certain limitations upon the actions of creditors
with respect to persons serving in the Armed Forces of the United States and,
to a more limited extent, their dependents and guarantors and sureties of debt
incurred by such persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her
ability to pay interest at a higher rate. Further, a secured party may not
repossess during a person's military service a Product subject to an
installment sales contract or a promissory note entered into prior to the
person's entering military service, for a loan default which occurred prior to
or during such service, without court action. The Relief Act imposes penalties
for knowingly repossessing property in contravention of its provisions.
Additionally, dependents of military personnel are entitled to the protection
of the Relief Act, upon application to a court, if such court determines the
obligation of such dependent has been materially impaired by reason of the
military service. To the extent an obligation is unenforceable against the
person in military service or a dependent, any guarantor or surety of such
obligation will not be liable for performance.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts
and promissory notes pursuant to which purchasers finance the acquisition of
consumer products. These laws place finance charge ceilings on the amount that
a creditor may charge in connection with financing the purchase of a consumer
product. These laws also impose other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply. In some cases, this liability could affect the ability of
an assignee, such as the related Trust, to enforce consumer finance contracts
such as the Contracts. The "Credit Practices" Rule of the Federal Trade
Commission (the "FTC") imposes additional restrictions on contract provisions
and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions (and certain related lenders
and their assignees) to all claims and defenses which the purchaser could
assert against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the event of a
successful claim is limited to amounts paid by the purchaser under the
consumer credit contract. However, the assignee's ability to collect any
balance remaining due thereunder is subject to these claims and defenses.
Accordingly, each Trust, as assignee of the related Contracts, will be subject
to claims or defenses, if any, that the purchaser of the related Product may
assert against the seller of such Product.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
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Green Tree will warrant in the related Trust Document that as of the date of
origination each Contract held by the related Trust complied with all
requirements of applicable law in all material respects. Accordingly, if such
Trust's interest in a Contract were materially and adversely affected by a
violation of any such law, such violation would constitute a Repurchase Event
and would obligate Green Tree to repurchase the Contract unless the breach
were cured. See "Description of the Trust Documents--Sale and Assignment of
the Contracts."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the collateral at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing such
indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the
Securities. The discussion is based upon the current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated thereunder and judicial or ruling authority, all of
which are subject to change, which change may be retroactive. The discussion
does not deal with federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules.
Investors are encouraged to consult their own tax advisors with respect to the
federal, state, local, and any other tax consequences of the purchase,
ownership, and disposition of the Securities.
Dorsey & Whitney P.L.L.P., counsel to the Seller ("Counsel"), has delivered
its opinion regarding certain federal income tax matters discussed below, and
will deliver its opinion regarding such tax matters applicable to each Series
of Securities. Such an opinion, however, is not binding on the Internal
Revenue Service (the "Service") or the courts. The opinion of Counsel will
specifically address only those issues specifically identified below as being
covered by such opinion; however, the opinion of Counsel also will state 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 Service.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the Securities of any series will depend upon whether the Trust
created with respect to such series is structured as an owner trust (treated
as a partnership for federal income tax purposes) or as a grantor trust. The
Prospectus Supplement for each series of Securities will indicate whether the
Trust created for such series will be treated as a partnership or as a grantor
trust. The following discussion deals first with series with respect to which
the Trust has been structured as an owner trust (treated as a partnership),
and then with series with respect to which the Trust has been structured as a
grantor trust.
OWNER TRUST SERIES
TAX STATUS OF THE TRUST
With respect to each series of Securities which includes both Notes and
Certificates, Counsel will deliver its opinion that the Trust will not be an
association or publicly traded partnership taxable as a corporation for
federal income tax purposes. As a result, in the opinion of Counsel, the Trust
itself will not be subject to federal income
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tax but, instead, each Certificateholder will be required to take into account
its distributive share of items of income and deduction (including deductions
for distributions of interest to the Noteholders) of the Trust as though such
items had been realized directly by the Certificateholder. This opinion will
be based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on counsel's conclusions that (1) the
Trust will not have certain characteristics necessary for a business trust to
be classified as an association taxable as a corporation and (2) the nature of
the income of the Trust will exempt it from the rule that certain publicly
traded partnerships are taxable as corporations. There are, however, no cases
or Service rulings on transactions involving a trust issuing both debt and
equity interests with terms similar to those of the Notes and the
Certificates. As a result, the Service may disagree with all or a part of this
discussion.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Contracts, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates.
TAX CONSEQUENCES TO NOTEHOLDERS
Treatment of the Notes as Indebtedness. The Owner Trustee, on behalf of the
Trust, will agree, and the Noteholders will agree by their purchase of Notes,
to treat the Notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the Notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
Notes is correct.
Interest Income on the Notes. Interest on the Notes will be taxable as
ordinary interest income when received by Noteholders utilizing the cash-basis
method of accounting and when accrued by Noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the Notes would be
considered issued with original issue discount ("OID") if the "stated
redemption price at maturity" of a Note (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 Notes are sold to the public). Any OID would be considered de minimis
under the OID regulations if it does not exceed 1/4% of the stated redemption
price at maturity of a Note multiplied by the number of full years until its
maturity date. It is anticipated that the Notes will not be considered issued
with more than de minimis OID. Under the OID regulations, an owner of a Note
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 Note.
While it is not anticipated that the Notes 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 Notes are not deemed to be "qualified stated interest" because
the Notes 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 Notes. Based upon existing authority,
however, the Trust will treat interest payments on the Notes as qualified
stated interest under the OID regulations. If the Notes 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 Notes would be includible in the income of
Noteholders 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 Notes were not materially different from its coupon, this treatment would
have no significant effect on Noteholders using the accrual method of
accounting. However, cash method Noteholders may be required to report income
with respect to the Notes in advance of the receipt of cash attributable to
such income.
A Noteholder must include OID in income as interest over the term of the
Notes under a constant yield method. In general, OID must be included in
income in advance of the receipt of cash representing that income. Each
Noteholder is encouraged to consult its own tax advisor regarding the impact
of the OID rules if the Notes are issued with OID.
