<PAGE>
Filed Pursuant to Rule 424(b)(5)
File No. 333-02725
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 6, 1996)
[LOGO OF GREEN TREE FINANCIAL CORPORATION]
$364,435,050 (APPROXIMATE)
GREEN TREE FINANCIAL CORPORATION
(SELLER AND SERVICER)
GREEN TREE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1996-C
$298,836,000 (APPROXIMATE) FLOATING RATE ASSET-BACKED NOTES, CLASS A-1
$ 14,577,000 (APPROXIMATE) FLOATING RATE ASSET-BACKED NOTES, CLASS A-2
$ 14,577,000 (APPROXIMATE) FLOATING RATE ASSET-BACKED NOTES, CLASS A-3
$ 11,846,000 (APPROXIMATE) FLOATING RATE ASSET-BACKED NOTES, CLASS A-4
$ 24,599,050 (APPROXIMATE) 7.65% ASSET-BACKED CERTIFICATES
----------------
Green Tree Recreational, Equipment & Consumer Trust 1996-C (the "Trust")
will be formed pursuant to a Trust Agreement, to be dated as of September 1,
1996 (the "Trust Agreement"), among Green Tree Financial Corporation ("Green
Tree"), Green Tree First GP Inc., a wholly owned subsidiary of Green Tree, and
Wilmington Trust Company, as Owner Trustee. The Trust will issue four classes
of Floating Rate Asset-Backed Notes (the "Notes"), designated as the Class A-1,
Class A-2, Class A-3 and Class A-4 Notes, respectively, pursuant to an
Indenture, to be dated as of September 1, 1996 (the "Indenture"), between the
Trust and First Trust National Association, as Indenture Trustee. The Trust
will also issue 7.65% Asset-Backed Certificates (the "Certificates" and,
together with the Notes, the "Securities"). 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 equipment
and all payments due thereunder on or after September 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 ("the Cut-
off Date Pool Principal Balance") was $364,435,050.94. 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 September 6, 1996
attached hereto (the "Prospectus").
(Continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" ON PAGE S-14
HEREIN AND ON PAGE 12 IN THE ACCOMPANYING PROSPECTUS.
----------------
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR
INTERESTS IN 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT GREEN TREE(1)(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note.............. 100% .4% 99.6%
- --------------------------------------------------------------------------------
Per Class A-2 Note.............. 100% .55% 99.45%
- --------------------------------------------------------------------------------
Per Class A-3 Note.............. 100% .75% 99.25%
- --------------------------------------------------------------------------------
Per Class A-4 Note.............. 100% .95% 99.05%
- --------------------------------------------------------------------------------
Per Certificate................. 99.921875% .95% 98.971875%
- --------------------------------------------------------------------------------
Total........................... $364,415,831.99 $1,731,072.97 $362,684,759.02
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from and including September 19, 1996.
(2) Before deducting estimated expenses of $425,000 payable by Green Tree.
----------------
The Securities 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 Securities will
be made on or about September 19, 1996.
----------------
MERRILL LYNCH & CO. MORGAN STANLEY & CO.
INCORPORATED
The date of the Prospectus Supplement is September 12, 1996.
<PAGE>
(Continued from preceding page)
The per annum rate of interest on the Notes for each monthly interest period
will equal one-month LIBOR (as defined herein) plus .24% for the Class A-1
Notes, plus .34% for the Class A-2 Notes, plus .45% for the Class A-3 Notes
and plus .60% for the Class A-4 Notes, subject in each case to a maximum rate
of 10.75% per annum.
Principal and interest on the Notes 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 October 1996. The rights of
the holders of the Class A-2, Class A-3 and Class A-4 Notes and the
Certificates to receive distributions on each Distribution Date will be
subordinated to such rights of the Class A-1 Noteholders; such rights of the
holders of the Class A-3 and Class A-4 Notes and the Certificates will be
subordinated to such rights of the Class A-2 Noteholders; such rights of the
holders of the Class A-4 Notes and the Certificates will be subordinated to
such rights of the Class A-3 Noteholders; and such rights of the
Certificateholders will be subordinated to such rights of the Class A-4
Noteholders.
The Certificates will represent fractional undivided interests in the Trust.
Interest will be distributed to the Certificateholders on each Distribution
Date as set forth herein. No distributions of principal on the Certificates
will be payable until all of the Notes have been paid in full. The
Certificateholders will have the benefit of a Limited Guaranty of Green Tree
to protect against losses that would otherwise be absorbed by the
Certificates. To the extent that available funds in the Collection Account are
insufficient to distribute to the holders of the Certificates the Certificate
Formula Distribution Amount (as described herein), Green Tree will be
obligated to make a Guaranty Payment equal to the amount of such deficiency.
The Securities 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 Securities will be represented by
book entries on the records of the participating members of DTC. Definitive
Securities will be available only under the limited circumstances described
herein. Holders of the Notes or the Certificates may hold through DTC (in the
United States) or, solely in the case of the Notes, CEDEL or Euroclear (as
defined herein) (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems. The
Certificates may not be held, directly or indirectly, through CEDEL or
Euroclear.
The Certificates may not be offered or sold in the United Kingdom. The Notes
may not be offered or sold in the United Kingdom by means of any document
except in circumstances which do not constitute an offer to the public within
the meaning of the Public Offers of Securities Regulations 1995. All
applicable provisions of the Financial Services Act of 1986 must be complied
with in connection with anything done in relation to the Notes in, from or
otherwise involving the United Kingdom. See "Underwriting."
There currently is no secondary market for the Securities. The Underwriters
expect, but are not obligated, to make a market in the Securities. 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 SECURITIES. 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 SECURITIES 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 SECURITIES
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 SECURITYHOLDERS
Unless and until Definitive Securities 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 the Indenture Trustee,
the Owner Trustee, and Cede & Co., as registered holder of the Securities and
the nominee of DTC. See "Description of the Trust Documents and Indenture--
Statements to Securityholders," herein and "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Reports to Securityholders" in the
accompanying Prospectus. Security Owners may receive such reports, upon
written request, together with a certification that they are Security Owners
and payment of reproduction and postage expenses associated with the
distribution of such reports, from the Indenture 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 Securities and Exchange
Commission (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 TERMS
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-C (the "Trust"), a Delaware business
trust to be formed on September 19, 1996 (the
"Closing Date"), pursuant to a Trust Agreement,
dated as of September 1, 1996 (the "Trust
Agreement"), among Green Tree First GP Inc.
(the "General Partner"), Green Tree Financial
Corporation ("Green Tree") and Wilmington Trust
Company, as Owner Trustee (the "Owner
Trustee").
Seller and Servicer........... Green Tree Financial Corporation. See "Green
Tree Financial Corporation" in the accompanying
Prospectus.
Indenture Trustee............. First Trust National Association, St. Paul,
Minnesota (the "Indenture Trustee"). See "The
Notes--The Indenture Trustee" in the
accompanying Prospectus.
Owner Trustee................. Wilmington Trust Company, as Owner Trustee
under the Trust Agreement. See "Description of
the Trust Documents--The Trustee" in the
accompanying Prospectus.
The Notes..................... The Trust will issue four classes of Floating
Rate Asset-Backed Notes (the "Notes"),
designated as the Class A-1, Class A-2, Class
A-3 and Class A-4 Notes, respectively. The
rights of the holders of each Class of Notes
will be subordinated to the rights of the
holders of each Class of Notes with a prior
numeric designation, in the manner and to the
extent described herein. The Notes will be
issued pursuant to an Indenture, dated as of
September 1, 1996 (the "Indenture"), between
the Trust and the Indenture Trustee. The Notes
will be offered for purchase in denominations
of $1,000 and integral multiples thereof in
book-entry form only. See "Certain Information
Regarding the Securities--Book-Entry
Registration" in the accompanying Prospectus.
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
Original Class A-1 Principal $298,836,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-2 Principal $14,577,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-3 Principal $14,577,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-4 Principal $11,846,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
S-3
<PAGE>
The Certificates.............. The Trust will issue 7.65% Asset-Backed
Certificates (the "Certificates") representing
fractional undivided interests in the Trust.
The rights of the holders of the Certificates
will be subordinated to the rights of the
holders of the Notes in the manner and to the
extent described herein. The Certificates will
be issued pursuant to the Trust Agreement. The
Certificates will be offered for purchase in
denominations of $1,000 and integral multiples
thereof in book-entry form only. See "Certain
Information Regarding the Securities--Book-
Entry Registration" in the accompanying
Prospectus.
Original Certificate
Principal Balance............. $24,599,050 (Approximate. Subject to a
permitted variance of plus or minus 5%).
Record Date................... The business day immediately preceding the
related Distribution Date.
The Trust Property............ Each Note will represent an obligation of, and
each Certificate will represent a fractional
undivided interest in, the Trust. 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 and
equipment (the "Products"), and all payments
due thereon on or after September 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 and the Spread
Account, including all investments therein, all
income from the investment of funds therein and
all proceeds thereof; and certain other rights
under the Sale and Servicing Agreement to be
dated as of September 1, 1996 (the "Sale and
Servicing Agreement"), between Green Tree and
the Trust. The Contracts will be transferred by
Green Tree to the Trust pursuant to the Sale
and Servicing 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.
Pursuant to the Indenture, the Trust Property
will be pledged to the Indenture Trustee on
behalf of the holders of the Notes.
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
11.73% and a weighted average remaining
maturity of approximately 103 months. As of the
Cutoff Date, no Contract had a scheduled
maturity prior to February 1997 and no Contract
was more than 59 days past due. The final
scheduled payment date on the Contract with the
latest maturity occurs in September 2016. The
Contracts are prepayable at any time without
penalty to the purchaser or co-purchasers of
the Product or other person or
S-4
<PAGE>
persons who are obligated to make payments
thereunder (each, an "Obligor"). See "The
Contract Pool" herein and "The Contracts" in
the accompanying Prospectus.
Terms of the Notes............ The principal terms of the Notes will be as
described below:
A. Distributions........... Noteholders will be entitled to receive on the
15th day of each month (or if such 15th day is
not a business day the next business day
thereafter) (a "Distribution Date") commencing
in October 1996, to the extent that the Amount
Available in the Collection Account is
sufficient therefor, the Noteholders'
Distributable Amount, as defined under
"Description of the Trust Documents and
Indenture." Distributions on the Notes will be
made first to the holders of the Class A-1
Notes, then to the holders of the Class A-2
Notes, then to the holders of the Class A-3
Notes, then to the holders of the Class A-4
Notes, and then to the holders of the
Certificates, in the manner described below.
The "Amount Available" on each Distribution
Date generally includes payments on the
Contracts due and received during the preceding
month, prepayments and other unscheduled
collections received during the preceding
month, and all collections in respect of
principal on the Contracts received during the
current month up to and including the third
business day prior to such Distribution Date
(but in no event later than the 10th day of the
month in which the Distribution Date occurs),
any amounts deposited in respect of Purchased
Contracts, all earnings from the investment of
funds in the Collection Account, Guaranty
Payments, minus, with respect to all
Distribution Dates other than the Distribution
Date in October 1996, all collections of
principal on the Contracts received during the
preceding month up to and including the third
business day prior to the preceding
Distribution Date (but in no event later than
the 10th day of the prior month).
The outstanding principal amount of the Class
A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes, to the extent
not previously paid, will be payable on the
Distribution Date occurring in October 2017
(the "Final Scheduled Distribution Date").
