<PAGE>
As filed with the Securities and Exchange Commission on October 24, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GREEN TREE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1807858
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) (Identification Number)
GREEN TREE LEASE FINANCE II, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA APPLIED FOR
(State or other jurisdiction of -----------
incorporation or organization) (I.R.S. Employer)
Identification Number)
GREEN TREE LEASE FINANCE 1997-1, LLC
(Exact name of registrant as specified in its charter)
DELAWARE NONE
(State or other jurisdiction of -----------
incorporation or organization) (I.R.S. Employer
Identification Number)
---------------
1100 LANDMARK TOWERS
345 ST. PETER STREET
ST. PAUL, MINNESOTA 55102-1639
(612) 293-3400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOEL H. GOTTESMAN, ESQ.
1100 LANDMARK TOWERS
345 ST. PETER STREET
ST. PAUL, MINNESOTA 55102-1639
(612) 293-3400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
COPIES TO: COPIES TO:
CHARLES F. SAWYER, ESQ. SIEGFRIED P. KNOPF, ESQ.
Dorsey & Whitney LLP Brown & Wood LLP
220 South Sixth Street One World Trade Center
Minneapolis, Minnesota 55402 New York, New York 10048
(612) 343-7986 (212) 839-5300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:__As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box:_____[_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box:_____[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:_____[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering:_____[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:_____[_]
--------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Proposed
Title of each Class Maximum Maximum Amount of
of Securities Amount to be Aggregate Price Aggregate registration
to be Registered registered per Unit(1) Offering Price(1) fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease-Backed Notes, Class A............................... $ 500,000 100% $ 500,000 $ 151.51
Lease-Backed Notes, Class B............................... $ 250,000 100% $ 250,000 $ 75.76
Lease-Backed Notes, Class C............................... $ 250,000 100% $ 250,000 $ 75.76
Class C Limited Guaranty.................................. (2) (2) (2) (2)
Total................................................ $1,000,000 100% $ 1,000,000 $ 303.03
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
(2) No additional consideration will be received for the Class C Limited
Guaranty; accordingly, no separate filing fee is being paid herewith
pursuant to Rule 457(n).
_______________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1997
$________
[LOGO]
GREEN TREE LEASE FINANCE 1997-1, LLC
ISSUER
$-------- ---% LEASE-BACKED NOTES, CLASS A-1
$-------- ---% LEASE-BACKED NOTES, CLASS A-2
$-------- ---% LEASE-BACKED NOTES, CLASS B
$-------- ---% LEASE-BACKED NOTES, CLASS C
GREEN TREE VENDOR SERVICES CORPORATION
SERVICER
The Lease-Backed Notes issued by Green Tree Lease FInance 1997-1, LLC (the
"Issuer"), will consist of four classes, designated as the Class A-1 Notes, the
Class A-2 Notes (together, the "Class A Notes"), the Class B Notes and the Class
C Notes (together with the Class A Notes and the Class B Notes, the "Notes").
The Notes will be issued pursuant to an indenture (the "Indenture") between the
Issuer and _______________, as Trustee. Pursuant to the Indenture, the Issuer
will pledge the Trust Assets to secure the repayment of the Notes. The Trust
Assets will include a pool of equipment leases (the "Leases") originated or
acquired by Green Tree Vendor Services Corporation ("Vendor Services") and
certain rights to the proceeds of disposition of the equipment underlying the
Leases (the "Residual Realizations").
The Notes will be payable from the Amount Available on each Payment Date
(which will consist primarily of the Scheduled Payments due under the Leases,
certain amounts received upon the prepayment or liquidation of Leases, and
investment earnings on amounts deposited in the Collection Account established
pursuant to the Indenture). The Notes will have the benefit of limited credit
support from that month's Residual Realizations (subject to the Residual Amount
Cap). The Class A Notes will also have the benefit of limited credit support
consisting of the subordination of the Class B Notes and the Class C Notes. The
Class B Notes will have the benefit of limited credit support consisting of the
subordination of the Class C Notes. See "Description of the Notes." The Class C
Notes will have the benefit of a limited guaranty (the "Class C Limited
Guaranty") of Green Tree Financial Corporation ("Green Tree") to protect against
losses that would otherwise be borne by the Class C Notes. See "Description of
the Notes -- Class C Limited Guaranty."
(continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THIS OFFERING,
SEE "RISK FACTORS" ON PAGE --- HEREIN.
_______________
THE NOTES WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF GREEN TREE VENDOR
SERVICES CORPORATION, GREEN TREE FINANCIAL CORPORATION (EXCEPT TO THE EXTENT
OF THE CLASS C LIMITED GUARANTY DESCRIBED HEREIN) OR ANY OF THEIR
RESPECTIVE AFFILIATES OTHER THAN GREEN TREE LEASE
FINANCE 1997-1, LLC.
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.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) THE ISSUER (1)(3)
---------------------- ---------------- ---------------------
<S> <C> <C> <C>
Per Class A-1 Note......... % % %
Per Class A-2 Note......... % % %
Per Class B Note........... % % %
Per Class C Note........... % % %
Total................. $ $ $
--------------
</TABLE>
(1) Plus accrued interest, if any, from December ___, 1997.
(2) The Issuer has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(3) Before deducting expenses estimated to be $________.
The Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify any order without notice.
It is expected that delivery of the Notes will be made in book-entry form
through the facilities of The Depository Trust Company on or about December ___,
1997.
LEHMAN BROTHERS
_______________
THE DATE OF THIS PROSPECTUS IS DECEMBER __, 1997
<PAGE>
(continued from preceding page)
To the extent the Amount Available is sufficient therefor, interest at the
rate per annum noted above for each Class of the Notes (the applicable "Interest
Rate") and principal will be paid to Holders of each class of the Notes on the
20th day of each month (or, if such day is not a Business Day, on the next
succeeding Business Day), commencing January 20, 1998 (each, a "Payment Date").
The Stated Maturity Date for the Class A-1 Notes, the Class A-2 Notes, the Class
B Notes and the Class C Notes is ______, ______, ______ and ______,
respectively, but final payment of any Class of Notes could occur significantly
earlier than the Stated Maturity Date of such Class of Notes.
The Notes are subject to redemption in whole as described herein under
"Description of the Notes -- Optional Purchase of Leases."
There is currently no secondary market for the Notes and there is no
assurance that one will develop. The Underwriters expect, but will not be
obligated, to make a market in the Notes. There is no assurance that any such
market will develop, or if any such market does develop, that such market will
continue. See "Risk Factors."
It is a condition of issuance of the Notes that each of __________ and
__________ (i) rate each class of the Class A Notes in its highest rating
category, (ii) rate the Class B Notes at least "___" and "___," respectively and
(iii) rate the Class C Notes at least "___ and "___", respectively. See
"Ratings of the Notes."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED
HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO
COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
Upon receipt of a request by an investor who has received an electronic
Prospectus from any Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
such Underwriter will promptly deliver, or cause to be delivered, without
charge, to such investor a paper copy of this Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer, on behalf of the Issuer, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Green Tree's Annual Report on Form 10-K for the year ended December 31,
1996, and Quarterly Reports on Form 10-Q for the periods ended March 31, June 30
and September 30, 1997, which have been filed with the Commission, are hereby
incorporated by reference in this Prospectus and the related
-i-
<PAGE>
Prospectus Supplement.
The Issuer will provide without charge to each person to whom a copy of
this Prospectus is delivered on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference, except the
exhibits to such documents. Requests for such copies should be directed to John
Dolphin, Vice President and Director of Investor Relations, Green Tree Financial
Corporation, 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota
55102-1639.
AVAILABLE INFORMATION
The Issuer has filed a Registration Statement under the Securities Act of
1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") with respect to the Notes offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement and amendments thereof and to the exhibits thereto, which are
available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, 13th Floor, New York, New York 10048; and Northwest Atrium
Center, 500 Madison Street, Chicago, Illinois 60661. Copies of the Registration
Statement and amendments thereof and exhibits thereto may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission also maintains a World Wide Web
site which provides on-line access to reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at the address "http://www.sec.gov."
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, monthly unaudited reports
containing information concerning the Issuer and the Notes will be sent on
behalf of the Trust to Cede & Co. ("Cede"), as nominee of The Depository Trust
Company ("DTC") as registered holder of the Notes pursuant to the Indenture. See
"Description of the Notes -- Book-Entry Registration." Such reports will be made
available to DTC and its participants to holders of interests in the Notes in
accordance with the rules, regulations and procedures creating and affecting
DTC. However, such reports will not be sent directly to each beneficial owner
while the Notes are in book-entry form. Upon the issuance of fully registered,
certificated Notes, such reports will be sent directly to each Noteholder. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. The Servicer, on behalf of the Trust,
will file with the Commission periodic reports concerning the Trust to the
extent required under the 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, the Servicer expects that
the Trust's obligation to file such reports will be terminated following the end
of 1998.
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................. i
AVAILABLE INFORMATION........................................................ ii
REPORTS TO NOTEHOLDERS....................................................... ii
SUMMARY...................................................................... 1
RISK FACTORS................................................................. 13
THE ISSUER AND THE SPC....................................................... 17
GREEN TREE VENDOR SERVICES CORPORATION....................................... 18
THE LEASES................................................................... 21
WEIGHTED AVERAGE LIFE OF THE NOTES........................................... 35
DESCRIPTION OF THE NOTES..................................................... 36
DESCRIPTION OF THE CONTRIBUTION AND SERVICING AGREEMENT...................... 49
CERTAIN LEGAL ASPECTS OF THE LEASES.......................................... 54
FEDERAL INCOME TAX CONSEQUENCES.............................................. 57
ERISA CONSIDERATIONS......................................................... 60
RATINGS OF THE NOTES......................................................... 61
USE OF PROCEEDS.............................................................. 61
UNDERWRITING................................................................. 61
LEGAL MATTERS................................................................ 62
INDEX OF PRINCIPAL TERMS..................................................... 63
</TABLE>
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<PAGE>
________________________________________________________________________________
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain
capitalized terms used in this Summary are defined elsewhere in this Prospectus
on the pages indicated in the "Index of Principal Terms."
ISSUER................. Green Tree Lease Finance 1997-1, LLC, a limited
liability company organized under the laws of the State
of Delaware. Green Tree Lease Finance II, Inc. (the
"SPC"), a wholly owned subsidiary of Green Tree Vendor
Services Corporation, is the sole member of the Issuer.