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Market Discount. The Notes, whether or not issued with original issue
discount, will be subject to the "market discount rules" of Section 1276 of
the Code. In general, these rules provide that if a Noteholder purchases the
Note at a market discount (i.e., a discount from its original issue price plus
any accrued original issue discount) that exceeds a de minimis amount
specified in the Code, and thereafter recognizes gain upon a disposition, the
lesser of (i) such gain or (ii) the accrued market discount will be taxed as
ordinary interest income. Market discount also will be recognized and taxable
as ordinary interest income as payments of principal are received on the Notes
to the extent that the amount of such payments does not exceed the accrued
market discount. Generally, the accrued market discount will be the total
market discount on the Note multiplied by a fraction, the numerator of which
is the number of days the Noteholder held the Note and the denominator of
which is the number of days after the date the Noteholder acquired the Note
until and including its maturity date. The Noteholder may elect, however, to
determine accrued market discount under the constant-yield method, which
election shall not be revoked without the consent of the Service.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder may elect to include market
discount in gross income as it accrues and, if such Noteholder makes such an
election, is exempt from this rule. The adjusted basis of a Note subject to
such election will be increased to reflect market discount included in gross
income, thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any such election to include market discount in gross income as
it accrues shall apply to all debt instruments held by the Noteholder at the
beginning of the first taxable year to which the election applies or
thereafter acquired and is irrevocable without the consent of the Service.
Amortizable Bond Premium. In general, if a Noteholder purchases a Note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), such Noteholder will be considered to have purchased such Note with
"amortizable bond premium" equal to the amount of such excess. Such Noteholder
may elect to deduct the amortizable bond premium as it accrues under a
constant-yield method over the remaining term of the Note. Such Noteholder's
tax basis in the Note will be reduced by the amount of the amortizable bond
premium deducted. Amortizable bond premium with respect to a Note will be
treated as an offset to interest income on such Note, and a Noteholder's
deduction for amortizable bond premium with respect to a Note will be limited
in each year to the amount of interest income derived with respect to such
Note for such year. Any election to deduct amortizable bond premium shall
apply to all debt instruments (other than instruments the interest on which is
excludible from gross income) held by the Noteholder at the beginning of the
first taxable year to which the election applies or thereafter acquired and is
irrevocable without the consent of the Service. Bond premium on a Note held by
a Noteholder who does not elect to deduct the premium will decrease the gain
or increase the loss otherwise recognized on the disposition of the Note.
Disposition of Notes. If a Noteholder sells a Note, the Noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the Noteholder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder generally will equal
the Noteholder's cost for the Note, increased by any market discount, OID and
gain previously included by such Noteholder in income with respect to the Note
and decreased by principal payments previously received by such Noteholder and
the amount of bond premium previously amortized with respect to the Note. Any
such gain or loss will be capital gain or loss if the Note was held as a
capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income, and will be long-term
capital gain or loss if the Note was held for more than one year. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Generally, interest paid to a Noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold
the Note in connection with a United States trade or business will be treated
as "portfolio interest" and therefore will be exempt from the 30% withholding
tax. Such a Noteholder will be entitled to receive interest payments on the
Notes free of United States federal income tax provided that such Noteholder
periodically provides the Indenture Trustee (or other person who would
otherwise be required to
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withhold tax) with a statement certifying under penalty of perjury that such
Noteholder is not a United States person and providing the name and address of
such Noteholder and will not be subject to federal income tax on gain from the
disposition of a Note unless the Noteholder is an individual who is present in
the United States for 183 days or more during the taxable year in which the
disposition takes place and certain other requirements are met.
Tax Administration and Reporting. The Indenture Trustee will furnish to each
Noteholder with each distribution a statement setting forth the amount of such
distribution allocable to principal and to interest. Reports will be made
annually to the Service and to holders of record that are not excepted from
the reporting requirements regarding such information as may be required with
respect to interest and original issue discount, if any, with respect to the
Notes.
Backup Withholding. Under certain circumstances, a Noteholder may be subject
to "backup withholding" at a 31% rate. Backup withholding may apply to a
Noteholder who is a United States person if the holder, among other
circumstances, fails to furnish his Social Security number or other taxpayer
identification number to the Indenture Trustee. Backup withholding may apply,
under certain circumstances, to a Noteholder who is a foreign person if the
Noteholder fails to provide the Indenture Trustee or the Noteholder's
securities broker with the statement necessary to establish the exemption from
federal income and withholding tax on interest on the Note. Backup
withholding, however, does not apply to payments on a Note made to certain
exempt recipients, such as corporations and tax-exempt organizations, and to
certain foreign persons. Noteholders should consult their tax advisors for
additional information concerning the potential application of backup
withholding to payments received by them with respect to a Note.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
Counsel, the Service successfully asserted that the Notes did not represent
debt for federal income tax purposes, the Notes might be treated as equity
interests in the Trust. If so treated, the Trust might be taxable as a
corporation with the adverse consequences described above (and the taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on Notes recharacterized as equity). Alternatively, and most
likely in the view of Counsel, the Trust might be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
certain qualifying income tests. Nonetheless, treatment of the Notes as equity
interests in such a partnership could have adverse tax consequences to certain
holders. For example, income to foreign holders generally would be subject to
federal tax and federal tax return filing and withholding requirements, and
individual holders might be subject to certain limitations on their ability to
deduct their share of Trust expenses.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Treatment of the Trust as a Partnership. The Seller, the General Partner and
the Owner Trustee will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in
whole or in part by income, with the assets of the partnership being the
assets held by the Trust, the partners of the partnership being the
Certificateholders and the General Partner, and the Notes being debt of the
partnership. The proper characterization of the arrangement involving the
Trust, the Certificates, the Notes, the General Partner, the Seller and the
Servicer, however, is not certain because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust. Any such characterization
would not result in materially adverse tax consequences to Certificateholders
as compared to the consequences from treatment of the Certificates as equity
in a partnership, described below. The following discussion assumes that the
Certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
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losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Contracts (including
appropriate adjustments for market discount, OID and bond premium) and any
gain upon collection or disposition of the Contracts. The Trust's deductions
will consist primarily of interest accruing with respect to the Notes,
servicing and other fees, and losses or deductions upon collection or
disposition of the Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass-Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Contracts that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) Prepayment Premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Although it is not anticipated that the Certificates will be
issued at a price which exceeds their principal amount, such allocations of
Trust income to the Certificateholders will be reduced by any amortization by
the Trust of premium on Contracts that corresponds to any such excess of the
issue price of Certificates over their principal amount. All remaining taxable
income of the Trust will be allocated to the General Partner. Based on the
economic arrangement of the parties, this approach for allocating Trust income
should be permissible under applicable Treasury regulations, although no
assurance can be given that the Service would not require a greater amount of
income to be allocated to Certificateholders. Moreover, even under the
foregoing method of allocation, Certificateholders may be allocated income
equal to the entire Pass-Through Rate plus the other items described above
even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis, and
Certificateholders may become liable for taxes on Trust income even if they
have not received cash from the Trust to pay such taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
A Certificateholder's share of expenses of the Trust (including fees to the
Servicer but not interest expense) will be miscellaneous itemized deductions.