B. Interest Rates.......... The per annum rate of interest on the Notes for
each monthly interest period will equal one-
month LIBOR (as defined below) for such period,
plus .24% for the Class A-1 Notes (the "Class
A-1 Rate"), plus .34% for the Class A-2 Notes
(the "Class A-2 Rate"), plus .45% for the Class
A-3 Notes (the "Class A-3 Rate"), plus .60% for
the Class A-4 Notes (the "Class A-4 Rate"),
subject in each case to a maximum rate of
10.75% per annum. Interest on the Notes will be
calculated on the basis of the actual number of
days in the monthly interest period divided by
360.
"LIBOR" ("London Interbank Offered Rate") with
respect to any monthly interest period will be
established by the calculation
S-5
<PAGE>
agent appointed by the Trust (the "Calculation
Agent") and will equal the offered rate for
United States dollar deposits for one month
that appears on Telerate Page 3750 as of 11:00
A.M., London time, on the second LIBOR Business
Day prior to such monthly interest period (a
"LIBOR Determination Date"). "Telerate Page
3750" means the display page so designated on
the Dow Jones Telerate Service (or such other
page as may replace that page on that service,
or such other service as may be designated by
the Calculation Agent as the information
vendor, for the purpose of displaying London
interbank offered rates of major banks). If
such rate appears on Telerate Page 3750, LIBOR
will be such rate. "LIBOR Business Day" as used
herein means a day that is both a business day
and a day on which banking institutions in the
City of London, England are not required or
authorized by law to be closed. If on any LIBOR
Determination Date the offered rate does not
appear on Telerate Page 3750, the Calculation
Agent will request each of the reference banks
(which shall be major banks that are engaged in
transactions in the London interbank market
selected by the Calculation Agent) to provide
the Calculation Agent with its offered
quotation for United States dollar deposits for
one month to prime banks in the London
interbank market as of 11:00 A.M., London time,
on such date. If at least two reference banks
provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the
arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.0000001%),
with five one-millionths of a percentage point
rounded upward, of all such quotations. If on
such date fewer than two of the reference banks
provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the
arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.0000001%),
with five one-millionths of a percentage point
rounded upward, of the offered per annum rates
that one or more leading banks in the City of
New York selected by the Calculation Agent are
quoting as of 11:00 A.M., New York City time,
on such date to leading European banks for
United States dollar deposits for one month;
provided, however, that if such banks are not
quoting as described above, LIBOR for such date
will be LIBOR applicable to the monthly
interest period immediately preceding such
monthly interest period. The "Calculation
Agent" will initially be the Indenture Trustee.
The interest rates for the various classes of
Notes are referred to collectively herein as
the "Interest Rates."
C. Class A-1 Interest...... Interest on the outstanding Class A-1 Principal
Balance will accrue from September 19, 1996, or
from the most recent Distribution Date, to but
excluding the following Distribution Date, at
the Class A-1 Rate for such monthly interest
period. The "Class A-1 Principal Balance" as of
any Distribution Date will be the Original
Class A-1 Principal Balance minus all amounts
S-6
<PAGE>
previously distributed to the Class A-1
Noteholders in respect of principal.
Interest will be paid on the Class A-1 Notes to
the extent of funds available on such
Distribution Date (as described under
"Description of the Notes" herein). In the
event that the funds available are not
sufficient to make a full distribution of
interest on the Class A-1 Notes, 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
Rate, to the extent legally permissible. See
"Description of the Notes."
D. Class A-1 Principal..... Class A-1 Noteholders will be entitled to
receive on each Distribution Date as payment of
principal, to the extent of funds available
after payment of all interest payable on the
Class A-1 Notes, an amount equal to the sum of
87.94% (approximate) of the Formula Principal
Distribution Amount for such Distribution Date
plus the Unpaid Class A-1 Principal Shortfall
(as described under "Description of the Notes--
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 each
outstanding Contract during the related Monthly
Period, (ii) the Scheduled Principal Balance of
each Contract which, during the related Monthly
Period, was purchased by Green Tree pursuant to
the Sale and Servicing Agreement on account of
a breach of a representation or warranty or by
the Servicer as a result of an uncured breach
of the covenants made by it with respect to the
Contracts, (iii) all Partial Principal
Prepayments applied and all Principal
Prepayments in Full received during the related
Monthly Period, (iv) the Scheduled Principal
Balance of each Contract that became a
Liquidated Contract during the related Monthly
Period, (v) all collections in respect of
principal on the Contracts received during the
current month up to and including the third
business day prior to such Distribution Date
(but in no event later than the 10th day of the
month in which the Distribution Date occurs),
minus (vi) with respect to all Distribution
Dates other than the Distribution Date in
October 1996, all collections of principal on
the Contracts received during the preceding
month up to and including the third business
day prior to the preceding Distribution Date
(but in no event later than the 10th day of the
prior month). 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
S-7
<PAGE>
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. See
"Description of the Certificates--
Distributions."
E. Class A-2 Interest...... Interest on the outstanding Class A-2 Principal
Balance will accrue from September 19, 1996, or
from the most recent Distribution Date, to but
excluding the following Distribution Date, at
the Class A-2 Rate for such monthly interest
period. 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
Noteholders in respect of principal.
Interest will be paid on the Class A-2 Notes to
the extent of funds available on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-1 Notes. In the event such funds
available are not sufficient to make a full
distribution of interest on the Class A-2
Notes, 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 Rate, to the extent
legally permissible. See "Description of the
Notes."
F. Class A-2 Principal..... Class A-2 Noteholders will be entitled to
receive on each Distribution Date as payment of
principal, to the extent of funds available
after payment of all interest and principal
payable on the Class A-1 Notes and after
payment of all interest payable on the Class A-
2 Notes, the sum of 4.29% (approximate) of the
Formula Principal Distribution Amount for such
Distribution Date plus the Unpaid Class A-2
Principal Shortfall, if any, from prior
Distribution Dates.
G. Class A-3 Interest...... Interest on the outstanding Class A-3 Principal
Balance will accrue from September 19, 1996, or
from the most recent Distribution Date, to but
excluding the following Distribution Date, at
the Class A-3 Rate for such monthly interest
period. 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
Noteholders in respect of principal.
Interest will be paid on the Class A-3 Notes to
the extent of funds available on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-2 Notes. In the event such funds
available are not sufficient to make a full
distribution of interest on the Class A-3
Notes, 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
S-8
<PAGE>
forward will bear interest at the Class A-3
Rate, to the extent legally permissible. See
"Description of the Notes."
H. Class A-3 Principal.....
Class A-3 Noteholders will be entitled to
receive on each Distribution Date as payment of
principal, to the extent of funds available
after payment of all interest and principal
payable on the Class A-2 Notes and after
payment of all interest payable on the Class A-
3 Notes, the sum of 4.29% (approximate) of the
Formula Principal Distribution Amount for such
Distribution Date plus the Unpaid Class A-3
Principal Shortfall, if any, from prior
Distribution Dates.
I. Class A-4 Interest...... Interest on the outstanding Class A-4 Principal
Balance will accrue from September 19, 1996, or
from the most recent Distribution Date, to but
excluding the following Distribution Date, at
the Class A-4 Rate for such monthly interest
period. 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
Noteholders in respect of principal.
Interest will be paid on the Class A-4 Notes to
the extent of funds available on such
Distribution Date, after payment of all
interest and principal then payable on the
Class A-3 Notes. In the event such funds
available are not sufficient to make a full
distribution of interest on the Class A-4
Notes, 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 Rate, to the extent
legally permissible. See "Description of the
Notes."
J. Class A-4 Principal..... Class A-4 Noteholders will be entitled to
receive on each Distribution Date as payment of
principal, to the extent of funds available
after payment of all interest and principal
payable on the Class A-3 Notes and after
payment of all interest payable on the Class A-
4 Notes, the sum of 3.49% (approximate) of the
Formula Principal Distribution Amount for such
Distribution Date plus the Unpaid Class A-4
Principal Shortfall, if any, from prior
Distribution Dates.
K. Optional Redemption..... The Notes will be redeemed in whole, but not in
part, on any Distribution Date on which Green
Tree exercises its option to purchase the
Contracts, which, subject to certain provisions
in the Sale and Servicing Agreement, can occur
after the Pool Scheduled Principal Balance
declines to 10% or less of the Cutoff Date Pool
Principal Balance, at a redemption price equal
to the unpaid principal amount of the Notes
plus accrued and unpaid interest thereon. See
"Description of the Notes--Optional
Redemption."
Spread Account................ Class A-2, Class A-3 and Class A-4 Noteholders
will have the benefit of a separate sub-account
for each Class contained in an account (the
"Spread Account") to be held by the Indenture
S-9
<PAGE>
Trustee. On any Distribution Date, if the
Amount Available in the Note Distribution
Account (after making all distributions on each
Class of Notes with a prior numeric
designation) is insufficient to distribute all
interest then payable on the Class A-2, Class
A-3 or Class A-4 Notes, the Indenture Trustee
will withdraw the amount of the deficiency from
the applicable sub-account (or the amount on
deposit in the applicable sub-account, if less)
and deposit such amount in the Note
Distribution Account for distribution to the
applicable Class.
On the Closing Date, the amount on deposit in
the Class A-2 sub-account will be $391,757 and
the amount on deposit in the Class A-3 and
Class A-4 sub-accounts will be zero. On each
Distribution Date the Indenture Trustee will
deposit all funds remaining in the Collection
Account, after distribution of all interest and
principal then payable on the Notes and
Certificates, first to the Class A-3 sub-
account and then to the Class A-4 sub-account,
until the amount on deposit in such sub-
accounts equals $391,757 and $318,361,
respectively (subject to reduction as provided
in, and to the other terms and conditions
contained in, the Sale and Servicing
Agreement). If any sub-account is drawn upon,
it will be replenished to the extent provided
in the Sale and Servicing Agreement. The Spread
Account is included in the Trust Property. See
"Description of the Notes--The Spread Account."
Terms of the Certificates..... The principal terms of the Certificates will be
as described below:
A. Distributions............. Certificateholders will be entitled to receive
on each Distribution Date commencing in October
1996, to the extent the Amount Available in the
Collection Account including the Guaranty
Payment described below is sufficient therefor,
the Certificateholders' Distributable Amount,
as defined under "Description of the Trust
Documents and Indenture."
The outstanding principal amount of the
Certificates, to the extent not previously
paid, will be payable on the Distribution Date
occurring in October 2017 (the "Final Scheduled
Distribution Date.")
B. Pass-Through Rate......... 7.65% per annum (the "Pass-Through Rate")
payable monthly at one-twelfth of the annual
rate, calculated on the basis of a 360-day year
consisting of twelve 30-day months.
C. Interest.................. On each Distribution Date, the Owner Trustee
will distribute pro rata to Certificateholders,
to the extent the Amount Available in the
Collection Account including the Guaranty
Payment described below is sufficient therefor,
accrued interest at the Pass-Through Rate on
the outstanding Certificate Principal Balance.
Interest in respect of a Distribution Date will
accrue from September 19, 1996, or from the
most recent Distribution Date on which interest
has been distributed to but excluding the
S-10
<PAGE>
following Distribution Date. The "Certificate
Principal Balance" as of any Distribution Date
will be the Original Certificate Principal
Balance minus all amounts previously
distributed to the Certificateholders in
respect of principal.
Interest will be paid on the Certificates to
the extent of funds available on such
Distribution Date, after payment of all
interest and principal then payable on the
Notes. In the event such funds available are
not sufficient to make a full distribution of
interest on the 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 Pass-Through
Rate, to the extent legally permissible. See
"Description of the Certificates."