See "The Issuer and the SPC."
SERVICER............... Green Tree Vendor Services Corporation ("Vendor
Services"). See "Green Tree Vendor Services
Corporation."
TRUSTEE................ ______________, in its capacity as trustee under an
Indenture (the "Indenture"), dated as of December 1,
1997, between the Issuer and the Trustee.
THE NOTES.............. Pursuant to the Indenture, the Issuer will issue four
classes of notes (the "Notes"), consisting of two
classes of senior notes, designated as the Lease-Backed
Notes, Class A-1, in the original principal amount of
$__________, Lease-Backed Notes, Class A-2, in the
original principal amount of $________ (together, the
"Class A Notes") and two classes of subordinated notes,
designated as the Lease-Backed Notes, Class B, in the
original principal amount of $__________ and the Lease-
Backed Notes, Class C, in the original principal amount
of $__________. See "Description of the Notes."
INTEREST............... Interest on the outstanding principal balance of the
Notes of each Class will accrue at the interest rate
for such Class of Notes specified on the cover page of
this Prospectus (the "Interest Rate" for such Class of
Notes) from and including the Closing Date to but
excluding January 20, 1998 (in the case of the first
interest period), and thereafter for each successive
Payment Date from and including the most recent prior
Payment Date to which interest has been paid, to but
excluding such Payment Date, in each case calculated on
the basis of a 360-day year comprised of twelve 30-day
months. To the extent the Amount Available is
sufficient therefor, the amount of interest to be paid
on the Notes on each Payment Date will be equal to one-
twelfth of the product of (i) the applicable Interest
Rate and (ii) the related principal balance of such
Class of Notes as of the immediately preceding Payment
Date (after giving effect to reductions in principal
balance on such immediately preceding Payment Date)
(or, in the case of the first interest period, interest
accrued on the original principal balance of such Class
of Notes from and including the Closing Date to but
excluding January 20, 1998).
-1-
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
PRINCIPAL.............. To the extent the Amount Available is sufficient
therefor after payment of interest on the Notes, the
aggregate amount of principal to be paid on the Notes
on each Payment Date will equal the Monthly Principal
Amount. The Class A, Class B and Class C Notes will be
entitled to receive on each Payment Date as payment of
principal, in the order of priority set forth below and
to the extent of the Amount Available after payment of
all interest then due on the Notes, an amount equal to
the Class A Percentage, the Class B Percentage or the
Class C Percentage, as applicable, of the Monthly
Principal Amount. See "Description of the Notes --
Principal."
The "Monthly Principal Amount" for any Payment Date
will equal the excess, if any, of (i) the sum of the
principal balances of the Notes as of such Payment Date
(determined prior to the payment of any principal in
respect thereof on such Payment Date), over (ii) the
aggregate of the Principal Balance of each Lease (the
"Lease Pool Principal Balance") as of the last day of
the Collection Period relating to such Payment Date.
The "Principal Balance" of any Lease as of the last day
of any Collection Period is the present value of the
unpaid Scheduled Payments due on such Lease after such
last day of the Collection Period (excluding all
Scheduled Payments due on or prior to, but not received
as of, such last day, as well as any Scheduled Payments
due after such last day and received on or prior
thereto, and assuming, for purposes of such
calculation, that each Scheduled Payment is due on the
last day of the applicable Collection Period), after
giving effect to any Prepayments received on or prior
to such last day, discounted monthly at the rate of
___% per annum (the "Discount Rate"), which rate is
equal to the weighted average Interest Rate of the
Class A, Class B and Class C Notes on the Closing Date.
The Principal Balance of any Lease which became a
Liquidated Lease during a given Collection Period or
which Vendor Services was obligated to purchase as of
the end of a given Collection Period due to a breach of
representations and warranties, will, for purposes of
computing the Monthly Principal Amount, be deemed to be
zero on and after the last day of such Collection
Period.
A "Liquidated Lease" is any Lease (a) which the
Servicer has charged off as uncollectible in accordance
with its credit and collection policies and procedures
(which shall be no later than the date as of which the
Servicer has repossessed and disposed of the related
Equipment, or otherwise collected all proceeds which,
in the Servicer's reasonable judgment, can be collected
under such Lease), or (b) as to which 10% or more of a
Scheduled Payment is delinquent 180 days or more. See
"Description of the Notes -- Principal."
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________________________________________________________________________________
<PAGE>
________________________________________________________________________________
The "Collection Period" for any Payment Date will be
the calendar month preceding the month in which such
Payment Date occurs.
The "Initial Pool Principal Balance" is $__________
(which amount is equal to the present value of the
unpaid Scheduled Payments due on the Leases as of the
Cut-off Date, discounted at a rate equal to ___% (the
"Statistical Discount Rate"). The aggregate of the
initial principal balances of the Notes will be equal
to or less than the Initial Pool Principal Balance.
The Class A Percentage for any Payment Date will equal
a fraction, expressed as a percentage, the numerator of
which is the Class A Principal Balance (equal to the
sum of the Class A-1 Principal Balance plus the Class
A-2 Principal Balance) as of such Payment Date and the
denominator of which is the sum of the Class A
Principal Balance, the Class B Principal Balance and
the Class C Principal Balance as of such Payment Date.
The Class A Percentage of the Monthly Principal Amount
will be paid, to the extent of the Amount Available
after payment of interest on the Notes, first to the
Class A-1 Notes until the Class A-1 Principal Balance
has been reduced to zero, and then to the Class A-2
Notes until the Class A-2 Principal Balance has been
reduced to zero.
The Class B Percentage for any Payment Date will equal
a fraction, expressed as a percentage, the numerator of
which is the Class B Principal Balance as of such
Payment Date and the denominator of which is the sum of
the Class A Principal Balance, the Class B Principal
Balance and the Class C Principal Balance as of such
Payment Date. The Class B Percentage of the Monthly
Principal Amount will be paid, to the extent of the
Amount Available after payment of interest on the Notes
and payment of principal on the Class A Notes, to the
Class B Notes until the Class B Principal Balance has
been reduced to zero.
The Class C Percentage for any Payment Date will equal
a fraction, expressed as a percentage, the numerator of
which is the Class C Principal Balance as of such
Payment Date and the denominator of which is the sum of
the Class A Principal Balance, the Class B Principal
Balance and the Class C Principal Balance as of such
Payment Date. The Class C Percentage of the Monthly
Principal Amount will be paid, to the extent of the
Amount Available after payment of interest on the Notes
and payment of principal on the Class A and Class B
Notes, to the Class C Notes until the Class C Principal
Balance has been reduced to zero.
STATED MATURITY DATES.. If and to the extent not previously paid, the
outstanding
-3-
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
principal balance of each Class of Notes will be
payable on the Stated Maturity Date of such Class of
Notes. The Class A-1 Stated Maturity Date will be
__________, the Class A-2 Stated Maturity Date will be
________, the Class B Stated Maturity Date will be
__________ and the Class C Stated Maturity Date will be
__________.
DENOMINATIONS.......... The Notes will be available for purchase in
denominations of $10,000 and integral multiples
thereof.
CLOSING DATE........... On or about December___, 1997.
PAYMENT DATES AND
RECORD DATES........... Interest and principal on the Notes will be paid on the
20th day of each month (or, if such 20th day is not a
Business Day, the next succeeding Business Day),
commencing in January 1998, to Holders of record on the
Business Day immediately preceding such Payment Date
(so long as the Notes are held in book-entry form), or
to Holders of record on the last day of the preceding
calendar month (if Definitive Notes have been issued).
SUBORDINATION.......... The likelihood of payment of interest on each Class of
Notes will be enhanced by the application of the Amount
Available to the payment of such interest prior to the
payment of principal on any of the Notes, as well as by
the preferential right of the Holders of Class A and
Class B Notes to receive such interest (1) in the case
of the Class A Notes, prior to the payment of any
interest on the Class B Notes or the Class C Notes, and
(2) in the case of the Class B Notes, prior to the
payment of any interest on the Class C Notes. Likewise,
the likelihood of payment of principal on each Class of
Class A and Class B Notes will be enhanced by the
preferential right of the Holders of Notes of each such
Class to receive such principal, to the extent of the
Amount Available, after payment of the Servicing Fee
and interest on the Notes as aforesaid, (i) in the case
of the Class A Notes, prior to the payment of any
principal on the Class B Notes or Class C Notes, and
(ii) in the case of the Class B Notes, prior to the
payment of any principal on the Class C Notes. See
"Description of the Notes."
RATINGS................ It is a condition of issuance of the Notes that each of
__________ ("___") and __________ ("___") (together,
the "Rating Agencies") (i) rate each Class of Class A
Notes in its highest rating category, (ii) rate the
Class B Notes at least "___" and "___," respectively,
and (iii) rate the Class C Notes at least "___" and
"___." The rating of each Class of Notes addresses the
likelihood of the timely receipt of interest and
payment of principal on such Class of Notes on or
before the Stated Maturity Date for such Class of
Notes. A rating is not a recommendation to buy, sell or
hold securities and may be
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________________________________________________________________________________
<PAGE>
________________________________________________________________________________
subject to revision or withdrawal at any time by the
assigning Rating Agency. The ratings of the Notes do
not address the likelihood of payment of principal on
any Class of Notes prior to the Stated Maturity Date
thereof. See "Ratings of the Notes."
TRUST ASSETS........... The Trust Assets will consist of:
(i) a pool of equipment lease contracts (each,
a "Lease") with various lessees, borrowers or other
obligors thereunder (each, an "Obligor"), including all
monies at any time paid or payable thereon or in
respect thereof from and after the Cut-Off Date in the
form of (1) Scheduled Payments (including all Scheduled
Payments due prior to, but not received as of, the Cut-
Off Date, but excluding any Scheduled Payments due on
or after, but received prior to, the Cut-Off Date),
(2) Prepayments and (3) Liquidation Proceeds (including
all net proceeds from the disposition of the related
Equipment);
(ii) certain rights to Residual Realizations and
amounts on deposit in the Residual Account (described
below);
(iii) amounts on deposit in (and Eligible
Investments allocated to) certain accounts established
pursuant to the Indenture and the Contribution and
Servicing Agreement, including the Collection Account;
and
(iv) certain other property and assets as herein
described.
On the Closing Date, Vendor Services will contribute to
the SPC all of its right, title and interest in the
Leases and the related Equipment, pursuant to the
Transfer Agreement between Vendor Services and the SPC.