An individual, an estate, or a trust that holds a Certificate either directly
or through a pass-through entity will be allowed to deduct such expenses under
Section 212 of the Code only to the extent that, in the aggregate and combined
with certain other itemized deductions, they exceed 2% of the adjusted gross
income of the Certificateholder. In addition, Section 68 of the Code provides
that the amount of itemized deductions (including those provided for in
Section 212 of the Code) otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds a threshold amount determined
under the Code ($117,950 in 1996, in the case of a joint return) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over
the specified threshold amount or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year. To the extent that a
Certificateholder is not permitted to deduct servicing fees allocable to a
Certificate, the taxable income of the Certificateholder attributable to that
Certificate will exceed the net cash distributions related to such income.
Certificateholders may deduct any loss on disposition of the Contracts to the
extent permitted under the Code.
Discount and Premium. It is believed that the Contracts were not issued with
OID, and, therefore, the Trust should not have OID income. The purchase price
paid by the Trust for the Contracts may exceed the remaining principal balance
of the Contracts at the time of purchase. If the Trust is deemed to acquire
the Contracts at such a premium or at a market discount, the Trust will elect
to offset any such premium against interest income on the Contracts or to
include any such discount in income currently as it accrues over the life of
the Contracts. The Trust will make this premium or market discount calculation
on an aggregate basis but may be required to recompute it on a Contract-by-
Contract basis. As indicated above, a portion of such premium deduction or
market discount income may be allocated to Certificateholders.
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Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss with respect to distributions from the Trust. A
Certificateholder will recognize gain, however, to the extent that any money
distributed exceeds the Certificateholder's adjusted basis in its Certificates
(as described below under "Disposition of Certificates") immediately before
the distribution. A Certificateholder will recognize loss upon termination of
the Trust or termination of the Certificateholder's interest in the Trust if
the Trust only distributes money to the Certificateholder and the amount
distributed is less than the Certificateholder's adjusted basis in the
Certificates. Any such gain or loss generally will be capital gain or loss if
the Certificates are held as capital assets and will be long-term gain or loss
if the holding period of the Certificates is more than one year.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. Such deemed
distribution and recontribution should not result in material adverse tax
consequences to Certificateholders (although it may accelerate the recognition
of income from the Trust for Certificateholders whose taxable year is
different than that of the Trust). Because the Trust may not have the
necessary data, the Trust will not comply with certain technical requirements
that may apply when such a constructive termination occurs. As a result, the
Trust may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements.
Disposition of Certificates. If a Certificateholder sells a Certificate, the
Certificateholder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized on the sale and the
seller's tax basis in the Certificate. A Certificateholder's tax basis in a
Certificate generally will equal the Certificateholder's cost increased by the
Certificateholder's share of Trust income and decreased by any distributions
received with respect to such Certificate. In addition, both the tax basis in
the Certificate and the amount realized on a sale of a Certificate would
include the Certificateholder's share of the Notes and other liabilities of
the Trust. A Certificateholder acquiring Certificates at different prices may
be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a portion of such aggregate tax basis to the Certificates sold
(rather than maintain a separate tax basis in each Certificate for purposes of
computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the
Certificateholder's share of unrecognized accrued market discount on the
Contracts would generally be treated as ordinary income to the
Certificateholder and would give rise to special tax reporting requirements.
The Trust does not expect to have any other assets that would give rise to
such special reporting requirements. Thus, to avoid those special reporting
requirements, the Trust will elect to include market discount in income as it
accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess generally will give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly, and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the
close of the related Record Date. As a result, a Certificateholder purchasing
a Certificate may be allocated tax items (which will affect the
Certificateholder's tax liability and tax basis) attributable to periods
before the Certificateholder actually owns the Certificate. The use of such a
convention may not be permitted by existing regulations. If a monthly
convention is not permitted (or only applies to transfers of less than all of
the Certificateholder's interest), taxable income or losses of the Trust may
be reallocated among the Certificateholders. The General Partner is authorized
to revise the Trust's method of allocation between transferors and transferees
to conform to a method permitted by future regulations.
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Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit or loss, the purchasing Certificateholder will have a
higher or lower basis in the Certificate than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher or lower basis unless the Trust files an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust will not make such
election. As a result, Certificateholders may be allocated a greater or lesser
amount of Trust income than would be appropriate based on their own purchase
price for Certificates.
Administrative Matters. Pursuant to an administration agreement (the
"Administration Agreement"), the Trustee will monitor the performance of the
following responsibilities of the Trust by other service providers. The Trust
is required to keep or have kept complete and accurate books of the Trust.
Such books will be maintained for financial reporting and tax purposes on an
accrual basis and the fiscal year of the Trust will be the calendar year. The
Trust will file a partnership information return (IRS Form 1065) with the
Service for each taxable year of the Trust and will report each
Certificateholder's allocable share of items of Trust income and expense to
Certificateholders and the Service on Schedule K-1. The Trust will provide the
Schedule K-1 information to nominees that fail to provide the Trust with
certain required information statements relating to identification of
beneficial owners of Certificates and such nominees will be required to
forward such information to such beneficial owners. Generally,
Certificateholders must file tax returns that are consistent with the
information return filed by the Trust or be subject to penalties unless the
Certificateholder notifies the Service of all such inconsistencies.