D. Principal................. No distributions of principal on the
Certificates will be payable until all of the
Notes have been paid in full. On each
Distribution Date commencing on the
Distribution Date on which the Class A-4 Notes
are paid in full, principal on the Certificates
will be payable in an amount equal to the
Certificate Percentage of the Formula Principal
Distribution Amount for such Distribution Date
(less, on the Distribution Date on which the
Notes are paid in full, the portion thereof
payable on the Notes), plus the Unpaid
Certificate Principal Shortfall, if any, from
prior Distribution Dates. The "Certificate
Percentage" for each Distribution Date will be
zero until all of the Notes are paid in full
and will be 100% thereafter. See "Description
of the Trust Documents and Indenture."
E. Limited Guaranty.......... In order to mitigate the effect of the
subordination of the Certificates and the
effect of liquidation losses on the Contracts,
the Certificateholders are entitled to receive
on each Distribution Date an 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 Certificate
Formula Distribution Amount (equal to accrued
and unpaid interest on the Certificates, plus
the Certificate Percentage of the Formula
Principal Distribution Amount, plus any Unpaid
Certificate Principal Shortfall for such
Distribution Date, and plus any Certificate
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 Notes.
F. Optional Prepayment....... If Green Tree or the Servicer exercises its
option to purchase the Contracts, which,
subject to certain provisions in the Sale and
Servicing Agreement, can occur after the Pool
Scheduled Principal Balance declines to 10% or
less of the Cutoff Date Pool Principal Balance,
the Certificateholders will receive an amount
in respect of the Certificates equal to the
Certificate Principal Balance, together with
accrued interest at the Pass-Through Rate
S-11
<PAGE>
and the Certificates will be retired. See
"Description of the Certificates--Optional
Prepayment."
Collection Account; Priority Except under certain conditions described
of Payments................... herein or as otherwise acceptable to each
Rating Agency, the Servicer will be required to
remit payments received with respect to the
Contracts within one business day of receipt
thereof to an account in the name of the
Indenture Trustee (the "Collection Account").
On each Distribution Date the Servicer will
instruct the Indenture Trustee to withdraw
funds on deposit in the Collection Account and
to apply such funds on such Distribution Date
to the following (in the priority indicated):
(i) if Green Tree is not the Servicer, the
Monthly Servicing Fee, together with any unpaid
Servicing Fees from prior Distribution Dates,
(ii) reimbursement of any advances made that
were recovered during the prior Monthly Period,
(iii) the Noteholders' Interest Distributable
Amount and the Noteholders' Principal
Distributable Amount into the Note Distribution
Account, (iv) the Certificateholders' Interest
Distributable Amount and, after the Notes have
been paid in full, the Certificateholders'
Principal Distributable Amount into the
Certificate Distribution Account, (v) amounts
necessary to fully fund the Class A-3 and Class
A-4 sub-accounts of the Spread Account and (vi)
99% of the amount remaining to Green Tree as
the Monthly Servicing and Guaranty Fee and 1%
of the amount remaining as a fee to the General
Partner (the "General Partner Fee").
Tax Status.................... In the opinion of counsel to Green Tree, for
federal income tax purposes, the Notes will be
characterized as debt, and the Trust will not
be characterized as an association (or a pub-
licly traded partnership) taxable as a corpora-
tion. 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. Al-
ternative characterizations of the Trust and
the Certificates are possible, but would not
result in materially adverse tax consequences
to Certificateholders. See "Certain Federal In-
come Tax Consequences" herein and in the accom-
panying Prospectus.
ERISA Considerations.......... If the Notes are considered to be indebtedness
without substantial equity features under a
regulation issued by the United States
Department of Labor, the acquisition or holding
of Notes by or on behalf of a Benefit Plan will
not cause the assets of the Trust to become
plan assets, thereby generally preventing the
application of certain prohibited transaction
rules of the Employee Retirement Income
Security Act of 1974, as amended, and the
Internal Revenue Code of 1986, as amended, that
otherwise would possibly be applicable. Green
Tree believes that the Notes should be treated
as indebtedness without substantial equity
features for purposes of such regulation.
S-12
<PAGE>
The Certificates may not be acquired by any
employee benefit plan, individual retirement
account or Keogh Plan subject to either Title I
of the Employee Retirement Income Security Act
of 1974, as amended, or the Internal Revenue
Code of 1986, as amended. See "ERISA
Considerations" herein and in the accompanying
Prospectus.
Ratings....................... It is a condition to the issuance of the
Securities that:
the Class A-1 Notes be rated "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")
(each, a "Rating Agency" and together, the
"Rating Agencies");
the Class A-2 Notes be rated at least "AA" by
S&P and at least "AA" by Fitch;
the Class A-3 Notes be rated at least "A" by
S&P and at least "A" by Fitch;
the Class A-4 Notes be rated at least "BBB" by
S&P and at least "BBB" by Fitch; and
the Certificates be rated 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 a
Rating Agency. The rating of the Certificates
will be based in part on an assessment of Green
Tree's ability to make payments under the
Limited Guaranty. Any reduction in a Rating
Agency's rating of Green Tree's debt securities
may result in a similar reduction in the rating
of the Certificates.
Green Tree has not requested a rating of the
Securities from any rating agencies other than
S&P and Fitch. There can be no assurance as to
whether any other rating agency will rate the
Securities or, if one does, what rating would
be assigned by such rating agency.
S-13
<PAGE>
RISK FACTORS
Prospective Securityholders should consider, in addition to the factors
described under "Risk Factors" in the Prospectus, the following factors in
connection with the purchase of the Securities:
SUBORDINATION OF CLASS A-2, CLASS A-3 AND CLASS A-4 NOTES AND CERTIFICATES;
LIMITED ASSETS
Distributions of interest and principal on each Class of Notes will be
subordinated to the rights of the holders of each Class of Notes with a prior
numeric designation to receive prior payment of interest and principal.
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to interest and principal due on the
Notes. Certificateholders will not receive any distributions until the full
amount of interest and principal payable on the Notes on such Distribution
Date has been deposited in the Note Distribution Account. Certificateholders
will not receive any distributions of principal until the Distribution Date on
which all of the Notes have been paid in full.
Holders of the Notes and the Certificates must rely for repayment upon
payments on the Contracts. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Contracts, the Spread Account and, for payment of losses absorbed by the
Certificates, the Limited Guaranty of Green Tree.
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" herein.
GEOGRAPHIC CONCENTRATION OF CONTRACTS
As of the Cutoff Date, the Obligors on approximately 19.08% and 10.49% of
the Contracts (based on principal balance and billing address of the Obligor)
were located in California and Texas, 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.
YIELD AND PREPAYMENT CONSIDERATIONS
The Trust Agreement provides that, in the event that (i) the General Partner
becomes insolvent, withdraws or is expelled as General Partner of the Trust or
is terminated or dissolved (a "Dissolution Event") and the Owner Trustee is
unable 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, or (ii) a Dissolution Event
occurs with respect to the General Partner, the Trust will terminate in 90
days and effect redemption of the Notes and prepayment of the Certificates
following the winding-up of the affairs of the Trust, unless within such 90
days the Owners of a majority of the Certificates agree in writing to continue
the business of the Trust and to the appointment of a successor to the General
Partner, and the Owner Trustee is able to obtain the opinion of counsel
described above. See "Yield and Prepayment Considerations" herein and
"Description of the Trust Documents--Termination" in the accompanying
Prospectus.
S-14
<PAGE>
THE TRUST
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying
Prospectus. Prospective Securityholders should consider, in addition to the
information below, the information under "The Trusts" in the accompanying
Prospectus.
GENERAL
Green Tree Recreational, Equipment & Consumer Trust 1996-C is a business
trust formed under the laws of the State of Delaware pursuant to the Trust
Agreement for the transactions described in this Prospectus Supplement. After
its formation, the Trust will not engage in any activity other than (i)
acquiring, holding and managing the Contracts and the other assets of the
Trust and proceeds therefrom, (ii) issuing the Notes and the Certificates,
(iii) making payments on the Notes and the Certificates and (iv) engaging in
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to $24,599,050
(approximate). Certificates with an aggregate original principal balance of
$246,050 (approximate) will be sold to the General Partner, and Certificates
representing the remainder of the Certificate Principal Balance will be sold
to third party investors that are expected to be unaffiliated with the General
Partner, Green Tree, the Servicer or their affiliates. The equity of the
Trust, together with the proceeds of the initial sale of the Notes, will be
used by the Trust to purchase the initial Contracts from Green Tree pursuant
to the Sale and Servicing Agreement.
The Trust's principal offices are in Wilmington, Delaware, at the address
listed below under "--The Owner Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cutoff Date, as if the issuance and sale of the Notes and Certificates had
taken place on such date:
<TABLE>
<S> <C>
Class A-1 Notes.............................................. $298,836,000
Class A-2 Notes.............................................. 14,577,000
Class A-3 Notes.............................................. 14,577,000
Class A-4 Notes.............................................. 11,846,000
Certificates................................................. 24,599,050
------------
Total...................................................... $364,435,050
============
</TABLE>
THE OWNER TRUSTEE
Wilmington Trust Company is the Owner Trustee under the Trust Agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. The Owner Trustee will perform limited
administrative functions under the Trust Agreement, including making
distributions from the Certificate Distribution Account. The Owner Trustee's
liability in connection with the issuance and sale of the Certificates and the
Notes is limited solely to the express obligations of the Owner Trustee as set
forth in the Trust Agreement.
THE TRUST PROPERTY
The Trust Property will include, among other things, (i) the Contracts; (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, the Spread Account
and certain other accounts established and maintained by the Servicer pursuant
to the Sale and Servicing Agreement, as described below (including all
investments in the Collection Account, the Spread Account and such other
accounts and all income from the investment of funds therein and all proceeds
thereof); (iv) an assignment of the security interests of Green Tree in the
Products; (v) an assignment of the right to receive proceeds from claims on
certain insurance policies covering the Products or the Obligors; and (vi)
certain other rights under the Trust Documents. See "The Contracts" and
"Description of the Trust Documents--Collections" in the accompanying
Prospectus.
S-15
<PAGE>
Each Certificate will represent a fractional undivided interest in the Trust
Property. Pursuant to the Indenture the Trust will grant a security interest
in the Trust Property in favor of the Indenture Trustee on behalf of the
Noteholders. Any proceeds of such security interest in the Trust Property
would be distributed according to the Indenture, as described below under
"Description of the Trust Documents--Distributions."
Green Tree, as custodian on behalf of the Trust, will hold each original
Contract, as well as copies of documents and instruments relating to such
Contract and evidencing the security interest in the Product securing such
Contract. In order to protect the Trust's ownership interest in such
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.
THE CONTRACT POOL
GENERAL
The Contract Pool consists of Contracts having an aggregate principal
balance as of the Cutoff Date of $364,435,050.94 (the "Cutoff Date Pool
Principal Balance"). The Contracts were originated between June 1985 and
August 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 and equipment contracts in Green Tree's
portfolio of consumer product and equipment 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 May 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
------------------------------ JUNE 30,
1992 1993 1994 1995 1996
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding (1).. 16,215 16,386 21,137 49,998 78,982
Number of Contracts Delinquent (2)...