The SPC will immediately contribute the Leases to the
Issuer and convey to the Issuer rights to the Residual
Realizations, to the extent necessary to make interest
and principal payments on the Notes on each Payment
Date and subject to the Residual Amount Cap (described
below). The Trust Assets will secure payment of the
Notes. See "Source of Payment and Security" below and
"The Issuer and the SPC."
SOURCE OF PAYMENT
AND SECURITY........... Principal of and interest on the Notes will be paid on
each Payment Date solely from, and secured by, the
"Amount Available" for such Payment Date, which is
equal to the sum of those Pledged Revenues on deposit
in the Collection Account as of the last Business Day
preceding the related Determination Date (the "Deposit
Date") which were received by the Servicer during the
related Collection Period or which represent amounts
paid by Vendor Services to repurchase Leases as of the
end of such Collection Period, plus Servicer Advances
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made by the Servicer, plus Residual Realizations for
the related Collection Period, but only to the extent
that Pledged Revenues plus any Servicer Advances are
insufficient to pay all interest and principal then due
on the Notes, plus any Class C Guaranty Payment.
"Pledged Revenues" will consist of:
(i) "Scheduled Payments" on the Leases (which
will consist of all payments under the Leases other
than those portions of such payments which, under the
Leases, are to be (A) applied by the Servicer to the
payment of insurance charges, maintenance, taxes and
other similar obligations or (B) retained by the
Servicer in payment of Administrative Fees) received on
or after the Cut-Off Date and due during the term of
the Leases, without giving effect to end-of-term
extensions or renewals thereof (including all Scheduled
Payments due prior to, but not received as of, the Cut-
Off Date, but excluding any Scheduled Payments due on
or after, but received prior to, the Cut-Off Date);
(ii) any voluntary prepayments
("Prepayments") received on or after the Cut-Off Date
under the Leases;
(iii) any amounts paid by Vendor Services to
repurchase Leases due to a breach of representations
and warranties with respect thereto, as described under
"Mandatory Repurchase or Substitution of Certain
Leases" below;
(iv) any amounts paid by the SPC to purchase the
Leases as described under "Optional Purchase of Leases"
below;
(v) all net proceeds derived from the
liquidation of the Leases and the related Equipment, as
described under "Liquidated Leases" below; and
(vi) any earnings on the investment of amounts
credited to the Collection Account.
SERVICER ADVANCES...... Prior to any Payment Date, the Servicer may, but will
not be required to, advance to the Trustee an amount
sufficient to cover delinquencies on the Leases with
respect to the prior Collection Period (a "Servicer
Advance"). The Servicer will be reimbursed for Servicer
Advances from late payments on the delinquent Leases
and, if the Servicer later determines that such
Servicer Advance will not be recoverable from the
delinquent Lease, from Available Funds on the next
Payment Date.
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RESIDUAL REALIZATIONS.. Cash flows realized from the sale or re-lease of the
Equipment following the scheduled expiration dates or
voluntary early termination of the Leases, other than
Equipment subject to Liquidated Leases (the "Residual
Realizations"), will provide additional credit support
to the Notes. During each Collection Period, the
Residual Realizations will be deposited in the Residual
Account. As provided in the Indenture, funds on deposit
in the Residual Account will be available to cover
shortfalls in the Available Pledged Revenues to pay
interest and principal payments then due on the Notes.
If, however, the aggregate amount of Residual
Realizations applied to cover shortfalls in the
Available Pledged Revenues on all Payment Dates reaches
$________ (the "Residual Amount Cap"), Residual
Realizations will thereafter not be available to cover
shortfalls in the Available Pledged Revenues. On each
Payment Date, amounts on deposit in the Residual
Account representing Residual Realizations from the
prior Collection Period, not applied to pay interest
and principal then due on the Notes, will be released
to the SPC. Actual Residual Realizations may be more or
less than the residual value of the Equipment recorded
on the accounting books of Vendor Services (the "Book
Value").
THE LEASES............. The aggregate of the Leases held by the Issuer as part
of the Trust Assets, as of any particular date, is
referred to as the "Lease Pool," and the Lease Pool, as
of the Cut-Off Date, is referred to as the "Cut-Off
Date Pool." As of the Cut-Off Date, the Cut-Off Date
Pool had the following characteristics (unless
otherwise noted, percentages are by Initial Pool
Principal Balance and all dollar amounts are calculated
using the Statistical Discount Rate);
(i) the Initial Pool Principal Balance is
$__________;
(ii) there were __________ Leases;
(iii) the average Principal Balance was
approximately $__________;
(iv) approximately ___% of such Leases related
to telecommunications equipment; approximately ___% of
such Leases related to manufacturing and construction
equipment; and approximately ___% of such Leases
related to computers and point-of-sale equipment;
(v) the Obligors on approximately ___% of the
Leases were located in California; approximately ___%
were located in New York; approximately ___% were
located in New Jersey; approximately ___% were located
in Florida; approximately ___% were located in Texas;
approximately
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___% were located in Illinois; and no other state
represented more than ___% of the Leases;
(vi) approximately ___% of the Leases had
been originated by Vendor Services, with the
remaining ___% of the Leases having been
originated by third parties and purchased by
Vendor Services;
(vii) the remaining term of the Leases
ranged from ___ month to ___ months; and
(viii) the weighted average remaining term of
the Leases was approximately ___ months and the
weighted average age of the Leases was
approximately ___ months. See "The Leases --
Certain Statistics Relating to the Cut-Off Date
Pool."
Vendor Services will make certain representations
and warranties regarding each Lease in connection
with its contribution of the Leases to SPC, and
will be obligated to repurchase (or substitute
another lease for) any Lease in the event of a
breach of any such representation or warranty that
materially and adversely affects the value of such
Lease. See "Mandatory Repurchase or Substitution
of Certain Leases" below.
LEASE PREPAYMENTS.......... Vendor Services will represent and warrant that
none of the Leases permit the Obligor thereunder
to prepay the amounts due under such Lease or
otherwise terminate the Lease prior to its
scheduled expiration date (except for a de minimis
number of Leases which allow for a prepayment or
early termination upon payment of an amount which
is not less than the Required Payoff Amount).
Nevertheless, under the Contribution and Servicing
Agreement, the Servicer will be permitted to allow
Prepayments of any of the Leases, but only if the
amount paid by or on behalf of the Obligor (or, in
the case of a partial Prepayment, the sum of such
amount and the remaining Principal Balance of the
Lease after application of such amount) is at
least equal to the Required Payoff Amount for such
Lease.
The "Required Payoff Amount," with respect to any
Collection Period for any Lease, is equal to the
sum of:
(i) the Scheduled Payment due in such
Collection Period, together with any Scheduled
Payments due in prior Collection Periods and not
yet received, plus
(ii) the Principal Balance of such Lease as
of the last day of such Collection Period (after
taking into account the Scheduled Payment due in
such Collection Period).
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LIQUIDATED LEASES.......... Liquidation Proceeds (which will consist generally
of all amounts received by the Servicer in
connection with the liquidation of a Liquidated
Lease and disposition of the related Equipment,
net of any related out-of-pocket liquidation
expenses) will be deposited in the Collection
Account and constitute Pledged Revenues to be
applied to the payment of interest and principal
on the Notes in accordance with the priorities
described under "Priority of Payments" below.
SERVICING.................. The Servicer will be responsible for managing,
administering, servicing and making collections on
the Leases. Compensation to the Servicer will
include a monthly fee (the "Servicing Fee"), which
will be payable to the Servicer from the Amount
Available on each Payment Date, in an amount equal
to the product of one-twelfth of ___% per annum
multiplied by the Lease Pool Principal Balance
determined as of the last day of the second
preceding Collection Period (or, in the case of
the Servicing Fee with respect to the Collection
Period commencing on the Cut-Off Date, the Pool
Principal Balance as of the Cut-Off Date), plus
any late fees, late payment interest,
documentation fees, insurance administration
charges and other administrative charges and a
portion of any extension fees (collectively, the
"Administrative Fees") collected with respect to
the Leases during the related Collection Period
and any investment earnings on collections prior
to deposit thereof in the Collection Account. The
Servicer may be terminated as Servicer under
certain circumstances, in which event a successor
Servicer would be appointed to service the Leases.
See "Description of the Contribution and Servicing
Agreement -- Servicing -- Events of Termination."
MANDATORY REPURCHASE OR
SUBSTITUTION OF CERTAIN
LEASES................... Vendor Services will make certain representations
and warranties with respect to each Lease and the
related Equipment, as more fully described in "The
Leases -- Representations and Warranties Made by
Vendor Services." The Trustee will be entitled to
require Vendor Services to purchase any Lease and
the related Equipment, at a price equal to (i) the
Required Payoff Amount, plus (ii) if applicable,
the Book Value of the related Equipment, if the
value of the Lease is materially and adversely
affected by a breach of any such representation or
warranty which is not cured within a specified
period.
Vendor Services will have the option to substitute
one or more Leases having similar characteristics
(each, a "Substitute Lease") for (a) Liquidated
Leases, (b) Leases subject to repurchase as a
result of a breach of representation and warranty
("Warranty Leases") and (c) Leases following a
modification or adjustment to the terms of such
Lease (each, an
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"Adjusted Lease"). The aggregate Principal Balance
of the Liquidated Leases, Warranty Leases or
Adjusted Leases for which Vendor Services may
substitute Substitute Leases is limited to an
amount not in excess of 10% of the Initial Pool
Principal Balance.
SERVICING AND COLLECTION
ACCOUNTS.................. The Trustee will establish and maintain a
Servicing Account, into which the Servicer will
deposit, no later than the second Business Day
after receipt thereof, all Scheduled Payments,
Prepayments, Liquidation Proceeds and other
amounts received by the Servicer in respect of the
Leases on and after the Cut-Off Date. The Trustee
will also establish and maintain (i) the
Collection Account, into which those amounts
deposited in the Servicing Account and
constituting Pledged Revenues will be transferred
within three Business Days following the deposit
thereof in the Servicing Account, and (ii) the
Residual Account, into which those amounts
deposited in the Servicing Account and
constituting Residual Realizations will be
transferred within three Business Days following
the deposit thereof in the Servicing Account. The
Servicer will be permitted to use any alternative
remittance schedule which is acceptable to the
Rating Agencies if the effect thereof will not
result in a qualification, reduction or withdrawal
of any of the ratings then applicable to the
Notes. See "Description of the Contribution and
Servicing Agreement -- Collections on Leases."