Green Tree or a subsidiary identified in the related Prospectus Supplement
will be designated as the tax matters partner in the Trust Agreement and, as
such, will be responsible for representing the Certificateholders in any
dispute with the Service. The Code provides for administrative examination of
a partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return
is filed. Any adverse determination following an audit of the return of the
Trust by the appropriate taxing authorities could result in an adjustment of
the returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust will be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under
facts substantially similar to those described herein. Although it is not
expected that the Trust will be engaged in a trade or business in the United
States for such purposes, the Trust will withhold as if it were so engaged in
order to protect the Trust from possible adverse consequences of a failure to
withhold. It is expected that the Trust will withhold on the portion of its
taxable income that is allocable to foreign Certificateholders pursuant to
Section 1446 of the Code, as if such income were effectively connected to a
U.S. trade or business, at a rate of 35% for foreign holders that are taxable
as corporations and 39.6% for all other foreign Certificateholders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a Certificateholder's nonforeign status, the Trust may rely on
Form W-8, Form W-9 or the Certificateholder's certification of nonforeign
status signed under penalties of perjury.
Each foreign Certificateholder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign
Certificateholder must obtain a taxpayer identification number from the
Service and submit that number to the Trust on Form W-8 in order to assure
appropriate crediting of the taxes withheld. A foreign Certificateholder
generally will be entitled to file with the Service a claim for refund with
respect to taxes withheld by the Trust, taking the position that no taxes are
due because the Trust is not engaged in a U.S. trade or business. However, the
Service may assert that additional taxes are due, and no assurance can be
given as to the appropriate amount of tax liability.
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Backup Withholding. Under certain circumstances, a Certificateholder may be
subject to "backup withholding" at a 31% rate. See the discussion above under
"Tax Consequences to Noteholders--Backup Withholding."
Proposed Tax Legislation. Legislation previously introduced in Congress
would apply special rules to "large partnerships," defined as partnerships
with at least 250 partners during a taxable year (counting towards such total
each owner during the year of a partnership interest that is transferred
during the year). Under the legislation, certain computations are made at the
partnership level rather than the partner level. In particular, taxable income
is calculated at the partnership level and is calculated generally in the same
manner as for an individual, except that 70% of miscellaneous itemized
deductions (such as expenses for the production of nonbusiness income) are
disallowed. As a result, all partners in a large partnership (including
corporations) might have a portion of their share of partnership deductions
disallowed. Moreover, large partnerships would become subject to new audit
procedures; among other things, an adjustment to taxable income of the
partnership for a prior year would flow through to current partners in the
year the audit was settled, and the partnership itself (rather than the
partners) would be subject to any applicable interest or penalties. Under the
previous proposal, these rules would apply to partnership taxable years ending
on or after December 31, 1994. No prediction can be made whether such
legislation will be enacted, the form in which it might be enacted, or the
ultimate effective date of such legislation.
GRANTOR TRUST SERIES
TAX STATUS OF THE TRUST
With respect to each series of Securities which includes only Certificates,
unless otherwise specified in the related Prospectus Supplement, Counsel will
deliver its opinion that the Trust will be classified as a grantor trust for
federal income tax purposes and not as an association which is taxable as a
corporation. The Trust will be classified as a trust regardless of whether the
Seller is considered to retain an interest in the Contracts, as discussed
below. While such a retained interest might be viewed as a second class of
beneficial interest in the Trust and Treasury Regulations Section 301.7701-
4(c) generally provides that an investment trust with more than one class of
ownership interest will be classified as an association taxable as a
corporation or a partnership, that regulation would treat the Trust as a
grantor trust because there will be no power under the Pooling and Servicing
Agreement to vary the investment of the Certificateholders, the purpose of the
Trust will be to facilitate direct investment in the Contracts, and the
existence of multiple classes of ownership interests in the Trust will be
incidental to that purpose.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Because the Trust will be classified as a grantor trust, each
Certificateholder (including any holder of a subordinated Certificate) will,
in the opinion of Counsel, be treated for federal income tax purposes as the
owner of an undivided interest in the Contracts and other Trust Property.
Accordingly, subject to the discussion below of certain limitations on
deductions and the "stripped bond" rules of the Code, each Certificateholder
must report on its federal income tax return its pro rata share of the entire
income from the Contracts and other Trust Property, and may deduct its pro
rata share of the fees paid by the Trust, at the same time as such items would
be reported under the Certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the Trust and received and paid
directly the amounts received and paid by the Trust. A Certificateholder's
share of expenses of the Trust will be miscellaneous itemized deductions
subject to certain limits on deductibility. See the discussion above under
"OWNER TRUST SERIES--Tax Consequences to Certificateholders--Partnership
Taxation."
A purchaser of a Certificate will be treated as purchasing an interest in
each Contract in the Trust at a price determined by allocating the purchase
price paid for the Certificate among all Contracts in proportion to their fair
market values at the time of purchase of the Certificate. To the extent that
the portion of the purchase price of a Certificate allocated to a Contract is
greater than or less than the portion of the principal balance of the Contract
allocable to the Certificate, that interest in the Contract will be deemed to
have been acquired with
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premium or discount, respectively. See the discussions above under "OWNER
TRUST SERIES--Tax Consequences to Noteholders--Market Discount" and "--
Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. It is not anticipated that the
Contracts will have original issue discount, unless they are subject to the
"stripped bond" rules of the Code described below. If the Contracts are
subject to the stripped bond rules of the Code, the market discount rules
discussed above may not apply.
Subordinated Certificates. If the subordinated Certificateholders receive
distributions of less than their share of the Trust's receipts of principal or
interest (the "Shortfall Amount") because of the subordination of the
subordinated Certificates, holders of subordinated Certificates would probably
be treated for federal income tax purposes as if they had (i) received as
distributions their full share of such receipts, (ii) paid over to the senior
Certificateholders an amount equal to such Shortfall Amount, and (iii)
retained the right to reimbursement of such amounts to the extent available
from future collections on the Contracts.
Under this analysis, (a) subordinated Certificateholders would be required
to accrue as current income any interest or OID income of the Trust that was a
component of the Shortfall Amount, even though such amount was in fact paid to
the senior Certificateholders, (b) a loss would only be allowed to the
subordinated Certificateholders when their right to receive reimbursement of
such Shortfall Amount became worthless (i.e., when it becomes clear that
amount will not be available from any source to reimburse such loss), and (c)
reimbursement of such Shortfall Amount prior to such a claim of worthlessness
would not be taxable income to subordinated Certificateholders because such
amount was previously included in income. Those results should not
significantly affect the inclusion of income for subordinated
Certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to subordinated Certificateholders on the cash method of
accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear.
Under current Service interpretations of applicable Treasury Regulations,
the Seller would be able to sell or otherwise dispose of any subordinated
Certificates. Accordingly, the Seller may offer subordinated Certificates for
sale to investors.