30-59 Days......................... 136 151 181 643 818
60-89 Days......................... 34 34 50 219 280
90 Days or More.................... 107 108 134 350 573
------ ------ ------ ------ ------
Total Contracts Delinquent........... 277 293 365 1,212 1,671
====== ====== ====== ====== ======
Delinquencies as a Percentage of
Contracts Outstanding (3)........... 1.71% 1.79% 1.73% 2.43% 2.12%
</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-16
<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------- SIX MONTHS ENDED
1992 1993 1994 1995 JUNE 30, 1996
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)........... 16,257 16,415 21,184 50,266 79,302
Principal Balance of
Contracts (1).......... $128,561 $113,391 $148,734 $506,459 $924,929
Contract Liquidations:
Units................. 269 175 160 365 790
Percentage (2)........ 1.65% 1.07% 0.76% 0.73% 1.00%
Net Losses:
Dollars (3)........... $ 1,867 $ 981 $ 884 $ 1,278 $ 3,766
Percentage (4)........ 1.45% 0.87% 0.59% 0.25% 0.41%
</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 and equipment contracts in Green Tree's servicing
portfolio include consumer product contracts other than the Contracts,
including consumer product contracts and equipment 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 six 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 $1,581.20 and not more than $5,221,216.72, (iv)
had a remaining principal balance as of the Cutoff Date of at least $1,031.02
and not more than $5,221,216.72 and (v) had a contractual rate of interest
("Contract Rate") of at least 7.43% and not more than 22.75%. Neither Green
Tree nor the Servicer may substitute other consumer product contracts for the
Contracts at any time during the term of the Sale and Servicing 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......... 1,126 4.59% $ 10,587,277.55 2.91% $ 9,402.56 11.77 117 116 83%
Marine................. 5,811 23.69 90,222,251.61 24.76 15,526.11 10.70 139 137 84
Motorcycle............. 7,752 31.60 60,752,657.59 16.67 7,837.03 14.42 62 60 82
Trucks................. 959 3.91 73,169,976.37 20.08 76,298.20 10.91 51 50 92
Aircraft............... 406 1.65 41,960,256.47 11.51 103,350.39 10.18 170 169 88
Sport Vehicles......... 5,134 20.93 28,369,436.02 7.78 5,525.80 15.86 56 54 84
Keyboard Instruments... 597 2.43 5,716,255.15 1.57 9,574.97 12.15 71 70 83
Recreational Vehicles.. 2,748 11.20 53,656,940.18 14.72 19,525.82 10.51 145 144 80
------ ------ --------------- ------ ---------- ----- --- --- ---
Total................. 24,533 100.00% $364,435,050.94 100.00% $14,854.89 11.73% 105 103 85%
====== ====== =============== ====== ========== ===== === === ===
</TABLE>
- --------
(1) Based on scheduled payments due after the Cutoff Date and assuming no
prepayments on the Contracts.
S-17
<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>
Alabama................. 405 1.65% $ 7,605,899.31 2.09%
Alaska.................. 15 .06 355,259.55 .10
Arizona................. 1,248 5.09 16,385,921.45 4.50
Arkansas................ 37 .15 493,644.00 .14
California.............. 4,665 19.03 69,585,858.68 19.08
Colorado................ 516 2.10 11,243,671.82 3.09
Connecticut............. 283 1.15 3,681,565.03 1.01
Delaware................ 61 .25 584,543.30 .16
District of Columbia.... 27 .11 423,391.91 .12
Florida................. 1,952 7.96 31,327,886.63 8.59
Georgia................. 768 3.13 10,771,660.09 2.96
Hawaii.................. 52 .21 492,614.16 .14
Idaho................... 38 .15 1,085,299.70 .30
Illinois................ 597 2.43 5,187,587.69 1.42
Indiana................. 195 .79 3,473,880.91 .95
Iowa.................... 46 .19 1,021,155.12 .28
Kansas.................. 55 .22 4,884,463.05 1.34
Kentucky................ 233 .95 3,232,689.70 .89
Louisiana............... 129 .53 2,637,992.62 .72
Maine................... 56 .23 786,081.35 .22
Maryland................ 652 2.66 7,776,886.03 2.13
Massachusetts........... 540 2.20 4,672,474.06 1.28
Michigan................ 354 1.44 5,000,634.05 1.37
Minnesota............... 405 1.65 7,362,253.48 2.02
Mississippi............. 190 .77 4,186,881.52 1.15
Missouri................ 411 1.68 11,917,772.89 3.27
Montana................. 26 .11 622,786.07 .17
Nebraska................ 58 .24 603,327.06 .17
Nevada.................. 449 1.83 5,811,072.87 1.59
New Hampshire........... 77 .31 830,241.89 .23
New Jersey.............. 956 3.90 8,968,189.53 2.46
New Mexico.............. 304 1.24 4,335,048.12 1.19
New York................ 919 3.75 9,790,162.90 2.69
North Carolina.......... 1,246 5.08 17,409,735.21 4.78
North Dakota............ 10 .04 298,328.97 .08
Ohio.................... 330 1.35 5,276,621.49 1.45
Oklahoma................ 435 1.77 5,622,866.50 1.54
Oregon.................. 379 1.54 6,818,331.45 1.87
Pennsylvania............ 381 1.55 4,939,278.44 1.36
Rhode Island............ 60 .24 433,350.67 .12
South Carolina.......... 300 1.22 5,981,714.06 1.64
South Dakota............ 26 .11 323,931.20 .09
Tennessee............... 665 2.71 10,118,936.29 2.78
Texas................... 2,777 11.33 38,274,953.89 10.49
Utah.................... 102 .42 2,483,955.39 .68
Vermont................. 22 .09 220,167.73 .06
Virginia................ 502 2.05 6,278,541.63 1.72
Washington.............. 352 1.43 6,495,871.85 1.78
West Virginia........... 38 .15 1,964,633.29 .54
Wisconsin............... 148 .60 3,709,949.15 1.02
Wyoming................. 28 .11 492,376.35 .14
Non-U.S. based service
personnel.............. 13 .05 152,710.84 .04
------ ------ --------------- ------
Total................. 24,533 100.00% $364,435,050.94 100.00%
====== ====== =============== ======
</TABLE>
- --------
(1) Based on the address of the Obligor set forth in Green Tree's records.
S-18
<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......... 14,286 $ 80,753,530.55 22.16%
Between $10,000 and
$19,999.................. 6,875 95,164,188.84 26.12
Between $20,000 and
$29,999.................. 1,517 35,974,368.37 9.87
Between $30,000 and
$39,999.................. 582 19,790,561.74 5.43
Between $40,000 and
$49,999.................. 323 14,225,475.55 3.90
Between $50,000 and
$59,999.................. 199 10,726,424.24 2.94
Between $60,000 and
$69,999.................. 140 9,003,360.29 2.47
Between $70,000 and
$79,999.................. 143 10,689,619.33 2.93
Between $80,000 and
$89,999.................. 142 11,831,568.34 3.25
Between $90,000 and
$99,999.................. 71 6,706,186.11 1.84
Between $100,000 and
$109,999................. 49 5,088,078.53 1.40
Between $110,000 and
$119,999................. 22 2,530,926.05 .69
Between $120,000 and
$129,999................. 23 2,847,916.81 .78
Between $130,000 and
$139,999................. 7 940,493.96 .26
Between $140,000 and
$149,999................. 18 2,596,457.38 .71
Between $150,000 and
$159,999................. 13 1,996,542.36 .55
Between $160,000 and
$169,999................. 10 1,620,895.99 .44
Between $170,000 and
$179,999................. 5 868,734.42 .24
Between $180,000 and
$189,999................. 11 2,003,217.18 .55
Between $190,000 and
$199,999................. 5 967,124.62 .27
Between $200,000 and
$249,999................. 24 5,283,091.35 1.45
Between $250,000 and
$299,999................. 9 2,447,947.51 .67
Between $300,000 and
$349,999................. 11 3,513,659.03 .96
Between $350,000 and
$399,999................. 8 3,007,706.95 .83
Between $400,000 and
$449,999................. 9 3,668,934.79 1.01
Between $450,000 and
$499,999................. 3 1,485,881.06 .41
Between $500,000 and
$549,999................. 4 2,041,969.23 .56
Between $550,000 and
$599,999................. 3 1,698,458.18 .47
Between $600,000 and
$649,999................. 1 637,000.00 .17
Between $650,000 and
$699,999................. 4 2,698,937.79 .74
Between $700,000 and
$749,999................. 3 2,126,415.06 .58
Between $750,000 and
$799,999................. 3 2,340,546.86 .64
Between $800,000 and
$849,999................. 0 .00 .00
Between $850,000 and
$899,999................. 2 1,750,343.60 .48
Between $900,000 and
$949,999................. 1 838,057.36 .23
Between $950,000 and
$999,999................. 2 1,953,485.05 .54
Between $1,000,000 and
$1,999,999............... 2 3,095,341.04 .85
Between $2,000,000 and
$2,999,999............... 2 4,300,388.70 1.18
Between $3,000,000 and
$3,999,999............... 0 .00 .00
Between $4,000,000 and
$4,999,999............... 0 .00 .00
Over $5,000,000........... 1 5,221,216.72 1.43
------ --------------- ------
Total................... 24,533 $364,435,050.94 100.00%
====== =============== ======
</TABLE>
S-19
<PAGE>
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.................... 1 $ 3,765.14 *%
1986.................... 0 .00 .00
1987.................... 1 40,921.70 .01
1988.................... 0 .00 .00
1989.................... 0 .00 .00
1990.................... 0 .00 .00
1991.................... 0 .00 .00
1992.................... 138 390,246.80 .11
1993.................... 6 56,175.94 .02
1994.................... 26 341,806.70 .09
1995.................... 136 1,567,782.57 .43
1996.................... 24,225 362,034,352.09 99.34
------ --------------- ------
Total................. 24,533 $364,435,050.94 100.00%
====== =============== ======
</TABLE>
- --------
*Indicates an amount greater than zero but less than .005% of the Cutoff
Date Pool Principal Balance.
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%........... 1,842 $ 13,960,896.83 3.83%
From 61 to 65%.......... 682 7,372,769.36 2.02
From 66 to 70%.......... 1,031 11,126,242.88 3.05
From 71 to 75%.......... 1,820 21,459,132.89 5.89
From 76 to 80%.......... 2,804 37,560,117.81 10.31
From 81 to 85%.......... 3,995 56,812,294.70 15.59
From 86 to 90%.......... 9,732 132,711,949.94 36.42
From 91 to 95%.......... 2,020 41,049,795.03 11.26
Over 95%................ 607 42,381,851.50 11.63
------ --------------- ------
Total................. 24,533 $364,435,050.94 100.00%
====== =============== ======
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 9.00%......... 168 $ 26,962,159.26 7.40%
9.01% to 10.00%........ 1,983 71,708,926.13 19.68
10.01% to 11.00%........ 4,096 93,545,664.64 25.66
11.01% to 12.00%........ 3,832 59,514,029.08 16.33
12.01% to 13.00%........ 1,856 28,383,728.87 7.79
13.01% to 14.00%........ 1,391 16,009,900.68 4.39
14.01% to 15.00%........ 3,927 27,146,477.34 7.45
15.01% to 16.00%........ 2,257 13,553,612.15 3.72
16.01% to 17.00%........ 1,963 11,258,316.48 3.09
Over 17.00%............. 3,060 16,352,236.31 4.49
------ --------------- ------
Total................. 24,533 $364,435,050.94 100.00%
====== =============== ======
</TABLE>
S-20
<PAGE>
REMAINING MONTHS TO MATURITY
<TABLE>
<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 31............. 1,140 $ 7,517,867.00 2.06%
31 to 60................ 13,528 144,794,562.99 39.74
61 to 90................ 2,807 39,370,764.54 10.80
91 to 120................ 3,664 53,909,066.40 14.79
121 to 150................ 1,950 37,501,965.44 10.29
151 to 180................ 1,325 63,382,505.79 17.40
181 to 210................ 11 5,261,479.33 1.44
211 to 240................ 108 12,696,839.45 3.48
------ --------------- ------
Total................... 24,533 $364,435,050.94 100.00%
====== =============== ======
</TABLE>
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 has the option to purchase from the Trust
all remaining Contracts, and thereby effect early retirement of the Notes and
the Certificates, on any Distribution Date when the Pool Scheduled Principal
Balance is 10% or less of the Cutoff Date Pool Principal Balance. See
"Description of the Trust Documents--Termination" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE NOTES AND THE CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments on the Contracts on the weighted average life of the Notes and 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 Notes and 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, Keyboard
Instruments and Recreational Vehicles................. 18% CPR
Marine................................................. 325% SPA
Motorcycles ........................................... 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
S-21
<PAGE>
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.