CLASS C LIMITED GUARANTY... In order to mitigate the effect of the
subordination of the Class C Notes and liquidation
losses on the Leases, Green Tree Financial
Corporation will provide a guaranty (the "Class C
Limited Guaranty") against losses that would
otherwise be borne by the Class C Notes. On each
Payment Date, Green Tree Financial Corporation
will be obligated to make a payment (the "Class C
Guaranty Payment") equal to the amount, if any by
which (i) interest and principal then due on the
Class C Notes, plus (ii) the Class C Liquidation
Loss Amount (if any), exceeds the Amount Available
less amounts due in respect of interest and
principal on the Class A and Class B Notes on such
Payment Date. The "Class C Liquidation Loss
Amount" for any Payment Date equals the amount, if
any, by which the aggregate principal balance of
the Notes (after giving effect to all payments of
principal on such Payment Date) exceeds the Lease
Pool Principal Balance for such Payment Date.
PRIORITY OF PAYMENTS....... On each Payment Date, the Trustee will be required
to make the following payments, first, from the
Available Pledged Revenues and second, from
amounts withdrawn from the Residual Account as
described under "Residual Realizations" above, in
the following order of priority (except as
otherwise described under "Description of the
Notes -- Events of Default; Rights Upon Event of
Default"):
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(i) the Servicing Fee (if Vendor Services
or an affiliate is no longer the Servicer);
(ii) to reimburse the Servicer for
unreimbursed Servicer Advances in respect of a
prior Payment Date;
(iii) interest on the Notes in the following
order of priority:
(a) interest on the Class A Notes,
(b) interest on the Class B Notes,
and
(c) interest on the Class C Notes;
(iv) an amount equal to the Monthly
Principal Amount as of such Payment Date, to the
Class A, Class B and Class C Notes in the amount
and order of priority described under "Principal"
above;
(v) if Vendor Services or an affiliate is
the Servicer, the Servicing Fee; and
(vi) the remainder, if any, to the SPC.
OPTIONAL PURCHASE OF
LEASES.................... The SPC may purchase all of the Leases on any
Payment Date following the date on which the
unpaid principal balance of the Notes is less than
10% of the Initial Pool Principal Balance, subject
to certain provisions as described herein under
"Description of the Notes -- Optional Purchase of
Leases." The purchase price to be paid in
connection with such purchase shall be at least
equal to the unpaid principal balance of the Notes
as of such Payment Date plus interest to be paid
on the Notes on such Payment Date. The proceeds of
such purchase shall be applied on such Payment
Date to the payment of the remaining principal
balance of the Notes, together with accrued
interest thereon.
TAX STATUS................. In the opinion of counsel to the Issuer, the Notes
will be characterized as indebtedness and the
Issuer will not be characterized as an
"association" or "publicly traded partnership"
taxable as a corporation for federal income tax
purposes. Each Noteholder, by its acceptance of a
Note, will agree to treat the Notes as
indebtedness for federal, state and local income
tax purposes. Prospective investors are advised to
consult their own tax advisors regarding the
federal income tax consequences of the purchase,
ownership and disposition of Notes, and the tax
consequences arising under the laws of any state
or other taxing jurisdiction. See "Federal Income
Tax Consequences."
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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 Issuer 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 ("ERISA"), and the Internal Revenue
Code of 1986, as amended (the "Code"), that
otherwise could possibly be applicable. Although
there can be no assurances in this regard, it
appears that the Notes should be treated as
indebtedness without substantial equity features
for purposes of such regulation. As a result,
subject to the considerations described in "ERISA
Considerations" herein, the Notes are eligible for
purchase with plan assets of any Benefit Plan.
However, a fiduciary or other person contemplating
purchasing the Notes on behalf of or with plan
assets of any Benefit Plan should carefully review
with its legal advisors whether the purchase or
holding of the Notes could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or Section 4975 of the
Code. See "ERISA Considerations."
REGISTRATION, CLEARANCE AND
SETTLEMENT OF NOTES....... Each of the Notes will be registered in the name
of Cede & Co., as the nominee of The Depository
Trust Company ("DTC"), and will be available for
purchase only in book-entry form on the records of
DTC and participating members thereof. Notes will
be issued in definitive form only under the
limited circumstances described under "Description
of the Notes -- Definitive Notes." All references
herein to "Holders" or "Noteholders" shall reflect
the rights of beneficial owners of Notes (the
"Note Owners"), as they may indirectly exercise
such rights through DTC and participating members
thereof, except as otherwise specified herein. See
"Description of the Notes -- Book-Entry
Registration."
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RISK FACTORS
Prospective Noteholders should consider the following factors in connection
with the purchase of the Notes:
LIMITED TRUST ASSETS
The Notes are secured by the payments to be derived from the Leases and
other Trust Assets. The Issuer will have no assets other than the Leases
(including the Liquidation Proceeds derived from the liquidation of defaulted
Leases), amounts on deposit from time to time in the Collection Account, the
Residual Account and the accounts established pursuant to the Contribution and
Servicing Agreement, and the Class C Limited Guaranty. The Notes will represent
obligations solely of the Issuer, and none of the Notes will be insured or
guaranteed, directly or indirectly, by Vendor Services, the SPC, or the Trustee
(or any affiliate of any of them) or any other person or entity, except for the
Class C Limited Guaranty provided by Green Tree.
SUBORDINATION OF THE CLASS B NOTES AND CLASS C NOTES
To the extent described herein under "Description of the Notes --
Distributions" and "-- Subordination of Class B Notes and Class C Notes,"
(i) payments of interest and principal on the Class B Notes will be subordinated
in priority of payment to interest and principal, respectively, on the Class A
Notes and (ii) payments of interest and principal on the Class C Notes will be
subordinated in priority of payment to interest and principal, respectively, on
the Class A Notes and the Class B Notes. In addition, payments of principal on
the Notes will be subordinated in priority of payment to payments of interest on
the Notes.
The only protection afforded the Class C Noteholders against delinquencies
and defaults on the Leases will be the Residual Realizations each month and the
Class C Limited Guaranty. Delinquencies and defaults on the Leases could
eliminate the protection afforded the Class B Noteholders by the subordination
of the Class C Notes, and the Class B Noteholders could incur losses on their
investment as a result. Further delinquencies and defaults on the Leases could
eliminate the protection offered to the Class A Noteholders by the subordination
of the Class B Notes and the Class C Notes, and the Class A Noteholders could
also incur losses on their investment as a result.
BANKRUPTCY AND INSOLVENCY RISKS
Dorsey & Whitney LLP, counsel to the Issuer, will deliver a legal opinion
to the effect that, subject to the qualifications and limitations expressed
therein, the transfer of the Leases and the Equipment from Vendor Services to
the SPC constitutes a sale or absolute assignment, rather than a pledge to
secure indebtedness of Vendor Services; and that in the event that Vendor
Services were to become a debtor under the federal bankruptcy code, a creditor
or trustee in bankruptcy would be unable to successfully challenge the transfer
of the Leases and the Equipment to the SPC and the Leases, payments thereunder
and the Equipment would not be property of the bankruptcy estate. However, if
Vendor Services 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 Vendor Services, or Vendor Services as debtor-in-
possession, might argue that such transfer of the Leases and the Equipment from
Vendor Services to the SPC was (or should be recharacterized as) a pledge of
such assets rather than a sale. If this position were accepted by a court, any
Leases considered to be "true" leases under the applicable Insolvency Laws (as
described under "The Leases -- Description of the Leases"), and any other Lease
considered to be executory under such Insolvency Laws, could be rejected by such
trustee in bankruptcy or by Vendor Services as debtor-in-possession, which would
result in the termination of
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Scheduled Payments under any such Leases and reductions in distributions to
Noteholders, and Noteholders could incur a loss on their investment as a result.
To reduce the likelihood of such rejection, UCC financing statements perfecting
a security interest for the benefit of the SPC in the Equipment, and assignments
of such perfected security interest to the Issuer and the Trustee, will be filed
against Vendor Services in those states where Equipment subject to Leases
constituting ___% of the Initial Pool Principal Balance is located. Even if such
Leases were not so rejected in the event of an insolvency of Vendor Services,
the Issuer and the Trustee could experience a delay in or reduction of
collections on all of the Leases, and Noteholders could incur a loss on their
investment as a result.
A case decided by the United States Court of Appeals for the Tenth Circuit
contains language to the effect that accounts sold by an entity that
subsequently became bankrupt remained property of the debtor's bankruptcy estate
because the sale of accounts is treated as a "security interest" that must be
perfected under the Uniform Commercial Code ("UCC"). Although the Leases
constitute chattel paper or general intangibles rather than accounts under the
UCC, sales of chattel paper, like sales of accounts, must be perfected under
Article 9 of the UCC. If Vendor Services 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, the Issuer (and thus
the Trustee) could experience a delay in or reduction of collections on the
Leases, and Noteholders could incur a loss on their investment as a result.
Dorsey & Whitney LLP will deliver a legal opinion to the effect that,
subject to the qualifications and limitations expressed therein, if Vendor
Services were to become a debtor in a bankruptcy case, a bankruptcy court would
not order that the assets and liabilities of the SPC be consolidated with those
of Vendor Services. The SPC has taken steps in structuring the transactions
described herein that are intended to prevent the voluntary or involuntary
application for relief by or on behalf of Vendor Services under any Insolvency
Law from resulting in the consolidation of the assets and liabilities of the SPC
with those of Vendor Services. Such steps include the maintenance of separate
books and records and the insistence on arm's-length terms in all agreements
with Vendor Services and affiliates thereof. Nevertheless, there can be no
assurance that, in the event of a bankruptcy or insolvency of Vendor Services, a
court would not order that the Issuer's or the SPC's assets and liabilities be
consolidated with those of Vendor Services. Any such order would adversely
affect the Issuer's ability to receive payments on the Leases, and Noteholders
could incur a loss on their investment as a result.
Under federal or state fraudulent transfer laws, a court could, among other
things, subordinate the rights of the Noteholders in the Leases and Equipment to
the rights of creditors of Vendor Services, if a court were to find, among other
things, that Vendor Services received less than reasonably equivalent value or
fair consideration for the Leases and the Equipment and, at the time of any
transfers, was insolvent or rendered insolvent as a result of such transfer, and
Noteholders could incur a loss on their investment as a result.