Stripped Certificates. Certain classes of Certificates may be subject to the
stripped bond rules of Section 1286 of the Code and for purposes of this
discussion will be referred to as "Stripped Certificates." In general, a
Stripped Certificate will be subject to the stripped bond rules where there
has been a separation of ownership of the right to receive some or all of the
principal payments on a Contract from ownership of the right to receive some
or all of the related interest payments. Certificates will constitute Stripped
Certificates and will be subject to these rules under various circumstances,
including the following: (i) if any servicing compensation is deemed to exceed
a reasonable amount; (ii) if two or more classes of Certificates are issued
representing the right to non-pro rata percentages of the interest or
principal payments on the Contracts; or (iii) if Certificates are issued which
represent the right to interest only payments or principal only payments.
Although not entirely clear, each Stripped Certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original issue discount. Original issue discount with
respect to a Stripped Certificate, if any, must be included in ordinary gross
income for federal income tax purposes as it accrues in accordance with the
constant-yield method that takes into account the compounding of interest and
such accrual of income may be in advance of the receipt of any cash
attributable to such income. See "OWNER TRUST SERIES--Tax Consequences to
Noteholders--Interest Income on the Notes" above. For purposes of applying the
original issue discount provisions of the Code, the issue price of a Stripped
Certificate will be the purchase price paid by the holder thereof and the
stated redemption price at maturity may include the aggregate amount of all
payments to be made with respect to the Stripped Certificate whether or not
denominated as interest. The amount of original issue discount with respect to
a Stripped Certificate may be treated as zero under the original issue
discount de minimis rules described above. Under rules similar to those
provided in Rev. Proc. 91-49, applicable only to mortgages secured by real
property, a Certificateholder may be required to
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account for any discount on a Stripped Certificate as market discount rather
than original issue discount if either (i) the amount of original issue
discount with respect to the Certificate was treated as zero under the
original issue discount de minimis rule when the Certificate was stripped or
(ii) no more than 100 basis points (including any amount of servicing in
excess of reasonable servicing) is stripped off of the Contracts.
When an investor purchases more than one class of Stripped Certificates, it
is currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the Service may take a contrary position with respect to
some or all of the foregoing tax consequences. For example, a holder of a
Stripped Certificate may be treated as the owner of (i) as many stripped bonds
or stripped coupons as there are scheduled payments of principal and/or
interest on each Contract or (ii) a separate installment obligation for each
Contract representing the Stripped Certificate's pro rata share of principal
and/or interest payments to be made with respect thereto. In addition, if a
Trust issues more than one class of Certificates with different Pass-Through
Rates, a holder of such a Certificate may be treated as the owner of a
stripped bond with a rate equal to the lowest such Pass-Through Rate and a
stripped coupon representing the excess, if any, of the Pass-Through Rate on
such Certificate over the lowest Pass-Through Rate. As a result of these
possible alternative characterizations, investors should consult their own tax
advisors regarding the proper treatment of Stripped Certificates for federal
income tax purposes.
The Servicing Fee to be received by the Servicer and the fee for the
enhancement, if any, provided with respect to a series of Certificates may be
questioned by the Service with respect to certain Certificates or Contracts as
exceeding a reasonable fee for the services being performed in exchange
therefor, and a portion of such servicing compensation could be
recharacterized as an ownership interest retained by the Servicer or other
party in a portion of the interest payments to be made pursuant to the
Contracts. In this event, a Certificate might be treated as a Stripped
Certificate subject to the stripped bond rules of Section 1286 of the Code and
the original issue discount provisions rather than to the market discount and
premium rules.
Disposition of Certificates. If a Certificate is sold, gain or loss will be
recognized equal to the difference between the amount realized on the sale and
the Certificateholder's adjusted tax basis in the Certificate. See the
discussion above under "OWNER TRUST SERIES--Tax Consequences to Noteholders--
Disposition of Notes."
Foreign Holders. Generally, interest paid to a Certificateholder who is a
nonresident alien individual or a foreign corporation and who does not hold
the Certificates in connection with a United States trade or business will be
treated as "portfolio interest." See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Foreign Holders."
TAX ADMINISTRATION AND REPORTING
The Trustee will furnish to each Certificateholder with each distribution a
statement setting forth the amount of such distribution allocable to principal
and to interest. In addition, the Trustee will furnish, within a reasonable
time after the end of each calendar year, to each Certificateholder who was a
Certificateholder at any time during such year, information regarding the
amount of servicing compensation received by the Servicer and such other
factual information as the Seller deems necessary to enable Certificateholders
to prepare their tax returns. Reports will be made annually to the Internal
Revenue Service and to holders of record that are not excepted from the
reporting requirements regarding information as may be required with respect
to interest and original issue discount, if any, with respect to the
Certificates.
BACKUP WITHHOLDING
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Backup Withholding."
47
<PAGE>
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan 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 and certain prohibitions on persons who are
fiduciaries of plans subject to ERISA. Under ERISA, generally any person who
exercises any authority or control with respect to the management or
disposition of the assets of a plan is considered to be a fiduciary of such
plan. A violation of these "prohibited transaction" rules may generate excise
tax and other liabilities under ERISA and the Code for such persons.
Certain transactions involving the related Trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Benefit Plan that purchased Securities if assets of the related Trust were
deemed to be assets of the Benefit Plan. Under a regulation issued by the
United States Department of Labor (the "Plan Assets Regulation"), the assets
of a Trust would be treated as plan assets of a Benefit Plan for the purposes
of ERISA and the Code only if the Benefit Plan acquired an "equity interest"
in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. The likely treatment of Notes and Certificates will be discussed in
the related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Securities should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential
consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase
from the Seller, the principal amount of each class of Securities of the
related series set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default
by any such underwriter, each Underwriting Agreement will provide that, in
certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the underwriters in negotiated transactions at varying prices to
be determined at the time of such sale. After the initial public offering of
any Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that Green Tree will indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.
The Indenture Trustee, if any, may, from time to time, invest the funds in
the Designated Accounts in Eligible Investments acquired from the
underwriters.