As used in the following tables, 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, Keyboard Instruments and
Recreational Vehicles 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 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 PURPORTS TO BE AN
HISTORICAL 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 $364,435,050.94 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 October 1996; and (vi) the Securities are issued
on September 19, 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 NOTES 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).................... 2.69 2.54 2.41 2.28 2.17
</TABLE>
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).................... 7.24 6.82 6.41 5.99 5.66
</TABLE>
S-22
<PAGE>
DESCRIPTION OF THE NOTES
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying
Prospectus. Prospective Noteholders should consider, in addition to the
information below, the information in the accompanying Prospectus under "The
Notes," "Certain Information Regarding the Securities," and "Description of
the Trust Documents."
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture will be filed with the Commission following the issuance of the
Securities. The following summary describes certain terms of the Notes and the
Indenture. The summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Notes
and the Indenture. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Notes of any given series and the related Indenture set
forth in the accompanying Prospectus, to which description reference is hereby
made. First Trust National Association, a national banking association
headquartered in St. Paul, Minnesota, will be the Indenture Trustee.
DISTRIBUTIONS
Noteholders will be entitled to receive on each Distribution Date commencing
in October 1996, to the extent that funds available are sufficient therefor,
the Noteholders' Distributable Amount. Distributions on the Notes will be made
from funds available first to the holders of the Class A-1 Notes, then to the
holders of the Class A-2 Notes, then to the holders of the Class A-3 Notes,
then to the holders of the Class A-4 Notes and then to the holders of the
Certificates, in the manner and order of priority described below.
CLASS A-1 INTEREST
Interest on the outstanding Class A-1 Principal Balance will accrue from
September 19, 1996, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class A-1 Rate for such
monthly interest period. 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 Noteholders 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 Notes to the extent of funds
available on such Distribution Date. In the event the funds available are not
sufficient to make a full distribution of interest on the Class A-1 Notes, 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 Rate, to the extent legally permissible.
CLASS A-1 PRINCIPAL
Class A-1 Noteholders will be entitled to receive on each Distribution Date
as payment of principal, to the extent of funds available after payment of all
interest payable on the Class A-1 Notes, an amount equal to the sum of 87.94%
(approximate) 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 Sale
S-23
<PAGE>
and Servicing 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, (iv) the
Scheduled Principal Balance of each Contract that became a Liquidated Contract
(as defined below) during the related Monthly Period, (v) all collections in
respect of principal received on the Contracts received during the current
month up to and including the third business day prior to such Distribution
Date (but in no event later than the 10th day of the month in which the
Distribution Date occurs), minus (vi) with respect to all Distribution Dates
other than the Distribution Date in October 1996, all collections of principal
on the Contracts received during the preceding month up to and including the
third business day prior to the preceding Distribution Date (but in no event
later than the 10th day of the prior month). 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. 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 Notes 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 from
September 19, 1996, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class A-2 Rate for such
monthly interest period. 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 Noteholders 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 Notes to the extent of funds
available on such Distribution Date, after payment of all interest and
principal then payable on the Class A-1 Notes. In the event such remaining
funds available are not sufficient to make a full distribution of interest on
the Class A-2 Notes, 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 Rate, to the
extent legally permissible.
CLASS A-2 PRINCIPAL
Class A-2 Noteholders will be entitled to receive on each Distribution Date
as payment of principal, to the extent of funds available after payment of all
interest and principal payable on the Class A-1 Notes and after payment of all
interest payable on the Class A-2 Notes, the sum of 4.29% (approximate) 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
Notes 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 from
September 19, 1996, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class A-3 Rate for such
monthly interest period. 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 Noteholders 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 Notes to the extent of funds
available on such Distribution Date, after payment of all interest and
principal then payable on the Class A-2 Notes. In the event such remaining
funds
S-24
<PAGE>
available are not sufficient to make a full distribution of interest on the
Class A-3 Notes, 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 Rate, to the extent
legally permissible.
CLASS A-3 PRINCIPAL
Class A-3 Noteholders will be entitled to receive on each Distribution Date
as payment of principal, to the extent of funds available after payment of all
interest and principal payable on the Class A-2 Notes and after payment of all
interest payable on the Class A-3 Notes, the sum of 4.29% (approximate) 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
Notes 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 from
September 19, 1996, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class A-4 Rate for such
monthly interest period. 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 Noteholders 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 Notes to the extent of funds
available on such Distribution Date, after payment of all interest and
principal then payable on the Class A-3 Notes. In the event such remaining
funds available are not sufficient to make a full distribution of interest on
the Class A-4 Notes, 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 Rate, to the
extent legally permissible.
CLASS A-4 PRINCIPAL
Class A-4 Noteholders will be entitled to receive on each Distribution Date
as payment of principal, to the extent of funds available after payment of all
interest and principal payable on the Class A-3 Notes and after payment of all
interest payable on the Class A-4 Notes, the sum of 3.49% (approximate) 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
Notes on any prior Distribution Date but not paid on any intervening
Distribution Date, less any Class A-4 Principal Liquidation Loss.
OPTIONAL REDEMPTION
The Notes will be redeemed in whole, but not in part, on any Distribution
Date on which Green Tree exercises its option to purchase the Contracts. Green
Tree may purchase the Contracts when the Pool Scheduled Principal Balance has
declined to 10% or less of the Cutoff Date Pool Principal Balance, as
described in the accompanying Prospectus under "Description of the Purchase
Agreements and the Trust Documents--Termination." Such redemption will effect
early retirement of the Notes. The redemption price will be equal to the
unpaid principal amount of the Notes redeemed plus accrued and unpaid interest
thereon (the "Redemption Price").
THE SPREAD ACCOUNT
Class A-2, Class A-3 and Class A-4 Noteholders will have the benefit of a
separate sub-account for each Class contained in the Spread Account to be held
by the Indenture Trustee. On any Distribution Date, if the Amount Available in
the Note Distribution Account (after making all distributions on each Class of
Notes with a
S-25
<PAGE>
prior numeric designation) is insufficient to distribute all interest then
payable on the Class A-2, Class A-3 or Class A-4 Notes, the Indenture Trustee
will withdraw the amount of the deficiency from the applicable sub-account (or
the amount on deposit in the applicable sub-account, if less) and deposit such
amount in the Note Distribution Account for distribution to the applicable
Class. On any Distribution Date, the amount of funds in the Spread Account
will not be available to cover a shortfall in principal distributable on any
Class of Notes, but would only be available to cover a shortfall in interest
distributable on the Class A-2, Class A-3 and Class A-4 Notes.
On the Closing Date, the amount on deposit in the Class A-2 sub-account will
be $391,757 and the amount on deposit in the Class A-3 and Class A-4 sub-
accounts will be zero. On each Distribution Date the Indenture Trustee will
deposit all funds remaining in the Collection Account, after distribution of
all interest and principal then payable on senior Classes of Notes, first to
the Class A-3 sub-account and then to the Class A-4 sub-account, until the
amount on deposit in such sub-accounts equals $391,757 and $318,361,
respectively (subject to reduction as provided in, and to the other terms and
conditions contained in, the Sale and Servicing Agreement). If any sub-account
is drawn upon, it will be replenished to the extent provided in the Sale and
Servicing Agreement. The Spread Account is included in the Trust. Any amount
remaining in the Spread Account upon termination of the Trust will be
distributed 99% to Green Tree and 1% to the General Partner.
LOSSES ON LIQUIDATED CONTRACTS
As described above, the distribution of principal to each Class of Notes is
intended to equal the applicable percentage of the Formula Principal
Distribution Amount, which on each Distribution Date includes the Scheduled
Principal Balance of each Contract that became a Liquidated Contract during
the Monthly Period related to such Distribution Date. 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 and the General Partner Fee payable to the General Partner, then by
the Certificateholders (although Green Tree will be obligated to make a
Guaranty Payment equal to any shortfall in the distribution to the
Certificateholders), and then by each Class of Notes in inverse numeric order.
If the funds available for any Distribution Date, after making all required
distributions of interest and principal to more senior Classes of Notes, are
insufficient to make a full distribution of interest and/or principal to a
Class of Notes or the Certificates, such deficiency will be carried forward
and added to the amount to be distributed to such Class of Notes or the
Certificates on the following Distribution Date.
If the Pool Scheduled Principal Balance for any Distribution Date is less
than the sum of the aggregate outstanding principal balance of the Notes and
the Certificate Principal Balance after giving effect to all distributions of
principal on such Distribution Date, then the Certificate Principal Balance
will be reduced by the amount of such deficiency (a "Certificate Principal
Liquidation Loss"). Green Tree will be obligated to pay the amount of any such
Certificate Principal Liquidation Loss under the Limited Guaranty. If Green
Tree should fail to pay such amount, however, the amount distributable on the
Certificates on future Distribution Dates would include interest on any such
Certificate Principal Liquidation Loss at the Pass-Through Rate (and, to the
extent legally permissible, interest on any unpaid interest at the Pass-
Through Rate) accrued from the date such Certificate Principal Liquidation
Loss was incurred, and the amount of such Certificate Principal Liquidation
Loss.
Similarly, if the Certificate Principal Balance were reduced to zero (which
would be caused only by Certificate 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 outstanding principal balance of the Notes after giving effect to
distributions of principal on such Distribution Date, then the Class A-4
Principal 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
Notes on future Distribution Dates would include interest on any such Class A-
4 Principal Liquidation Loss at the Class A-4 Rate (and, to the extent legally
permissible, interest on such unpaid interest at the Class A-4 Rate) accrued
from
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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
Notes would similarly be subject to reduction in its outstanding principal
balance if the aggregate outstanding principal balance of all more junior
Classes of Notes were reduced to zero and the Pool Scheduled Principal Balance
were less than the aggregate outstanding principal balance of the Notes, and
would similarly be entitled on future Distribution Dates to receive interest
on any such Principal Liquidation Loss at the applicable Interest Rate, and
the amount of such Principal Liquidation Loss. The respective percentages of
the Formula Principal Distribution Amount distributable to each Class of Notes
on each Distribution Date will not be affected by any Principal Liquidation
Loss experienced by a Class of Notes. Accordingly, even if a Class of Notes
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).
BOOK-ENTRY REGISTRATION
Holders of the Notes or the Certificates may hold through DTC (in the United
States) or, solely in the case of the Notes, CEDEL or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations
that are participants in such systems. The Certificates may not be held,
directly or indirectly, through CEDEL or Euroclear.
Cede & Co., as nominee for DTC, will hold the Notes and the Certificates.
CEDEL and Euroclear will hold omnibus positions in the Notes on behalf of the
CEDEL Participants and the Euroclear Participants, respectively, through
customers' securities accounts in CEDEL's and Euroclear's names on the books
of their respective depositaries (collectively, the "Depositaries"), which in
turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC.
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between CEDEL Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. CEDEL Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day. Cash
received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a Participant will
be received with value on the DTC settlement date but will be available in the
relevant CEDEL or Euroclear cash account only as of the business day following
settlement in DTC.