While Vendor Services is the Servicer, cash collections held by Vendor
Services may, subject to certain conditions, be commingled and used for the
benefit of the Servicer prior to the date on which such collections are required
to be deposited in a Collection Account as described under "Description of the
Contribution and Servicing Agreement -- Collections on Leases" and, in the event
of the insolvency or receivership of the Servicer or, in certain circumstances,
the lapse of certain time periods, the Issuer may not have a perfected ownership
or security interest in such collections, and Noteholders could incur a loss on
their investment as a result.
If the SPC or the Issuer were to become insolvent under any Insolvency Law,
delays and reductions in the amount of distributions to Noteholders could occur.
The SPC and the Issuer have each taken certain steps to minimize the likelihood
that it will become bankrupt or otherwise insolvent.
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The SPC is prohibited by its organizational documents and the Transfer Agreement
from engaging in activities (including the incurrence or guaranty of debt) other
than those permitted by the Transfer Agreement. See "The Issuer and the SPC."
Its Articles of Incorporation also contain restrictions on the SPC's ability to
commence a voluntary case or proceeding under any Insolvency Law without the
affirmative vote of all its directors, including its independent directors. The
Issuer is subject to similar constraints under the Contribution and Servicing
Agreement and its LLC Agreement. The Trustee, on behalf of the Noteholders, will
covenant not to subject the SPC or the Issuer to bankruptcy proceedings until
the Notes have been paid in full and one year and one day has elapsed. Vendor
Services believes that such actions substantially mitigate the risk of an
involuntary bankruptcy petition being filed against either the SPC or the
Issuer.
Vendor Services will make certain representations and warranties regarding
the Leases, the Equipment and certain other matters (see "The Leases --
Representations and Warranties Made by Vendor Services"). In the event that any
such representation or warranty with regard to a specific Lease is breached, is
not cured within a specified period of time, and the value of such Lease is
materially and adversely affected by such breach, Vendor Services will be
required to purchase the Lease from the Issuer at a price equal to the Required
Payoff Amount of such Lease and will be required to purchase the related
Equipment from the SPC at a price equal to the Book Value thereof (or, subject
to certain conditions, deliver a Substitute Lease therefor). In the event of a
bankruptcy or insolvency of Vendor Services, the Trustee's right to compel a
purchase would both be impaired and would have to be satisfied out of the
available assets, if any, of Vendor Services's bankruptcy estate, and
Noteholders could incur a loss on their investment as a result.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Notes will be reduced by prepayments and
early terminations of the Leases. Prepayments and early terminations may result
from payments by Obligors, certain amounts received as a result of default or
early termination of a Lease, the receipt of proceeds from the physical damage
to the Equipment to the extent described herein under "The Leases," purchases by
Vendor Services of Leases as a result of certain uncured breaches of the
representations and warranties made by it with respect thereto (see "The
Leases -- Representations and Warranties Made by Vendor Services") or the SPC
exercising its option to purchase all of the remaining Leases (see "Description
of the Notes -- Optional Purchase of Leases"). Generally, none of the Leases
permit a prepayment or early termination thereof. Nevertheless, Vendor Services
historically has permitted lessees to terminate leases early, either in
connection with the execution of a new lease of replacement equipment or upon
payment of a negotiated prepayment premium, or both. The Contribution and
Servicing Agreement will permit the Servicer to allow a voluntary prepayment of
a Lease by an Obligor at any time so long as the amount paid by or on behalf of
the Obligor (or, in the case of a partial prepayment, the sum of such amount and
the remaining Principal Balance of the Lease after application of such amount)
is at least equal to the Required Payoff Amount for such Lease. The amounts so
received in respect of such prepayments are to be added to the Amount Available
and applied in the priority described in "Description of the Notes --
Distributions." No assurance can be given as to the rate of prepayments or as to
whether there will be a substantial amount of prepayments, nor can any assurance
be given as to the level or timing of any prepayments that do occur. As the
rate of payment of principal of the Notes will depend on the rate of payment
(including prepayments) on the Leases, final payment of a Class of Notes could
occur significantly earlier than the Stated Maturity Date of such Class of
Notes. There can be no assurance that Noteholders will be able to reinvest
principal paid on any Class of Notes at an interest rate equal to the Interest
Rate for such Class of Notes, and Noteholders will bear all reinvestment risk
resulting from the timing of payments of principal on the Notes. See "Weighted
Average Life of the Notes."
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CERTAIN LEGAL ASPECTS OF THE LEASES
The transfer of the Leases by Vendor Services to the SPC, and by the SPC to
the Issuer, the perfection of the interest of the Issuer in the Leases and the
right to receive payments thereon, and the Issuer's and the Trustee's interest
in such Leases and in the Equipment are subject to the requirements of the UCC
as in effect in Minnesota and, with respect to certain of the Equipment, in the
various states in which the Equipment subject to the applicable Lease is located
from time to time. Vendor Services will take or cause to be taken such actions
as are required to perfect the transfer to the SPC and thence to the Issuer of
Vendor Services's rights in the Leases and the right to receive payments
thereunder and to perfect the security interest of the Trustee in the Issuer's
rights in the Leases and the right to receive payments thereunder.
It has been the general policy of Vendor Services, depending on the dollar
amount and type of the particular Lease, the perceived credit quality of the
particular Obligor and the estimated repossession value of the particular
related Equipment, not to file or (in certain cases) not to obtain or file UCC
financing statements with respect to the Equipment relating to certain Leases.
See "Green Tree Vendor Services Corporation -- Documentation." With respect to
any such Leases that were deemed to be loans or leases intended for security (as
described under "The Leases -- Description of the Leases"), a purchaser from the
applicable Obligor of the related Equipment would acquire such Equipment free
and clear of the interest of Vendor Services in such Equipment, and a creditor
of the Obligor which has taken a security interest in such Equipment and filed a
UCC financing statement with respect thereto or a trustee in the bankruptcy of
such Obligor would have priority over the interest of Vendor Services in such
Equipment. Any such purchaser, creditor or trustee would have an interest
superior to the interest of the Issuer in such Equipment, which interest is
derived from the transfer and conveyance of a security interest in the Equipment
by Vendor Services to the SPC, and by the SPC to the Issuer. All of the Leases
prohibit the Obligor from selling or pledging the related Equipment to third
parties.
Due to the administrative burden and expense, no assignments of the UCC
financing statements evidencing the security interest of Vendor Services in the
Equipment (to the extent that such financing statements have been filed against
the Obligor, as discussed above) will be filed to reflect the SPC's, the
Issuer's or the Trustee's interests therein. While failure to file such
assignments does not affect the Issuer's interest in the Leases or perfection of
the Trustee's interest in such Leases (including Vendor Services's security
interest in the related Equipment), it does expose the Issuer (and thus
Noteholders) to the risk that Vendor Services could release its security
interest in the Equipment of record, and it could complicate the Issuer's
enforcement, as assignee, of Vendor Services's security interest in the
Equipment. While these risks should not affect the perfection or priority of
the interest of the Trustee in the Leases or rights to payment thereunder, they
may adversely affect the right of the Trustee to receive proceeds of disposition
of the Equipment subject to a Liquidated Lease. Additionally, statutory liens
for repairs or unpaid taxes and other liens arising by operation of law may have
priority even over prior perfected security interests in the Equipment assigned
to the Trustee.
The Servicer will hold the Leases and certain related documents on behalf
of the Issuer and the Trustee. To facilitate servicing and save administrative
costs, the documents will not be physically segregated from other similar
documents that are in the Servicer's possession. UCC financing statements will
be filed in the appropriate jurisdictions reflecting (i) the sale and assignment
of the Leases and Vendor Services' interests in the Equipment to the SPC,
(ii) the transfer and assignment of the Leases and rights to Residual
Realizations by the SPC to the Issuer, and (iii) the pledge of the Leases and
the Residual Realizations by the Issuer to the Trustee, and the Servicer's
accounting records and computer systems will also reflect such transfers. The
Leases will not, however, be stamped or otherwise marked to reflect that such
Leases have been sold to the Issuer, transferred to the Trust or pledged to the
Trustee. If, through inadvertence or otherwise, any of the Leases were sold to
another
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party (or a security interest therein were granted to another party) that
purchased (or took a security interest in) any of such Leases in the ordinary
course of business and took possession of such Leases, the purchaser (or secured
party) would acquire an interest in the Leases superior to the interest of the
Issuer and the Trustee if the purchaser (or secured party) acquired (or took a
security interest in) such Leases for new value and without actual knowledge of
the Issuer's or the Trustee's interest. Such superior interest may include an
ownership interest, which would cut off all rights of the Issuer to such Leases
and payments thereunder, or a security interest, which would be senior to the
security interest held by the Issuer; in either case, Noteholders could incur a
loss on their investment as a result.
LIMITED LIQUIDITY
There is currently no market for the Notes. The Underwriters expect, but
will not be obligated, to make a market for the Notes. There can be no
assurance that a secondary market for the Notes will develop or, if it does
develop, that it will provide the Holders of such Notes with liquidity of
investment or will continue for the life of such Notes.
BOOK-ENTRY REGISTRATION
The Notes will be issued in book-entry, rather than physical, form and, as
a result, in certain circumstances, the liquidity of the Notes in the secondary
market and the ability of the Noteholders to pledge them may be adversely
affected. See "Underwriting" and "Description of the Notes -- Book Entry
Registration." The Notes will be registered in the name of a nominee of DTC and
will not be registered in the names of the beneficial owners or their nominees.
As a result, unless and until Definitive Notes are issued in the limited
circumstances described under "Description of the Notes -- Definitive Notes,"
beneficial owners will not be recognized by the Trustee as Noteholders, as that
term is used in the Indenture. Hence, until such time, beneficial owners will
only be able to exercise the rights of Noteholders indirectly through DTC and
its participating organizations. In addition, the laws of some states require
that certain purchasers of securities take physical delivery of such securities
in certificated form. Such limits and such laws may impair the ability to
transfer beneficial interests in the Notes.
THE ISSUER AND THE SPC
The Issuer is a limited liability company organized under the laws of the
State of Delaware. Green Tree Lease Finance II, Inc. ("SPC") is the sole and
managing member of the Issuer. The SPC is wholly owned by Vendor Services.