48
<PAGE>
Under each Underwriting Agreement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of
all other such classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL MATTERS
Certain matters with respect to the validity of the Certificates and the
Notes will be passed upon for the Seller by Dorsey & Whitney P.L.L.P.,
Minneapolis, Minnesota. The validity of the Certificates and the Notes will be
passed upon for the underwriters named in the related Prospectus Supplement by
Brown & Wood, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994
incorporated by reference herein have been audited by KPMG Peat Marwick LLP,
independent accountants, as stated in their opinion given upon their authority
as experts in accounting and auditing.
49
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND ANY INFOR-
MATION OR REPRESENTATION NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY GREEN TREE OR ANY UNDERWRITER. THIS PROSPEC-
TUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH THE PROSPECTUS SUPPLEMENT RE-
LATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GREEN TREE OR
THE TRUST SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Reports to Certificateholders.............................................. S-2
Summary of the Terms of the Certificates................................... S-3
Risk Factors............................................................... S-10
The Trust.................................................................. S-10
The Contract Pool.......................................................... S-11
Yield and Prepayment Considerations........................................ S-16
Description of the Certificates............................................ S-17
Certain Federal Income Tax Consequences.................................... S-23
ERISA Considerations....................................................... S-23
Underwriting............................................................... S-25
Legal Matters.............................................................. S-25
Prospectus
Available Information...................................................... 2
Reports to Securityholders................................................. 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 11
The Trusts................................................................. 13
The Contracts.............................................................. 13
Green Tree Financial Corporation........................................... 14
Yield and Prepayment Considerations........................................ 15
Pool Factor................................................................ 16
Use of Proceeds............................................................ 16
The Certificates........................................................... 16
The Notes.................................................................. 17
Certain Information Regarding the Securities............................... 21
Description of the Trust Documents......................................... 24
Certain Legal Aspects of the Contracts..................................... 33
Certain Federal Income Tax Consequences.................................... 38
ERISA Considerations....................................................... 48
Plan of Distribution....................................................... 48
Legal Matters.............................................................. 49
Experts.................................................................... 49
</TABLE>
-----------------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT) ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[GREEN TREE LOGO]
$431,146,642 (APPROXIMATE)
GREEN TREE RECREATIONAL,
EQUIPMENT
& CONSUMER
TRUST 1996-A
$ % CERTIFICATES, CLASS A-1
$ % CERTIFICATES, CLASS A-2
$ % CERTIFICATES, CLASS A-3
$ % CERTIFICATES, CLASS A-4
$ % CERTIFICATES, CLASS B
GREEN TREE FINANCIAL CORPORATION
(SELLER AND SERVICER)
-----------------
PROSPECTUS SUPPLEMENT
January , 1996
-----------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in connection
with the offering of the Asset-Backed Certificates and the Asset-Backed Notes,
other than underwriting discounts and commissions, described in this
Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $150,000.00
Printing and Engraving.......................................... 100,000.00
Legal Fees and Expenses......................................... 100,000.00
Blue Sky Filing and Counsel Fees................................ 5,000.00
Accounting Fees and Expenses.................................... 20,000.00
Trustee Fees and Expenses....................................... 22,000.00
Rating Agencies' Fees........................................... 75,000.00
Miscellaneous Expenses.......................................... 3,000.00
-----------
Total....................................................... $425,000.00
===========
</TABLE>
- --------
* All fees and expenses, other than the Securities and Exchange Commission
Registration Fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Green Tree Financial Corporation is incorporated under the laws of Delaware.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation,
by reason of the fact that such person was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation
or enterprise). The indemnity may include expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceedings,
provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, for
criminal proceedings, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may identify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director actually and reasonably incurred.
The Certificate of Incorporation and Bylaws of Green Tree Financial
Corporation provide, in effect, that, subject to certain limited exceptions,
such corporation will indemnify its officers and directors to the extent
permitted by the Delaware General Corporation Law.
ITEM 16. EXHIBITS.
The Exhibits filed as part of this Registration Statement are:
<TABLE>
<C> <S>
*1.1 --Form of Underwriting Agreement (for Grantor Trusts).
*1.2 --Form of Underwriting Agreement (for Owner Trusts).
3.1 --Certificate of Incorporation of Green Tree (incorporated by reference
to Exhibit 3.1 to the registrant's Registration Statement No. 33-
60869).
3.2 --By-Laws of Green Tree (incorporated by reference to Exhibit 3.2 to
the registrant's Registration Statement No. 33-60869).
*4.1 --Form of Pooling and Servicing Agreement between Green Tree, as Seller
and as Servicer, and the Owner Trustee (for Grantor Trusts).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
*4.2 --Form of Sale and Servicing Agreement relating to Owner Trusts.
*4.3 --Form of Trust Agreement relating to Owner Trusts.
*4.4 --Form of Indenture between the Trust and the Indenture Trustee,
including form of Note.
5.1 --Opinion and consent of Dorsey & Whitney with respect to legality.
8.1 --Opinion and consent of Dorsey & Whitney with respect to tax matters.
*23.1 --Consent of KPMG Peat Marwick LLP.
*23.2 --Consent of Dorsey & Whitney (included as part of Exhibit 5.1).
*23.3 --Consent of Dorsey & Whitney (included as part of Exhibit 8.1).
**25.1 --Form of T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of the Indenture Trustee.
*99.1 --Form of Prospectus Supplement for Grantor Trusts.
*99.2 --Form of Prospectus Supplement for Owner Trusts.
</TABLE>
- --------
*Previously filed.
**To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant on behalf of the Trust hereby undertakes that,
for purposes of determining any liability under the Securities Act of 1933,
each filing of the Owner Trust's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change to such information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in the information set forth in the registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the Trust
Indenture Act.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 5
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
THE 18TH DAY OF JANUARY, 1996.
Green Tree Financial Corporation
/s/ John W. Brink
By __________________________________
JOHN W. BRINK
Executive Vice President and Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 4 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
* Chairman of the
- ------------------------------------- Board and Chief January 18,
LAWRENCE M. COSS Executive Officer 1996
(Principal
Executive Officer
and Director)
/s/ John W. Brink Executive Vice January 18,
- ------------------------------------- President and Chief 1996
JOHN W. BRINK Financial Officer
(Principal
Financial Officer)
* Vice President and
- ------------------------------------- Controller January 18,
ROBLEY D. EVANS (Principal 1996
Accounting Officer)
* Director
- ------------------------------------- January 18,
RICHARD G. EVANS 1996
Director
- -------------------------------------
W. MAX MCGEE
Director
- -------------------------------------
TANIA A. MODIC
* Director
- ------------------------------------- January 18,
ROBERT S. NICKOLOFF 1996
* Director
- ------------------------------------- January 18,
ROBERT D. POTTS 1996
/s/ John W. Brink
*By _________________________________
JOHN W. BRINK
as Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
*1.1 --Form of Underwriting Agreement.