For a description of transfers between persons holding directly or
indirectly through DTC, see "Certain Information Regarding the Securities--
Book-Entry Registration" in the Prospectus.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL Participants,
thereby eliminating the need for physical movement of
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certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its CEDEL Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL Participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
and may include the Underwriters. Indirect access to CEDEL is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a CEDEL Participant, either
directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in Euroclear in any of 32
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described in Annex I hereto.
The Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Noteholder under the
Indenture on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
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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."
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement will be filed with the Commission
following the issuance of the Securities. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Trust Agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
The General Partner will hold at least 1% of the outstanding principal
amount of the Certificates until the termination of the Trust Agreement.
DISTRIBUTIONS
Certificateholders will be entitled to receive on each Distribution Date
commencing in October 1996, to the extent that funds available together with
the Guaranty Payment described below are sufficient therefor, the
Certificateholders' Distributable Amount.
INTEREST
On each Distribution Date, the Owner Trustee will distribute pro rata to
Certificateholders accrued interest at the Pass-Through Rate on the
outstanding Certificate Principal Balance. Interest in respect of a
Distribution Date will accrue from September 19, 1996, or from the most recent
Distribution Date on which interest has been distributed to but excluding the
following Distribution Date. The "Certificate Principal Balance" as of any
Distribution Date will be the Original Certificate Principal Balance, reduced
by all amounts allocable to principal previously distributed to
Certificateholders minus any Certificate Principal Liquidation Loss (described
below under "--Losses on Liquidated Contracts").
Interest will be paid on the Certificates to the extent of funds available
on such Distribution Date, after payment of all interest and principal then
payable on the Notes. In the event such funds available are not sufficient to
make a full distribution of interest on the 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 Pass-Through Rate, to the extent legally permissible. See
"Description of the Certificates."
PRINCIPAL
No distributions of principal on the Certificates will be payable until all
of the Notes have been paid in full. On each Distribution Date commencing on
the Distribution Date on which the Class A-4 Notes are paid in full, principal
on the Certificates will be payable in an amount equal to the Certificate
Percentage of the Formula Principal Distribution Amount for such Distribution
Date plus any Unpaid Certificate Principal Shortfall (as defined below) for
such Distribution Date.
The "Unpaid Certificate Principal Shortfall" for any Distribution Date will
equal any amount required to be paid in respect of principal on the
Certificates on any prior Distribution Date but not paid on any intervening
Distribution Date, less any Certificate Principal Liquidation Loss.
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OPTIONAL PREPAYMENT
If Green Tree exercises its option to purchase the Contracts when the Pool
Scheduled Principal Balance declines to 10% or less of the Cutoff Date Pool
Principal Balance, Certificateholders will receive an amount in respect of the
Certificates equal to the outstanding Certificate Principal Balance together
with accrued interest at the Pass-Through Rate, which distribution will effect
early retirement of the Certificates. See "Description of the Purchase
Agreements and the Trust Documents--Termination" in the accompanying
Prospectus.
LIMITED GUARANTY
In order to mitigate the effect of the subordination of the Certificates and
the effect of liquidation losses and delinquencies on the Contracts, the
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 Certificate Formula Distribution Amount (equal
to accrued and unpaid interest on the Certificates, plus the Certificate
Percentage of the Formula Principal Distribution Amount for such Distribution
Date, plus any Unpaid Certificate Principal Shortfall, plus any Certificate
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 Notes.
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 Noteholders.
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, which will be equal to 99% of the
Amount Available remaining after payment of the Certificate Formula
Distribution Amount and any deposit into the Spread Account required on that
Distribution Date. The remaining 1% of the Amount Available will be
distributed to the General Partner as the General Partner Fee.
TRANSFERS OF CERTIFICATES
Certificateholders, other than individuals or entities holding Certificates
through a broker who reports sales of securities on Form 1099-B, are required
under the Trust Agreement to notify the Owner Trustee of any transfer of their
Certificates in a taxable sale or exchange within 30 days of such transfer.
LOSSES ON LIQUIDATED CONTRACTS
As described above, the distribution of principal to each Class of Notes is
intended to equal the applicable 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 Monthly Period
preceding such Distribution Date. 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 and the
General Partner Fee payable to the General Partner, then by the
Certificateholders (although Green Tree will be obligated to make a Guaranty
Payment equal to any shortfall in the distribution to the Certificateholders),
and then by each Class of Notes in inverse numeric order.
If the funds available for any Distribution Date, after making all required
distributions of interest and principal to more senior Classes of Notes, are
insufficient to make a full distribution of interest and/or principal to a
Class of Notes or the Certificates, such deficiency will be carried forward
and added to the amount to be distributed to such Class of Notes or the
Certificates on the following Distribution Date.
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If the Pool Scheduled Principal Balance for any Distribution Date is less
than the sum of the aggregate outstanding Principal Balance of the Notes and
the Certificate Principal Balance after giving effect to all distributions of
principal on such Distribution Date, then the Certificate Principal Balance
will be reduced by the amount of such deficiency (a "Certificate Principal
Liquidation Loss"). Green Tree will be obligated to pay the amount of any such
Certificate Principal Liquidation Loss under the Limited Guaranty. If Green
Tree should fail to pay such amount, however, the amount distributable on the
Certificates on future Distribution Dates would include interest on any such
Certificate Principal Liquidation Loss at the Pass-Through Rate (and, to the
extent legally permissible, interest on any unpaid interest at the Pass-
Through Rate) accrued from the date such Certificate Principal Liquidation
Loss was incurred, and the amount of such Certificate Principal Liquidation
Loss.
DESCRIPTION OF THE TRUST DOCUMENTS AND INDENTURE
The following summary describes certain terms of the Sale and Servicing
Agreement and the Trust Agreement (together, the "Trust Documents") and the
Indenture. Forms of the Trust Documents have been filed as exhibits to the
Registration Statement. A copy of the Trust Documents will be filed with the
Commission following the issuance of the Securities. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Trust Documents. The following summary
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Trust Documents (as
such terms are used in the accompanying Prospectus) set forth in the
accompanying Prospectus, to which description reference is hereby made.
ACCOUNTS
The Servicer will establish and maintain one or more accounts, in the name
of the Indenture Trustee on behalf of the Noteholders and the
Certificateholders, into which all payments made on or with respect to the
Contracts will be deposited (the "Collection Account"). The Servicer will
establish and maintain an account, in the name of the Indenture Trustee on
behalf of the Noteholders, in which amounts released from the Collection
Account for distribution to Noteholders will be deposited and from which all
distributions to Noteholders will be made (the "Note Distribution Account").
The Servicer will also establish and maintain the Spread Account, which will
include sub-accounts for the Class A-2, Class A-3 and Class A-4 Noteholders,
in the name of the Indenture Trustee on behalf of the Noteholders, in which
amounts will be deposited to cover shortfalls in interest distributable on the
Class A-2, Class A-3 and Class A-4 Notes. The Owner Trustee will establish and
maintain an account, in the name of the Owner Trustee on behalf of the
Certificateholders, in which amounts released from the Collection Account for
distribution to Certificateholders will be deposited and from which all
distributions to Certificateholders will be made (the "Certificate
Distribution Account"). See "Description of the Trust Documents--Collections"
in the accompanying Prospectus.
DISTRIBUTIONS
On each Distribution Date, the Servicer shall instruct the Indenture Trustee
to distribute the Amount Available (other than any Guaranty Payment) in the
following order of priority:
1. If Green Tree or an affiliate is no longer the Servicer, then to the
Servicer, the Servicing Fee for the related Monthly Period.
2. To the Servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior Monthly Period.
3. To the Note Distribution Account, the Noteholders' Interest
Distributable Amount, the Noteholders' Principal Distributable Amount, and
any amounts previously withdrawn from any sub-account of the Spread Account
and not previously replenished.
4. To the Certificate Distribution Account, the Certificateholders'
Interest Distributable Amount.
5. To the Certificate Distribution Account, the Certificateholders'
Principal Distributable Amount.
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6. To the Indenture Trustee for deposit in the Spread Account, to fund
the initial amounts required in the Class A-3 and Class A-4 sub-accounts.
7. To Green Tree, the Monthly Servicing and Guaranty Fee and to the
General Partner, the General Partner Fee.
On each Distribution Date, the Indenture Trustee will distribute all amounts
on deposit in the Note Distribution Account in the following order of
priority:
(i) to the Class A-1 Noteholders, interest, principal, interest and
principal shortfalls from prior payment periods, and interest and principal
in respect of Principal Liquidation Losses;
(ii) to the Class A-2 Noteholders, interest, principal, interest and
principal shortfalls from prior payment periods, and interest and principal
in respect of Principal Liquidation Losses;
(iii) to the Class A-2 sub-account of the Spread Account to the extent
amounts have previously been withdrawn therefrom to pay interest on the
Class A-2 Notes and have not previously been replenished;
(iv) to the Class A-3 Noteholders, interest, principal, interest and
principal shortfalls from prior payment periods, and interest and principal
in respect of Principal Liquidation Losses;
(v) to the Class A-3 sub-account of the Spread Account to the extent
amounts have previously been withdrawn therefrom to pay interest on the
Class A-3 Notes and have not previously been replenished;
(vi) to the Class A-4 Noteholders, interest, principal, interest and
principal shortfalls from prior payment periods, and interest and principal
in respect of Principal Liquidation Losses; and
(vii) to the Class A-4 sub-account of the Spread Account to the extent
amounts have previously been withdrawn therefrom to pay interest on the
Class A-4 Notes and have not previously been replenished.
On each Distribution Date, the Owner Trustee will distribute all amounts on
deposit in the Certificate Distribution Account to the Certificateholders.
For the purposes hereof, the following terms shall have the following
meanings:
"Amount Available" means, with respect to any Distribution Date, the sum of
payments on the Contracts due and received during the preceding month,
prepayments and other unscheduled collections received during the preceding
month, all collections in respect of principal on the Contracts received
during the current month up to and including the third business day prior to
such Distribution Date (but in no event later than the 10th day of the month
in which the Distribution Date occurs) , any amounts deposited in respect of
Purchased Contracts, all earnings from the investment of funds in the
Collection Account, Guaranty Payments, minus, with respect to all Distribution
Dates other than the Distribution Date in October 1996, all collections of
principal on the Contracts received during the preceding month up to and
including the third business day prior to the preceding Distribution Date (but
in no event later than the 10th day of the prior month) .
"Formula Principal Distribution Amount" means, with respect to any
Distribution Date, 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 of each Contract which, during the
related Monthly Period, was purchased by Green Tree pursuant to the Sale and
Servicing Agreement on account of a breach of a representation or warranty or
by the Servicer as a result of an uncured breach of the covenants made by it
with respect to the Contracts, (iii) all Partial Principal Prepayments applied
and all Principal Prepayments in Full received during the related Monthly
Period, (iv) the Scheduled Principal Balance of each Contract that became a
Liquidated Contract during the related Monthly Period, (v) all collections in
respect of principal on the Contracts received during the current month up to
and including the third business day prior to such Distribution Date (but in
no event later than the 10th day of the month in which the Distribution Date
occurs), minus (vi) with respect to all Distribution Dates other than the
Distribution Date in October 1996, all collections of principal on the
Contracts received during the preceding month up to and including the third
business day prior to the preceding Distribution Date (but in no event later
than the 10th day of the prior month).
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"Liquidated Contract" means any defaulted Contract as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Contract through the date of disposition of the related Product have
been recovered; provided that any defaulted Contract in respect of which the
related Product has been realized upon and disposed of and proceeds of such
disposition have been received shall be deemed to be a Liquidated Contract.