The Issuer has been formed solely for the purposes of the transactions
described in this Prospectus. Under its LLC Agreement and the Indenture, the
Issuer is not permitted to engage in any activity other than (i) acquiring the
Leases and rights to the Residual Realizations from the SPC, (ii) pledging the
Pledged Revenues and the rights to the Residual Realizations to the Trust,
(iii) executing and performing its obligations under the Contribution and
Servicing Agreement and the Indenture, and (iv) engaging in other transactions,
including entering into agreements, that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected therewith.
The Issuer is prohibited from incurring any debt, issuing any obligations or
incurring any liabilities, except in connection with the issuance of the Notes.
The SPC, as sole and managing member of the Issuer, does not intend to
engage in any business or activities other than (i) becoming a member of, making
capital contributions to, and acting as the managing member, of the Issuer and
other similar special purpose entities; (ii) acquiring, owning,
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leasing, transferring, receiving, pledging the Leases and related Equipment,
other similar leases and related equipment, and related activities set forth in
the SPC's Articles of Incorporation; and (iii) engaging in any lawful act or
activity and exercising any powers permitted to corporations organized under the
Minnesota Business Corporation Act that are incidental to and necessary or
convenient for the accomplishment of the above mentioned business and purposes,
all as more specifically set forth in its Articles of Incorporation, provided
that none of the actions referenced in clauses (ii) and (iii) above shall result
in a downgrade of a rating issued by a Rating Agency with respect to the Notes.
The SPC is not liable, responsible or obligated, directly or indirectly, for
payment of any principal, interest or any other amount in respect of any of the
Notes.
On the Closing Date, Vendor Services will contribute the Leases and the
Equipment to the SPC pursuant to the Transfer Agreement. Immediately
thereafter, the SPC will, pursuant to the Contribution and Servicing Agreement,
contribute to the Issuer all of the Leases and rights to the Residual
Realizations, and Vendor Services will agree to service the Leases on behalf of
the Issuer. The Issuer will pledge the Trust Assets to the Trustee and issue
the Notes pursuant to the Indenture.
The Trust Assets will consist of:
(1) a pool of equipment lease contracts (the "Leases") with various
lessees or other obligors thereunder (each, an "Obligor"), including all
monies at any time paid or payable thereon or in respect thereof from and
after the Cut-Off Date in the form of (i) Scheduled Payments (including all
Scheduled Payments due prior to, but not received as of, the Cut-Off Date,
but excluding any Scheduled Payments due on or after, but received prior
to, the Cut-Off Date), (ii) Prepayments, and (iii) Liquidation Proceeds
(including any derived from the disposition of the related Equipment)
received with respect to defaulted Leases;
(2) rights to Residual Realizations, to the extent necessary to make
payments of interest and principal then due on the Notes;
(3) amounts on deposit in (and Eligible Investments allocated to)
certain accounts established pursuant to the Indenture and the Contribution
and Servicing Agreement, including the Collection Account;
(4) the Class C Limited Guaranty; and
(5) the Issuer's rights under the Contribution and Servicing Agreement
and the SPC's rights under the Transfer Agreement.
GREEN TREE VENDOR SERVICES CORPORATION
GENERAL
The Leases comprising the Trust Assets have been originated by Green Tree
Vendor Services Corporation ("Vendor Services"), a Delaware corporation, or, in
some cases, purchased from third parties by Vendor Services. Vendor Services is
a leading independent provider of vendor/manufacturer-oriented equipment finance
programs, with headquarters in Bloomington, Minnesota, additional operations in
Paramus, New Jersey, and twelve regional sales offices located through the U.S.
Vendor Services, a wholly-owned subsidiary of Green Tree Financial Corporation,
acquired from FINOVA Corporation in November 1996.
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Vendor Services offers "small-ticket" equipment leasing programs, for
assets with a purchase price generally less than $100,000, to manufacturers,
dealers and distributors, and to a select group of financial intermediaries
nationwide, facilitating the sale of their products to end-user customers.
EQUIPMENT LEASE BUSINESS
Market Position
Vendor Services establishes customized financing programs for the end-user
customers of equipment vendors and select financing intermediaries that focus on
end-user customers who meet Vendor Services's general customer profiles. The
equipment vendor segment has been the primary focus of Vendor Services's
activities. In total, as of December 1996, Vendor Services had in its portfolio
a total of 57,000 individual end-user customers with active accounts. Vendor
Services attempts to maintain geographical diversity and a broad cross-section
of commercial account types in its lease portfolio.
Equipment Vendors
The primary sales focus of Vendor Services is on providing point-of-sale
financing for the customers of equipment vendors, including equipment
manufacturers, dealers and distributors that sell their products regionally or
nationally. While Vendor Services primarily finances office equipment such as
copy machines, fax machines, personal computers and related peripherals, office
furniture and telephone systems, its vendor base also consists of sellers of
commercial laundry equipment, automotive diagnostic equipment and health-care
related products.
Financing Intermediaries
With respect to financing intermediaries, Vendor Services focuses its
activities on those that have industry recognition and proven track records,
generating new business through end-user contracts or through low-end equipment
dealers.
CREDIT UNDERWRITING STANDARDS
Vendor Services has established policies, controls, systems and procedures
designed to manage and limit credit risk. These policies, controls, systems and
procedures are subject to periodic review by management.
Vendor Services seeks to minimize credit risk through diversification of
the portfolio by customer, industry segment, equipment type, geography and
transaction maturity. Vendor Services's financing activities are spread across
a wide range of equipment types, including general equipment, office equipment,
information technology and light commercial equipment, with end-users located
throughout the United States.
Underwriting procedures are divided into three main categories: Equipment
Dealers and Manufacturers, Intermediaries and Lessees. Listed below is an
overview of each underwriting process.
Equipment Dealers and Manufacturers
Vendor Services requires that all leased equipment be sold by authorized
sellers that have sufficient experience with each brand they sell. Credit
requirements vary depending on the degree to which Vendor Services relies on the
dealer or manufacturer to support and service the equipment.
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End-user Intermediaries
End-user intermediaries are required to have well-established histories and
conform to Vendor Services's approved equipment Dealer/Manufacturers business
line. Although standard industry representations and warranties are required,
Vendor Services's credit decision will not depend on an end-user intermediary's
ability to honor these obligations.
Lessees
Vendor Services's underwriting standards are intended to evaluate a
prospective customer's credit standing and repayment ability. Credit decisions
are based on the credit characteristics of the applicant, loss experience with
comparable customers, the amount, terms and conditions of the proposed
transaction and the type of equipment to be leased or financed. Vendor Services
uses a proprietary automated credit scoring system, which is a statistically
based scoring system that quantifies information obtained from customers' credit
applications and credit reports.
DOCUMENTATION
Prior to funding a leasing and financing transaction, a complete
documentation package must be completed. Generally, such a package includes a
credit application, signed lease/installment sale or financing agreement, vendor
invoice, initial lease/advance payment, proof of insurance (where relevant),
delivery and acceptance acknowledgments and appropriate UCC financing
statements. UCC filings are generally required if the underlying equipment cost
is over $25,000.
COLLECTIONS
Invoices are generated 21 days prior to the due date with a 10-day grace
period before late charges accrue. Identified payments are electronically
posted according to established hierarchy.
The collection processes begin after 15 days with an automatic late notice.
Collection calls are placed between 15 and 30 days after the due date. A
contract is classified as delinquent when it reaches 31 days past due.
Automated "work to be done screens" are updated daily, allowing individual
collectors to customize their follow-up procedures. Management approval is
required for contract rewrites or extensions.
LEGAL ADMINISTRATION
The legal administration department manages the portfolio of accounts that
are deemed to be "non-earning." A legal administrator may refer a delinquent
account to a pre-approved collection agency or to an attorney, based upon dollar
amount and the likelihood of collection. This group is responsible for ensuring
collection costs are reasonable in relation to exposure and ability to collect
from a lessee or guarantor, and for negotiating and processing settlements and
write-offs within authorized levels.
CHARGE-OFF POLICY
Vendor Services's management team works closely with vendors to manage
delinquencies by maintaining and closely monitoring non-accrual and write-off
policies. Vendor Services requires that accounts 90-plus days past due (or
sooner, if in the judgment of the collection manager the account is impaired)
are deemed "non-earning" and are placed on non-accrual status. Non-accrual
accounts are
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assigned to legal administrators. A write-off is recommended by the legal
administration department if it has been determined that the lease is
uncollectible even through litigation.
Before an account is written-off or settled, its disposition must be
approved at a level of management commensurate with the size of the account.
Similarly, re-writes and extensions must be approved at a level of management
commensurate with the size of the account.
PORTFOLIO MONITORING
Portfolio Performance Tracking
Vendor Services uses a number of tools to monitor portfolio performance.
Monthly vendor performance reports are prepared for all active accounts,
indicating the dollar amount of delinquent accounts, the percentage of accounts
delinquent, the dollar amount of accounts on non-accrual status, the percentage
of accounts on non-accrual status and the dollar amount of any accounts written
off. Accounts that fall outside standard Vendor Services guidelines are subject
to further analysis.
Each vendor relationship with a portfolio balance in excess of $1,000,000
is given an annual in-depth review covering portfolio performance, an analysis
of management, the quality of the business sent to Vendor Services and the
financial condition of the vendor. Any vendors whose portfolio performance
falls outside the standard guidelines are assigned to a more senior analyst or
manager for further review.
Ongoing Credit Review
In addition to the initial credit review, Vendor Services conducts ongoing
credit review procedures to identify at an early stage those customers who may
be experiencing financial difficulty. These customers are monitored by credit
personnel, who periodically summarize for the Credit Committee the possible
remedial actions, what portion, if any, of total credit exposures should be
written off, and whether a specific allocation of Vendor Services's loss
reserves is appropriate.
In establishing allowances for credit losses, Vendor Services's management
reviews, among other things, the maturity of Vendor Services's portfolio, the
status of all non-performing leases and receivables, prior collection experience
and Vendor Services's overall exposure and changes in credit risk.
THE LEASES
DESCRIPTION OF THE LEASES
General
Substantially all of the Leases are commercial rather than consumer leases.
The following description of the Leases generally describes the material terms
of the Leases to be included in the Lease Pool, although an immaterial number of
Leases may differ in one or more provisions from the following description.
Vendor Services offers a variety of lease plans based on (i) the type of
equipment sold by the vendor, (ii) the average transaction size, (iii) the
vendor's monthly lease volume, (iv) the general credit characteristics of the
vendor's end-user customers and (v) the end-of-lease purchase option.
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The Leases include both true leases and leases intended for security.