3.1 --Certificate of Incorporation of Green Tree (incorporated by
reference to Exhibit 3.1 to the registrant's Registration
Statement No. 33-60869).
3.2 --By-Laws of Green Tree (incorporated by reference to Exhibit
3.2 to the registrant's Registration Statement No. 33-60869).
*4.1 --Form of Pooling and Servicing Agreement between Green Tree, as
Seller and as Servicer, and the Owner Trustee.
*4.2 --Form of Sale and Servicing Agreement relating to Trusts
including Pre-Funding Accounts or issuing Notes.
*4.3 --Form of Trust Agreement relating to Trusts including Pre-
Funding Accounts or issuing Notes.
*4.4 --Form of Indenture between the Trust and the Indenture Trustee,
including form of Note.
5.1 --Opinion and consent of Dorsey & Whitney with respect to
legality.
8.1 --Opinion and consent of Dorsey & Whitney with respect to tax
matters.
*23.1 --Consent of KPMG Peat Marwick.
*23.2 --Consent of Dorsey & Whitney (included as part of Exhibit 5.1).
*23.3 --Consent of Dorsey & Whitney (included as part of Exhibit 8.1).
**25.1 --Form of T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of the Indenture Trustee.
*99.1 --Form of Prospectus Supplement for Grantor Trusts.
*99.2 --Form of Prospectus Supplement for Trusts including Pre-Funding
Accounts or issuing Notes.
</TABLE>
- --------
*Previously filed.
**To be filed by amendment.
<PAGE>
EXHIBIT 5.1
-----------
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Registration Statement on Form S-3
File No. 33-63575
Ladies and Gentlemen:
We have acted as counsel to Green Tree Financial Corporation, a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission (the "Commission") on October 20, 1995, and as subsequently
amended, including Amendment No. 4 thereto filed with the Commission on January
16, 1996 (the "Registration Statement"), relating to the registration by the
Company of $435,000,000 of Asset-Backed Securities (the "Securities") to be
issued by Green Tree Recreational, Consumer & Equipment Trusts to be formed by
the Company from time to time. The Securities are proposed to be issued from
time to time in series under either
(i) with respect to Securities issued by a Trust characterized for tax
purposes as a grantor trust, a separate Pooling and Servicing Agreement in
substantially the form filed as Exhibit 4.1 to the Registration Statement
(each such agreement, a "Pooling and Servicing Agreement"), between the
Company, as seller and servicer, and a bank or trust company, as trustee
(the "Trustee"); or
(ii) with respect to Securities issued by a Trust characterized as an
owner trust treated as a partnership for tax purposes, a combination of (a)
a separate Trust Agreement in substantially the form filed as Exhibit 4.3
to the Registration Statement (each such Agreement, a "Trust Agreement"),
(b) a separate Sale and Servicing Agreement in substantially the form filed
as Exhibit 4.2 to the Registration Statement (each such Agreement, a "Sale
and Servicing Agreement"), and, if such Trust issues Notes, a separate
Indenture in substantially the form filed as Exhibit 4.4 to the
Registration Statement (each such Indenture, an "Indenture").
<PAGE>
Green Tree Financial Corporation
January 16, 1996
Page 2
The Company may provide a Limited Guaranty (the "Limited Guaranty") with
respect to one or more classes of any series of Securities.
We have examined the Registration Statement, the forms of such
agreements filed as exhibits thereto, and such other documents, and have
reviewed such questions of law, as we have considered necessary and appropriate
for the purposes of this opinion. Based on the foregoing, we are of the opinion
that:
1. Each Pooling and Servicing Agreement, when it has been duly
authorized by the Board of Directors of the Company and duly executed and
delivered by the Company and the Trustee, will constitute the valid and binding
obligation of the Company and the Limited Guaranty of the Company, if any,
provided for therein will constitute the valid and binding obligation of the
Company.
2. Each series of Certificates issued pursuant to a Pooling and
Servicing Agreement, when duly executed and delivered in accordance with the
terms of such Pooling and Servicing Agreement, will be legally and validly
issued, and the holders of such Certificates will be entitled to the benefits of
such Pooling and Servicing Agreement.
3. Each Sale and Servicing Agreement, when it has been duly
authorized by the Board of Directors of the Company and duly executed and
delivered by the Company and the Trustee, will constitute the valid and binding
obligation of the Company and the Limited Guaranty of the Company, if any,
provided for therein will constitute the valid and binding obligation of the
Company. Each Trust Agreement, when it has been duly authorized by the Board of
Directors of the Company and duly executed and delivered by the Company and the
Trustee, will constitute the valid and binding obligation of the Company. Each
Indenture, when it has been duly authorized by the Trust and the applicable
Indenture Trustee, will constitute the valid and binding obligation of such
Trust.
4. Each series of Certificates issued pursuant to a Trust Agreement,
when duly executed and delivered in accordance with the terms of such Trust
Agreement, will be legally and validly issued, fully paid and non-assessable,
and the holders of such Certificates will be entitled to the benefits of such
Trust Agreement and the related Sale and Servicing Agreement.
<PAGE>
Green Tree Financial Corporation
January 16, 1996
Page 3
5. Each Series of Notes issued by a Trust, when duly authorized and
executed by such Trust and duly authenticated by the Indenture Trustee pursuant
to the terms of the related Indenture, will be legally and validly issued and
will constitute the valid and binding obligations of such Trust.
The opinions set forth above are subject to the following
qualifications and exceptions:
(a) In rendering the opinions set forth above, we have assumed that,
at the time of the execution of the applicable Agreements and the execution
and delivery of the related series of Securities, there will not have
occurred any change in the law affecting the authorization, execution,
delivery, validity or enforceability of the Securities or any Limited
Guaranty, the Registration Statement will have been declared effective by
the Commission and will continue to be effective, the Securities and the
Limited Guaranty will be issued and sold as described in the Registration
Statement, none of the particular terms of a series of Securities will
violate any applicable law and neither the issuance and sale thereof nor
the compliance by the Company with the terms thereof will result in a
violation of any agreement or instrument then binding upon the Company or
any order of any court or governmental body having jurisdiction over the
Company.