"Purchased Contract" means a Contract (i) that Green Tree has become
obligated to repurchase (or, under certain circumstances, has elected to
repurchase) as a result of an uncured breach by Green Tree of a representation
or warranty made by Green Tree with respect to such Contract or (ii) that the
Servicer has become obligated to repurchase (or, under certain circumstances,
has elected to repurchase) as a result of an uncured breach of the covenants
made by it with respect to such Contract.
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued for the related monthly interest
period on each Class of Notes at the respective Interest Rate for such Class
on (i) the outstanding Principal Balance of the Notes of such Class on the
immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), and (ii) the aggregate Principal
Liquidation Losses of such Class on each prior Distribution Date, in each case
after giving effect to all payments of principal to the Noteholders of such
Class on the immediately preceding Distribution Date.
"Principal Liquidation Loss" means, with respect to any Distribution Date
and any Class of Notes, the amount by which the aggregate Principal Balance of
such Class and each junior Class and the Certificate Principal Balance (after
giving effect to any Principal Liquidation Losses imposed on such junior
Classes and Certificates) exceeds the Pool Scheduled Principal Balance, after
giving effect to all distributions of principal on such Distribution Date.
"Principal Balance" means, with respect to any Determination Date and any
Class of Notes, the Original Principal Balance of such Class minus all amounts
previously distributed in respect of principal of such Class and minus any
Principal Liquidation Losses of such Class.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Interest Rate for
each respective class of Notes for the applicable monthly interest period.
"Noteholder's Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Unpaid Principal
Shortfall as of the close of the preceding Distribution Date; provided,
however, that the Noteholders' Principal Distributable Amount shall not exceed
the outstanding principal balance of the Notes, and provided further, that (i)
the Noteholders' Principal Distributable Amount on the Class A-1 Final
Scheduled Distribution Date shall not be less than the amount that is
necessary (after giving effect to other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the outstanding principal balance (including all unpaid Principal
Liquidation Losses) of the Class A-1 Notes to zero; (ii) the Noteholders'
Principal Distributable Amount on the Class A-2 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect
to other amounts to be deposited in the Note
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Distribution Account on such Distribution Date and allocable to principal) to
reduce the outstanding principal balance (including all unpaid Principal
Liquidation Losses) of the Class A-2 Notes to zero; (iii) on the Class A-3
Final Scheduled Distribution Date the Noteholders' Principal Distributable
Amount shall not be less than the amount that is necessary (after giving
effect to other amounts to be deposited in the Note Distribution Account on
such Distribution Date and allocable to principal) to reduce the outstanding
principal balance (including all unpaid Principal Liquidation Losses) of the
Class A-3 Notes to zero; and (iv) on the Class A-4 Final Scheduled
Distribution Date the Noteholders' Principal Distributable Amount shall not be
less than the amount that is necessary (after giving effect to other amounts
to be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance (including
all unpaid Principal Liquidation Losses) of the Class A-4 Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with respect to
any Distribution Date, the Noteholders' Percentage of the Formula Principal
Distribution Amount plus the aggregate Principal Liquidation Loss of each
Class of Notes.
"Noteholders' Percentage" means, 100% until payment in full of the Principal
Balance of the Notes and 0% thereafter.
"Noteholders' Unpaid Principal Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Unpaid Principal
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account on such
Distribution Date.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Interest Distributable
Amount and the Certificateholders' Principal Distributable Amount.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, interest accrued for the related monthly
interest period at the Pass-Through Rate on (i) the Certificate Principal
Balance on the immediately preceding Distribution Date, and (ii) the aggregate
Certificate Principal Liquidation Losses on each prior Distribution Date, in
each case after giving effect to all payments allocable to the reduction of
the Certificate Principal Balance and Certificate Principal Liquidation
Losses, respectively, made on the immediately preceding Distribution Date.
"Certificate Principal Liquidation Loss" means, with respect to any
Distribution Date, the amount by which the aggregate Principal Balance of the
Notes and the Certificate Principal Balance exceeds the Pool Scheduled
Principal Balance, after giving effect to all distributions of principal on
such Distribution Date.
"Certificate Principal Balance" equals, initially, $24,599,050 (approximate)
and, thereafter, equals the Original Certificate Principal Balance, reduced by
all amounts allocable to principal previously distributed to
Certificateholders minus Certificate Principal Liquidation Losses.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest at the Pass-Through
Rate that is actually deposited in the Certificate Distribution Account on
such preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Pass-Through Rate from such preceding Distribution
Date to but excluding the current Distribution Date.
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"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Unpaid Principal Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Certificateholders' Principal Distributable Amount
shall not exceed the Certificate Principal Balance plus the Certificate
Principal Liquidation Losses. In addition, on the Final Scheduled Distribution
Date, the principal required to be deposited into the Certificate Distribution
Account shall not be less than the amount that is necessary (after giving
effect to the other amounts to be deposited in the Certificate Distribution
Account on such Distribution Date and allocable to principal) to reduce to
zero the Certificate Principal Balance plus the Certificate Principal
Liquidation Losses.
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, the
Certificate Percentage of the Formula Principal Distribution Amount and the
Certificate Principal Liquidation Loss (less, on the Distribution Date on
which the Notes are paid in full, the portion thereof payable on the Notes).
"Certificate Percentage" means, for each Distribution Date, a percentage
equal to 100% minus the Noteholders' Percentage for such Distribution Date.
"Certificateholders' Unpaid Principal Shortfall" means, as of the close of
any Distribution Date, the excess of the Certificateholders' Monthly Principal
Distributable Amount and any outstanding Certificateholders' Unpaid Principal
Shortfall from the preceding Distribution Date, over the amount in respect of
principal that is actually deposited in the Certificate Distribution Account.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Indenture Trustee a statement to be delivered to the Noteholders and to
the Owner Trustee a statement to be delivered to the Certificateholders 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. Each such statement to be delivered to Noteholders
will include the following information as to the Notes, and 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:
(i) the amount of the distribution allocable to interest on or with
respect to each Class of Notes and to the Certificates;
(ii) the amount of the distribution allocable to principal on or with
respect to each Class of Notes and to the Certificates;
(iii) the aggregate outstanding principal balance and the Note Pool
Factor for the Notes and the Certificate Principal Balance and the
Certificate Pool Factor for the Certificates after giving effect to all
payments reported under (ii) above on such date;
(iv) the Noteholders' Interest Shortfall, the Noteholders' Principal
Shortfall, the Certificateholders' Interest Shortfall and the
Certificateholders' Principal Shortfall, if any, and the change in such
amounts from the preceding statement;
(v) the amount, if any, of Principal Liquidation Losses and the amount of
the distribution allocable to such losses for the Notes and Certificates;
(vi) the amount, if any, deposited or withdrawn from each sub-account of
the Spread Account and the amount on deposit in each sub-account of the
Spread Account after giving effect to all withdrawals and deposits on such
Distribution Date;
(vii) the amount, if any, of the Guaranty Payment;
(viii) the amount of the Monthly Servicing and Guaranty Fee paid to the
Servicer and the General Partner Fee paid to the General Partner with
respect to the related Monthly Period;
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(ix) the number and aggregate principal balances of delinquent Contracts,
the number of Products repossessed and repossessed and remaining in
inventory, and the number of Contracts that became Liquidated Contracts
with respect to the immediately preceding Monthly Period; and
(x) the aggregate amount of Servicer Advances made by the Servicer with
respect to such Distribution Date, and the aggregate amount paid to the
Servicer as reimbursement of Servicer Advances made on prior Distribution
Dates.
Each amount set forth pursuant to subclauses (i) through (vi) with respect
to Certificates or Notes will be expressed as a dollar amount per $1,000 of
the initial principal amount of the Notes or the initial Certificate Principal
Balance, as applicable.
Unless and until Definitive Notes or Definitive Certificates are issued,
such reports will be sent on behalf of the Trust to Cede & Co., as registered
holder of the Notes and the Certificates and the nominee of DTC. Note Owners
and Certificate Owners may receive copies of such reports upon written
request, together with a certification that they are Note Owners or
Certificate Owners, as the case may be, and payment of any expenses associated
with the distribution of such reports, from the Indenture Trustee or Owner
Trustee. See "Reports to Securityholders" herein and "Reports to
Securityholders" and "Certain Information Regarding the Securities" in the
accompanying Prospectus.
Within the required period of time after the end of each calendar year, the
Indenture Trustee and the Owner Trustee, as applicable, will furnish to each
person who at any time during such calendar year was a Noteholder or
Certificateholder, a statement as to the aggregate amounts of interest and
principal paid to such Noteholder or Certificateholder, information regarding
the amount of servicing compensation received by the Servicer and such other
information as Green Tree deems necessary to enable such Noteholder or
Certificateholder to prepare its tax returns. See "Certain Federal Income Tax
Consequences" herein.
ADMINISTRATOR
Green Tree Financial Servicing Corporation, a Delaware corporation (the
"Administrator"), will provide the notices and perform other administrative
obligations required by the Indenture and the Trust Agreement. The
Administrator, a subsidiary of Green Tree, will enter into an Administration
Agreement with the Trust and the Indenture Trustee relating to its duties and
obligations as Administrator.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences relating to the purchase, ownership, and disposition of the Notes
and the Certificates. 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. For additional
information regarding federal income tax consequences, see "Certain Federal
Income Tax Consequences--Owner Trust Series" in the Prospectus.
Prospective investors should consult their own tax advisors to determine the
federal, state, local and other tax consequences of the purchase, ownership
and disposition of the Notes and the Certificates. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "IRS") with respect to any of the federal income tax
consequences discussed herein or in the accompanying Prospectus, and no
assurance can be given that the IRS will not take contrary positions.
Moreover, there are no cases or IRS rulings on transactions similar to those
described herein with respect to the Trust, involving both debt and equity
interests issued by a trust with terms similar to those of the Notes and the
Certificates. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the
Securities.
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In the opinion of Dorsey & Whitney LLP, 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 Certificateholder, by the acceptance of a Certificate, agrees to treat
the Trust as a partnership in which the Certificateholders are partners for
federal income tax purposes. The Notes will not be issued with original issue
discount ("OID"). The Notes provide for stated interest at a floating rate
based on LIBOR, subject to a cap of 10.75% per year. Under Treasury
regulations, stated interest payable at a variable rate is not treated as OID
or contingent interest if the variable rate is a qualified floating rate or a
qualified objective rate. The stated interest on the Notes represents interest
payable at a qualified floating rate and will be taxable to holders of the
Notes as interest and not as OID or contingent interest.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and/or Section 4975 of the Code, prohibits a pension,
profit-sharing or other employee benefit plan, as well as individual
retirement accounts and certain types of Keogh Plans (each a "Benefit Plan")
from engaging in certain transactions with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
such Benefit Plan. A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons. Title I of ERISA also requires that fiduciaries of a
Benefit Plan subject to ERISA make investments that are prudent, diversified
(except if prudent not to do so) and in accordance with governing plan
documents.
Certain transactions involving the purchase, holding or transfer of the
Securities might be deemed to constitute prohibited transactions under ERISA
and the Code if assets of the Trust were deemed to be assets of a Benefit
Plan. Under a regulation issued by the United States Department of Labor (the
"Plan Assets Regulation"), the assets of the Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquires an "Equity Interest" in the Trust and none of the
exceptions contained in the Plan Assets Regulation is 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. Green Tree believes that the Notes
should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. However, without regard to whether the
Notes are treated as an Equity Interest for such purposes, the acquisition or
holding of Notes by or on behalf of a Benefit Plan could be considered to give
rise to a prohibited transaction if the Trust, the Owner Trustee or the
Indenture Trustee, the owner of collateral, or any of their respective
affiliates is or becomes a party in interest or a disqualified person with
respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a Note.