Under a true lease the lessor bears the risk of ownership and takes any federal
tax benefits associated with the lease, and no title is conferred upon the
lessee. The lessee under a true lease has the right to the temporary use of
equipment for a term shorter than the economic life of such equipment in
exchange for payments at scheduled intervals during the lease term and the
lessor retains a significant "residual" economic interest in the leased
equipment. End of lease options for true leases include purchase of the
equipment at fair market value or renewal of the lease at fair market value.
Under leases intended for security, the lessor in effect finances the "purchase"
of the leased assets by the lessee and retains a security interest in the leased
assets. The lessee retains the leased property for substantially all its
economic life and the lessor retains no significant residual interest. These
leases are considered conditional sales type leases for federal tax purposes,
and, accordingly, the lessor may not claim any federal tax benefits of ownership
of the leased equipment. End of lease options for such leases depend on the
terms of the related Lease, although generally these terms provide for purchase
of the Equipment at a prestated price. The inclusion of true leases in the
Lease Pool will have no income tax impact on Noteholders since the Notes are
treated as debt for income tax purposes. See "Federal Income Tax Consequences."
However, true leases are treated differently under the Bankruptcy Code from
leases intended for security. See "Risk Factors -- Bankruptcy and Insolvency
Risks" and "Certain Legal Aspects of the Leases -- Insolvency Matters" for a
discussion of these differences.
Lease Forms
The Leases are generally in one of two forms: (a) a master lease agreement
containing all of the general terms and conditions of the lease transaction or
transactions, with schedules setting forth the specific terms of each lease
transaction with that particular Obligor (a "Master Form Lease") or (b) a
specific lease agreement form containing all of the terms and conditions of the
lease transaction (a "Specific Lease Form"). In certain cases, the Lease may be
written on another form which was created by Vendor Services, by a customer or
by a third-party originator.
Payments
Generally, the Leases require that the Obligor make periodic payments on a
monthly basis. An immaterial number of Leases provide for quarterly, semi-
annual, annual, or variable payments. The payments under all of the Leases are
required to be made in United States dollars and are fixed and specified
payments, rather than payments which are tied to a formula or are otherwise at a
floating rate. Payments under the Leases are ordinarily payable in advance,
although a small percentage provide for payments in arrears. Many Leases also
require security deposits which are held until all contractual obligations are
met.
Expenses Relating to Equipment
The Leases require the Obligors to assume the responsibility for payment of
all expenses of the related Equipment including (without limitation) any
expenses in connection with the maintenance and repair of the related Equipment,
the payment of any and all premiums for casualty and liability insurance and the
payment of all taxes relating to the Equipment.
Insurance; Repair and Replacement
The Leases (except for a small number of Leases which, in relation to the
Initial Pool Principal Balance, is not material) require the Obligors to
maintain liability insurance which must name the lessor as additional insured.
Leases require Obligors to procure property insurance against the loss,
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theft or destruction of, or damage to, the Equipment for its full replacement
value, naming the lessor (or lender) as loss payee. This requirement is, from
time to time, waived by the originator for a small number of transactions and,
for some Leases, the Obligor is permitted to self-insure the Equipment under the
Obligor's already existing self-insurance program.
For transactions involving Equipment with a cost of $200,000 or less, the
Obligor is generally provided with written information concerning its property
insurance obligations under the Lease and the originator's own property
insurance coverage that will be provided at the expense of the Obligor if the
Obligor does not provide the originator with satisfactory evidence of its own
insurance coverage. The Obligor is given a specified time period in which to
provide such evidence. Proper evidence of coverage is verified independently
and tracked by a third party tracking company and licensed broker. If the
originator provides the insurance coverage, the Obligor is charged a monthly fee
covering the insurance charges and other related administrative charges. The
Obligor has the ability to "opt out" of the program by providing evidence of its
own coverage, at which time such monthly charges cease.
For transactions involving Equipment with a cost of more than $200,000,
insurance coverage generally is verified and traced by the respective
originator, and the failure to maintain such insurance constitutes an event of
default under the applicable Lease. Generally, either pursuant to the Specific
Lease Form or the Master Form Lease, the Obligor also agrees to indemnify the
originator for all liability and expenses arising from the use, condition or
ownership of the Equipment.
Under each Lease, if the Equipment is damaged or destroyed, the Obligor is
required (i) to repair such Equipment, (ii) to make a termination payment to the
lessor in an amount not less than the Required Payoff Amount, or (iii) in some
cases, to replace such damaged or destroyed Equipment with other equipment of
comparable use and value. Under the Contribution and Service Agreement, the
Servicer is permitted (in the case of the destruction of the Equipment related
to a particular Lease) either to allow the Lessee to replace such Equipment
(provided that the replacement equipment is, in the judgment of the Servicer, of
comparable use and at least equivalent value to the value of the Equipment which
was destroyed) or to accept the termination payment referred to above.
Assignment of Leases
The Leases permit the assignment thereof by the lessor or secured party
without the consent of the Obligor, except for a small number of Leases which
require notification of the assignment to, or the consent of, the Obligor.
The Leases do not permit the assignment thereof (or the Equipment related
thereto) by the Obligor without the prior consent of the lessor or secured
party, other than Leases which (i) may permit assignments to a parent,
subsidiary or affiliate, (ii) permit the assignment to a third party, provided
the Obligor remains liable under the Lease or (iii) permit assignment to a third
party with a credit standing (determined by Vendor Services in accordance with
its underwriting policy and practice at the time for an equivalent contract
type, term and amount) equal to or better than the original Obligor.
Under the Contribution and Servicing Agreement, the Servicer may permit an
assignment of a particular Lease from an Obligor to a third party only if the
Servicer (utilizing the current underwriting criteria for its contract
origination activities generally) determines that such third party is of
sufficient credit quality that the Servicer would permit such third party to
become an Obligor with respect to a Lease originated by the Servicer generally.
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Hell-or-High-Water Leases
The Leases are "hell-or-high-water" contracts which require any payments
thereunder to be made regardless of the condition or suitability of the related
Equipment and notwithstanding any defense, set-off or counterclaim that the
Obligor may have against the lessor.
Events of Default and Remedies
Events of default under the Leases generally include the failure to pay all
amounts required by the Lease when due, the failure of the Obligor to perform
its agreements and covenants under the applicable Lease, material
misrepresentations made by the Obligor, the bankruptcy or insolvency of the
Obligor or the appointment of a receiver for the Obligor and, in some cases,
default by the Obligor under other contracts or agreements. Some of these
default provisions are subject to notice provisions and cure periods. Remedies
available to the lessor or secured party upon the occurrence of an event of
default by the Obligor include the right to cancel or terminate the Lease, to
recover possession of the related Equipment, and to receive an amount intended
to make the lessor or secured party (as the case may be) whole plus costs and
expenses (including legal fees) incurred by the lessor or secured party as a
result of such default. Notwithstanding such events of default and remedies,
under the Contribution and Servicing Agreement, the Servicer is permitted to
take such actions, with respect to delinquent and defaulted Leases, as a
reasonably prudent creditor would do under similar circumstances. See
"Description of the Contribution and Servicing Agreement -- Servicing." The
originator may occasionally provide payment extensions (generally of three
months or less, although longer extensions are occasionally granted) to
customers experiencing delays in payment due to cash flow shortages or other
reasons. However, it is not intended that extensions be used to provide a
temporary solution for a delinquent account. Rather, extensions are intended to
be used when, in the judgment of the relevant credit authority, it will permit
the permanent resolution of the delinquency.
Prepayments and Early Termination
None of the Leases permit the prepayment or early termination of the Lease
(except for a de minimis number of Leases which allow for a prepayment or early
termination upon payment of an amount which is not less than the Required Payoff
Amount). Nevertheless, the Servicer is permitted under the Contribution and
Servicing Agreement to accept prepayments of any of the Leases, but only if the
amount paid by or on behalf of the Obligor (or, in the case of a partial
prepayment, the sum of such amount and the remaining Principal Balance of the
lease after application of such amount) is at least equal to the Required Payoff
Amount for such Lease.
Disclaimer of Warranties
The Leases contain provisions whereby the lessor (or the originator, as
assignee of the lessor) disclaims all warranties with respect to the Equipment
and, in the majority of cases, the lessor assigns the manufacturer's warranties
to the Obligor for the term of the Lease. Under the Leases, the Obligor
"accepts" the Equipment under the applicable Lease following delivery and an
opportunity to inspect the related Equipment.