(b) Our opinions in paragraphs 1, 3 and 5 above are subject to the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar law of general application affecting creditors' rights.
(c) Our opinion in paragraphs 1, 3 and 5 above are subject to the
effect of general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing, and
other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
(d) Minnesota Statutes (S) 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report does
not have a cause of action upon which it may bring suit under Minnesota law
unless the corporation has filed a Notice of Business Activities Report and
provides that the use of the courts of the State of Minnesota for all
contracts executed and all causes of action that arose before the end of
any period for which a corporation failed to file a required report is
precluded. Insofar as our opinion may relate to the valid, binding and
enforceable character of any
<PAGE>
Green Tree Financial Corporation
January 16, 1996
Page 4
agreement under Minnesota law or in a Minnesota court, we have assumed that
any party seeking to enforce such agreement has at all times been, and will
continue at all times to be, exempt from the requirement of filing a Notice
of Business Activities Report or, if not exempt, has duly filed, and will
continue to duly file, all Notice of Business Activities Reports.
Our opinions expressed above are limited to the laws of the State of
Minnesota and the Delaware General Corporation Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the heading
"Legal Matters" in the Prospectus comprising part of the Registration Statement.
Dated: January 16, 1996
Very truly yours,
/s/ DORSEY & WHITNEY P.L.L.P.
CFS
<PAGE>
EXHIBIT 8.1
-----------
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102-1639
Re: Federal Income Tax Consequences of Recreational,
Equipment & Consumer Trust Certificates
Ladies and Gentlemen:
We have acted as counsel to Green Tree Financial Corporation, a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission (the "Commission") on October 20, 1995, and as subsequently
amended, including Amendment No. 4 thereto filed with the Commission on January
16, 1996 (the "Registration Statement"), relating to the registration by the
Company of $435,000,000 of Asset-Backed Securities (the "Securities") to be
issued by Green Tree Recreational, Equipment & Consumer Trusts to be formed by
the Company from time to time. The Securities are proposed to be issued from
time to time in series under either
(i) with respect to Securities issued by a Trust characterized for tax
purposes as a grantor trust, a separate Pooling and Servicing Agreement in
substantially the form filed as Exhibit 4.1 to the Registration Statement
(each such agreement, a "Pooling and Servicing Agreement"), between the
Company, as seller and servicer, and a bank or trust company, as trustee
(the "Trustee"); or
(ii) with respect to Securities issued by a Trust characterized as an
owner trust treated as a partnership for tax purposes, a combination of (a)
a separate Trust Agreement in substantially the form filed as Exhibit 4.3
to the Registration Statement (each such Agreement, a "Trust Agreement"),
(b) a separate Sale and Servicing Agreement in substantially the form filed
as Exhibit 4.2 to the Registration Statement (each such Agreement, a "Sale
and Servicing Agreement"), and, if such Trust issues Notes, a separate
Indenture in substantially the form filed as Exhibit 4.4 to the
Registration Statement (each such Indenture, an "Indenture").
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Green Tree Financial Corporation
January 16, 1996
Page 2
The Certificates are described in the prospectus constituting Part I
of the Registration Statement (the "Prospectus"). Each series of Certificates
will be more particularly described in a supplement to the Prospectus (each, a
"Supplement").
You have requested our opinion with respect to certain federal income
tax consequences of the purchase, ownership and disposition of the Certificates.
For purposes of rendering our opinion we have examined the Registration
Statement. Each Supplement and Pooling and Servicing Agreement or Trust
Agreement pertaining to a specific series is to be completed subsequent to the
date of this opinion. Accordingly, we have not examined any Supplement or
Pooling and Servicing Agreement or Trust Agreement relating to any specific
series to be issued, and our opinion does not address the contents of any such
Supplement or Agreement except as and to the extent that the provisions of same
may be described in the Prospectus. We understand that each Supplement will
contain a discussion of any material federal income tax consequences pertaining
to the series to be offered thereunder which are not addressed in the
Prospectus.
As set forth in the Prospectus, for federal income tax purposes each
series of Certificates will be issued as either a grantor trust ("Grantor
Trust") or an owner trust treated as a partnership ("Owner Trust"). Each
series' status as a Grantor Trust or an Owner Trust is to be set forth in the
Supplement related thereto.
Our opinion is based upon existing law and currently applicable
Treasury Department regulations, current published administrative positions of
the Internal Revenue 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. Our
opinion is also based on the representations and warranties set forth in the
applicable Pooling and Servicing Agreement or Trust Agreement and the
assumptions that the Company and the Trustee will at all times comply with the
requirements of the applicable Agreement. Based upon the foregoing, as of the
date hereof it is our opinion that:
(1) With respect to each Grantor Trust series of Certificates, each
pool of contracts and the arrangement to be administered by the Company
under which the Trustee will hold and the Company will be obligated to
service the contracts and pursuant to which Certificates will be issued to
certificateholders, all as described in the Prospectus, will not be
classified as an association taxable as a corporation, but rather will be
classified as a grantor trust under Subpart E, Part I of Subchapter J of
the Internal Revenue Code of 1986, as amended. Each
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Green Tree Financial Corporation
January 16, 1996
Page 3
holder of a Certificate will be treated as the owner of an undivided
interest in the contracts and other property of the Trust.
(2) With respect to each Owner Trust series of Certificates, each pool
of contracts and the arrangement to be administered by the Company under
which the Trustee will hold and the Company will be obligated to service
the contracts and pursuant to which Certificates will be issued to
certificateholders, all as described in the Prospectus, will not be
characterized as an association or a publicly-traded partnership taxable as
a corporation. As a result, the Trust itself will not be subject to
federal income tax but, instead, each holder of a Certificate will be
required to take into account its distributive share of items of income and
deduction of the Trust as though such items had been realized directly by
such holder. If such Trust issues Notes pursuant to an Indenture as
described in the Prospectus, the Notes will be classified as debt for
federal income tax purposes.
We consent to the filing 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, and we hereby confirm that,
insofar as they constitute statements of law or legal conclusions as to the
likely outcome of material issues under the federal income tax laws, the
discussion under such heading accurately sets forth our advice.
Dated: January 16, 1996
Very truly yours,
/s/ DORSEY & WHITNEY P.L.L.P.
CFS