Included among these exemptions are: Prohibited Transaction Class Exemption
("PTCE") 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38 regarding investments by bank collective investment
funds; and PTCE 84-14, regarding transactions effected by "qualified
professional asset managers."
The Certificates may not be acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity. By its acceptance of a Certificate, each
Certificateholder will be deemed to have represented and warranted that it is
not subject to the foregoing limitation. In this regard, purchasers that are
insurance companies should consult with their counsel with respect to the
United States Supreme Court case interpreting the fiduciary responsibility
rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris Trust and
Savings Bank (decided December 13, 1993). In John Hancock, the Supreme Court
ruled that assets held in an insurance company's general account may be deemed
to be "plan assets" for ERISA purposes under certain circumstances.
Prospective purchasers should determine whether the decision affects their
ability to make purchases of the Certificates. In particular, such an
insurance company should consider the exemptive relief granted by the
Department of Labor for
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transactions involving insurance company general accounts in Prohibited
Transactions Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995). The Small
Business Job Protection Act of 1996 (the "1996 Act") became effective on
August 20, 1996. The 1996 Act amends ERISA to require the Department of Labor
to issue regulations to clarify, retroactively, the application of ERISA and
the prohibited transaction provisions of the Code to insurance company general
accounts. For additional information regarding treatment of the Certificates
under ERISA, see "ERISA Considerations" in the Prospectus.
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. Such plans may, however, be
subject to the provisions of other applicable federal and state laws,
including, for any such governmental or church plan qualified under Section
401(a) of the Code and exempt from taxation under Section 501(a) of the Code,
the prohibited transaction rules set forth in Section 503 of the Code.
A plan fiduciary considering the purchase of Notes 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.
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 Notes and Certificates set forth opposite
their names below:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITER NOTES NOTES NOTES NOTES CERTIFICATES
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated.... $149,418,000 $ 7,289,000 $ 7,289,000 $ 5,923,000 $12,300,050
Morgan Stanley & Co.
Incorporated....... 149,418,000 7,288,000 7,288,000 5,923,000 12,299,000
------------ ----------- ----------- ----------- -----------
Total............... $298,836,000 $14,577,000 $14,577,000 $11,846,000 $24,599,050
============ =========== =========== =========== ===========
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Notes and Certificates offered hereby, if any of such
Notes and Certificates are purchased.
Green Tree has been advised by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, the Representative of the Underwriters, that the Underwriters
propose initially to offer the Notes and Certificates to the public at the
public offering prices set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in
excess of .24% of the principal amount of the Class A-1 Notes, .33% of the
Class A-2 Notes, .45% of the Class A-3 Notes, .57% of the Class A-4 Notes and
.57% of the Certificates, and that the Underwriters and such dealers may
reallow a discount of not in excess of .125% of the principal amount of the
Class A-1 Notes, .15% of the Class A-2 Notes, .225% of the Class A-3 Notes,
.25% of the Class A-4 Notes and .25% of the 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 Notes
and Certificates offered hereby.
Each Underwriter has represented, warranted and agreed that (i) it has not
offered or sold and, prior to the expiration of the period of six months from
the Closing Date, will not offer or sell any Securities to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Securities in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue of the Securities to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 (as amended) or is a person to whom such document may
otherwise lawfully be issued or passed on.
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<PAGE>
The Notes have not been and will not be registered under the Securities and
Exchange Law of Japan (the "Securities and Exchange Law") and the Underwriters
have agreed that they will not offer or sell any of the Notes, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan
(which term as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan), except
pursuant to an exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any other applicable
laws, regulations and ministerial guidelines of Japan.
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 Notes and
Certificates on a national securities exchange, but has been advised by the
Underwriters that the Underwriters currently intend to make a market in the
Notes and Certificates, as permitted by applicable laws and regulations. The
Underwriters are not obligated, however, to make a market in the Notes and
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 Notes and Certificates.
LEGAL MATTERS
Certain matters with respect to the legality of the Notes and 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 LLP, Minneapolis, Minnesota. The validity of the Notes and
Certificates will be passed upon for the Underwriters by Brown & Wood LLP, New
York, New York.
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Notes will be available only in
book-entry form (the "Global Notes"). Investors in the Global Notes may hold
such Global Notes through any of DTC, CEDEL or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Notes through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Notes will be subject to
U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investors securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no
"lock-up" or restricted period. Global Notes will be credited to the
securities custody accounts on the settlement date against payments in same-
day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Notes are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the
A-1
<PAGE>
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear, as applicable, will instruct its Depositary to
receive the Global Notes against payment. Payment will include interest
accrued on the Global Notes from and including the last coupon payment date to
and excluding the settlement date. Payment will then be made by such
Depositary to the DTC Participant's account against delivery of the Global
Notes. After settlement has been completed, the Global Notes will be credited
to the applicable clearing system and by the clearing system, in accordance
with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The Global Notes credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Notes will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Notes would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Notes were credited to their
accounts. However, interest on the Global Notes would accrue from the value
date. Therefore, in many cases the investment income on the Global Notes
earned during that one-day period may substantially reduce or offset the
amount of such overdraft charges, although this result will depend on each
CEDEL Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Notes to the
respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global Notes
are to be transferred by the respective clearing systems, through their
respective Depositaries, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
CEDEL or Euroclear will instruct their respective Depositaries, as
appropriate, to deliver the Notes to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Notes from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would be back-
valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the CEDEL Participant or Euroclear Participant
have a line of credit with its clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the bank-
valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use CEDEL or Euroclear and that
purchase Global Notes from DTC Participants for delivery to CEDEL Participants
or Euroclear Participants should note that these trades would automatically
fail on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
A-2
<PAGE>
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their CEDEL or Euroclear account in
order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Notes holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of Notes that
are non-U.S. Persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status)
and a certificate under penalties of perjury (the "Tax Certificate") that
such beneficial owner is (i) not a controlled foreign corporation (within
the meaning of Section 957(a) of the Code) that is related (within the
meaning of Section 864(d)(4) of the Code) to the Trust or the Transferor
and (ii) not a 10 percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Trust or the Transferor. If the
information shown on Form W-8 or the Tax Certificate changes, a new Form W-
8 or Tax Certificate, as the case may be, must be filed within 30 days of
such change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of Notes
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the beneficial owner of Notes or such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8 and
Form 1001 are effective for three calendar years and Form 4224 is effective
for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
federal income tax withholding that may be relevant to foreign holders of the
Global Notes. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Notes.
A-3
<PAGE>
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 Trust 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 Trust. 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.
(Continued on next page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" AT PAGE 12 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 SEPTEMBER 6, 1996.
<PAGE>
(Continued from previous page)
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.
2
<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. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
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,
1995, and Quarterly Reports on Form 10-Q for the periods ended March 31, 1996
and June 30, 1996, 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.
3
<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.
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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
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4
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<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"),
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5
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<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
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6
<PAGE>
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<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>
7
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<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."
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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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Mandatory Purchase of Certain With respect to each series of Securities,
Contracts........................ 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
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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."
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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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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; 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 December 31, 1995, had
stockholders' equity of approximately $925,022,000. 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 three 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, 1995,
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 aircraft 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 (other than a small number of loans made to
corporate borrowers to finance the purchase of a fleet of trucks) 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 success as an
owner-operator of the truck. A loan for the purchase of an aircraft is
generally subject to limitations
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of a 45% debt-to-income ratio and generally will not exceed $1,000,000,
although loans of up to $10,000,000 may be made with senior management
approval. 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; 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.
RATIO OF EARNINGS TO FIXED CHARGES FOR THE COMPANY
Set forth below are the Company's ratios of earnings to fixed charges for
the past five years. For the purposes of compiling these ratios, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense and the interest portion of rent expense.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ --------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..... 2.83 3.55 4.81 7.98 7.90 8.67
</TABLE>
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 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 Trust, 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. Purchase money security interests in
Products that are "consumer goods" (as defined in the UCC) are deemed
perfected under some states' laws when the contract is executed and Green Tree
has advanced the purchase price of the goods. 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. Likewise, where Green Tree did not file a UCC
financing statement because its security interest was perfected as a purchase
money security interest in "consumer goods," (i) such security interest may be
deemed not to be perfected if the Product were ultimately determined not to be
"consumer goods," and (ii) a subsequent purchaser of the Product may acquire
the Product free of Green Tree's security interest. Such events would,
however, 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
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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 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 valid security interest in a United States-registered
aircraft to be perfected against third parties, including a trustee in
bankruptcy of the borrower, 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").
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. If provided for by state law, a non-possessory mechanic's lien on an
aircraft may 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
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 aircraft is not registered with the Registry, under the UCC, the
perfection and effect of perfection of the mortgage or any security interest
in other collateral would be governed 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 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.
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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 LLP, counsel to the Seller, has delivered an opinion
regarding certain federal income tax matters discussed below. Counsel to the
Seller identified in the related Prospectus Supplement ("Counsel") will
deliver an opinion regarding 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."
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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.
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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 the counsel for the Seller
identified in the applicable Prospectus Supplement. The validity of the
Certificates and the Notes will be passed upon for the underwriters named in
the related Prospectus Supplement by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995
and 1994 and for each of the three years in the period ended December 31, 1995
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.
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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.
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PROSPECTUS SUPPLEMENT
<S> <C>
Reports to Securityholders................................................. S-2
Summary of Terms........................................................... S-3
Risk Factors............................................................... S-14
The Trust.................................................................. S-15
The Trust Property......................................................... S-15
The Contract Pool.......................................................... S-16
Yield and Prepayment Considerations........................................ S-21
Description of the Notes................................................... S-23
Description of the Certificates............................................ S-29
Description of the Trust Documents and Indenture........................... S-31
Certain Federal Income Tax Consequences.................................... S-36
ERISA Considerations....................................................... S-37
Underwriting............................................................... S-38
Legal Matters.............................................................. S-39
Annex I.................................................................... A-1
PROSPECTUS
Available Information...................................................... 3
Reports to Securityholders................................................. 3
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 14
The Contracts.............................................................. 14
Green Tree Financial Corporation........................................... 15
Yield and Prepayment Considerations........................................ 16
Pool Factor................................................................ 17
Use of Proceeds............................................................ 17
The Certificates........................................................... 17
The Notes.................................................................. 18
Certain Information Regarding the Securities............................... 22
Description of the Trust Documents......................................... 25
Certain Legal Aspects of the Contracts..................................... 34
Certain Federal Income Tax Consequences.................................... 39
ERISA Considerations....................................................... 49
Plan of Distribution....................................................... 49
Legal Matters.............................................................. 50
Experts.................................................................... 50
</TABLE>
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UNTIL DECEMBER 11, 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLE-
MENT) ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUP-
PLEMENT AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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$364,435,050 (APPROXIMATE)
LOGO
SELLER AND SERVICER
GREEN TREE RECREATIONAL,
EQUIPMENT
& CONSUMER
TRUST 1996-C
$298,836,000 (APPROXIMATE)FLOATING RATE ASSET-BACKED NOTES, CLASS A-1
$14,577,000 (APPROXIMATE)FLOATING RATE ASSET-BACKED NOTES, CLASS A-2
$14,577,000 (APPROXIMATE)FLOATING RATE ASSET-BACKED NOTES, CLASS A-3
$11,846,000 (APPROXIMATE)FLOATING RATE ASSET-BACKED NOTES, CLASS A-4
$24,599,050 (APPROXIMATE) 7.65%ASSET-BACKED CERTIFICATES
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SEPTEMBER 12, 1996
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