REPRESENTATIONS AND WARRANTIES MADE BY VENDOR SERVICES
Under the Transfer Agreement, Vendor Services will make the following
representations and warranties regarding each Lease (and the related Equipment)
as of the Cut-Off Date, and regarding each Substitute Lease as of the date of
its substitution:
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(A) Each Lease (i) constitutes a valid, binding and enforceable payment
obligation of the Obligor in accordance with its terms (except as may be limited
by applicable bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights generally and the availability of equitable
remedies), (ii) has been duly and properly sold, assigned and conveyed by Vendor
Services under the Transfer Agreement to the SPC and has been duly and properly
transferred and conveyed by the SPC to the Issuer pursuant to the Contribution
and Servicing Agreement, (iii) was originated by Vendor Services in the ordinary
course of its business, or (in the case of any Lease purchased by Vendor
Services) was acquired by Vendor Services for proper consideration and was
validly assigned to Vendor Services by the originator of such Lease, and
(iv) contains customary and enforceable provisions adequate to enable
realization against the Obligor and/or the related Equipment (although no
representation or warranty is made with respect to the perfection or priority of
any security interest in such related Equipment);
(B) No selection procedures adverse to the Noteholders were utilized in
selecting the Leases from those leases owned by Vendor Services on the Cut-Off
Date;
(C) All requirements of applicable Federal, state and local laws, and
regulations thereunder, in respect of all of the Leases, have been complied with
in all material respects;
(D) There is no known default, breach, violation or event permitting
cancellation or termination of the Lease by the lessor under the terms of any
Lease (other than Scheduled Payment delinquencies (in excess of 10% of the
Scheduled Payment due) of not more than 59 days), and (except for payment
extensions and waivers of Administrative Fees in accordance with Vendor
Services's servicing and collection policies and procedures) there has been no
waiver of any of the foregoing; and as of the Cut-Off Date, no related Equipment
had been repossessed;
(E) Immediately prior to the sale, assignment and conveyance of each Lease
by Vendor Services to the SPC, Vendor Services had good title to such Lease and
Vendor Services's interest in the related Equipment (subject to the terms of
such Lease) and was the sole owner thereof, free of any Lien; and immediately
prior to the transfer and conveyance of the Leases by the SPC to the Issuer, the
SPC had good title to such Leases and such interest in the related Equipment and
was the sole owner thereof, free of any Lien (other than the rights of the
Obligor under the related Lease);
(F) No person has a participation in or other right to receive Scheduled
Payments under any Lease, and neither the SPC nor Vendor Services has taken any
action to convey any right to any person that would result in such person having
a right to Scheduled Payments received with respect to any Lease;
(G) Each Lease was originated by Vendor Services or acquired by Vendor
Services and was sold and assigned by Vendor Services to the SPC without any
fraud or misrepresentation on the part of Vendor Services;
(H) Each Obligor (i) is located in the United States, and (ii) is not
(a) the United States of America or any State or local government or any agency,
department, subdivision or instrumentality thereof or (b) Vendor Services or any
subsidiary thereof (except for ___% of the Initial Pool Principal Balance);
(I) The sale, transfer and assignment of such Lease and Vendor Services'
interest in the related Equipment to the SPC under the Transfer Agreement, and
the transfer and conveyance of such Lease from, and the grant of rights to the
related Residual Realizations by, the SPC to the Issuer under the Contribution
and Servicing Agreement, are not unlawful, void or voidable under the laws of
the
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jurisdiction applicable to such Lease;
(J) All filings and other actions required to be made, taken or performed
by any person in any jurisdiction to give the Issuer a first priority perfected
lien or ownership interest in the Leases and a first priority perfected security
interest in Vendor Services's interest in the Equipment have been made, taken or
performed;
(K) There exists a Lease File pertaining to each Lease, and such Lease
File contains the Lease or a facsimile copy thereof;
(L) There is only one original executed copy of each Lease or, if there
are multiple originals, all such originals are in the possession of Vendor
Services or the signed original in the possession of Vendor Services is noted
thereon as being the only copy that constitutes chattel paper;
(M) The Leases constitute chattel paper within the meaning of the UCC as
in effect in the States of Minnesota and Delaware (other than those Leases in
which the lessor is financing exclusively the Obligor's software license or
maintenance contract for leased Equipment, which Leases, in proportion to the
Initial Pool Principal Balance, are not material);
(N) Each Lease was entered into by an Obligor who, at the Cut-Off Date,
had not been identified on the records of Vendor Services as being the subject
of a current bankruptcy proceeding;
(O) The computer tape containing information with respect to the Leases
that was made available by Vendor Services to the Trustee on the Closing Date
and was used to select the Leases was complete and accurate in all material
respects as of the Cut-Off Date and includes a description of the same Leases
that are described in the Schedule of Leases to the Contribution and Servicing
Agreement;
(P) By the Closing Date, the portions of the electronic master record of
Vendor Services relating to the Leases will have been clearly and unambiguously
marked to show that the Leases constitute part of the Trust Assets and are owned
by the Issuer in accordance with the terms of the Subsequent Lease Transfer
Agreement;
(Q) No Lease has a Scheduled Payment delinquency (in excess of 10% of the
Scheduled Payment due) of more than 59 days past due as of the Cut-Off Date;
(R) Each Lease may be sold, assigned and transferred by Vendor Services to
the SPC, and may be assigned and transferred by the SPC to the Issuer, without
the consent of, or prior approval from, or any notification to, the applicable
Obligor, other than (i) certain Leases (which, in proportion to the aggregate of
all of the Leases, are not material) that require notification of the assignment
to the Obligor, which notification will be given by the Servicer not later than
10 days following the Closing Date, and (ii) Leases (which, in proportion to the
aggregate of all of the Leases, are not material) that require the consent of
the Obligor, which consent will be obtained by the Servicer not later than 10
days following the Closing Date;
(S) Each Lease prohibits the sale, assignment or transfer of the Obligor's
interest therein, the assumption of the Lease by another person in a manner that
would release the Obligor thereof from the Obligor's obligation, or any sale,
assignment or transfer of the related Equipment, without the prior consent of
the lessor, other than Leases which may (i) permit assignment to a subsidiary,
corporate parent or other affiliate, (ii) permit the assignment to a third
party, provided the Obligor remains liable under the Lease, or (iii) permit
assignment to a third party with a credit standing (determined by Vendor
Services in accordance with its underwriting policy and practice at the time for
an
-26-
<PAGE>
equivalent contract type, term and amount) equal to or better than the original
Obligor;
(T) The Obligor under each Lease is required to make payments thereunder
(i) in United States dollars, and (ii) in fixed amounts and on fixed and
predetermined dates;
(U) Each Lease requires the Obligor to assume responsibility for payment
of all expenses in connection with the maintenance and repair of the related
Equipment, the payment of all premiums for insurance of such Equipment and the
payment of all taxes (including sales and property taxes) relating to such
Equipment;
(V) Each Lease requires the Obligor thereunder to make all Scheduled
Payments thereon under all circumstances and regardless of the condition or
suitability of the related Equipment and notwithstanding any defense, set-off or
counterclaim that the Obligor may have against the manufacturer, lessor or
lender (as the case may be);
(W) Under each Lease, if the Equipment is damaged or destroyed, the
Obligor is required either (i) to repair such Equipment, (ii) to make a
termination payment to the lessor in an amount not less than the Required Payoff
Amount, or (iii) in some cases, to replace such damaged or destroyed Equipment
with other equipment of comparable use and value;
(X) None of the Leases permit the Obligor to terminate the Lease prior to
the latest Stated Maturity Date or to otherwise prepay the amounts due and
payable thereunder, except for a de minimis number of Leases which allow for an
early termination or prepayment upon payment of an amount which is not less than
the Required Payoff Amount;
(Y) It is not a precondition to the valid transfer or assignment of Vendor
Services' interest in any of the Equipment related to any Lease that title to
such Equipment be transferred on the records of any governmental or quasi-
governmental agency, body or authority;
(Z) The information with respect to the Leases listed on the Schedule of
Leases attached to the Contribution and Servicing Agreement is true, correct and
complete in all material respects;
(AA) No provisions of any Lease have been waived, altered or modified in
any material respect, except as indicated in the Lease File;
(BB) No Lease is a "consumer lease" as defined in Article 2A of the Uniform
Commercial Code; and
(CC) To the best of Vendor Services's knowledge, each Obligor has accepted
the related Equipment and has had reasonable opportunity to inspect and test
such Equipment.
The above-described representations and warranties of Vendor Services will
survive the transfer and assignment of the related Leases and other Trust Assets
to the Issuer.
In the event of a breach of any such representation or warranty with
respect to a Lease that materially and adversely affects the value of such Lease
(any such breach being a "Repurchase Event"), Vendor Services, unless it cures
the breach by the end of the second Collection Period after the date on which
Vendor Services becomes aware of or receives written notice from the Trustee or
the Servicer of such breach, will be obligated to repurchase (or substitute
another lease for) the Lease and, in the case of a Lease, the related Equipment.
Any such purchase shall be made on the Deposit Date immediately following the
end of such second Collection Period at a price equal to the Required Payoff
-27-
<PAGE>
Amount applicable to such Lease plus, if applicable, the Book Value of the
related Equipment. This purchase or substitution obligation may be enforced by
the Trustee on behalf of the holders of the Notes, and will constitute the sole
remedy available to the Noteholders against Vendor Services for any such uncured
breach, except that pursuant to the Transfer Agreement, Vendor Services will
indemnify the Trustee, the Issuer and the Noteholders against losses, damages,
liabilities and claims which may be asserted against any of them as a result of
third-party claims arising out of the facts giving rise to such breach.
Upon the purchase or substitution by Vendor Services of a Lease (and, in
the case of a Lease, any related Equipment), such Lease and related Equipment
will be released to Vendor Services.
-28-
<PAGE>
CERTAIN STATISTICS RELATING TO THE CUT-OFF DATE POOL
General
Vendor Services has prepared certain statistics relating to the Pool as of
the Cut-Off Date (the "Cut-Off Date Pool"). The Initial Pool Principal Balance
is an amount equal to $______________ (which amount is based upon the Pool
Principal Balance determined as of the Cut-Off Date, but also includes an amount
in respect of Scheduled Payments on the Leases due prior to, but not received as
of, the Cut-Off Date). The total number of Leases in the Cut-Off Date Pool is
________. The average Pool Principal Balance of the Leases, as of the Cut-Off
Date, was approximately $__________. Within the Cut-Off Date Pool, ______% of
the Leases (by Initial Pool Principal Balance) were originated by Vendor
Services and ____% of such Leases (by Initial Pool Principal Balance) were
purchased by Vendor Services from unrelated third parties. All calculations of
the Principal Balances of the Leases set forth herein are made using the
Statistical Discount Rate of ___%. Calculations of the Monthly Principal Amount
for each Payment Date, which will determine the amount of principal due on the
Notes on such Payment Date, will be made using the Discount Rate, which will be
the weighted average of the Interest Rates of each Class of Notes on the Closing
Date. The Lease Pool Principal Balance as of the Cut-off Date (calculated using
the Discount Rate) will not vary materially from Initial Pool Principal Balance
(which is calculated using the Statistical Discount Rate), and will be larger
than the aggregate original principal balance of the Notes.
COMPOSITION OF THE CUT-OFF DATE POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
INITIAL AVERAGE AVERAGE AVERAGE
NUMBER POOL PRINCIPAL ORIGINAL REMAINING PRINCIPAL
OF LEASES BALANCE TERM TERM BALANCE
(RANGE) (RANGE) (RANGE)
- ----------- -------------- ------------------------ --------------------- -----------------
months months
<S> <C> <C> <C> <C>
(__ months to __months) (__ month to __ months) (___ to ________)
</TABLE>
-29-
<PAGE>
Geographical Diversity
The following table shows the geographical diversity of the Cut-Off Date
Pool, by indicating the number of Leases, the aggregate Principal Balance of
such Leases and the percentage (by number of Leases and by aggregate Principal
Balance) of such Leases relative to all of the Leases in the Cut-Off Date Pool
by reference to the State in which the Obligors on such Leases are located:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL NUMBER AGGREGATE % OF INITIAL POOL
STATE LEASES OF LEASES PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- --------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama..........
Alaska...........
Arizona..........
Arkansas.........
California.......
Colorado.........
Connecticut......
Delaware.........
District of......
Columbia.........
Florida..........
Georgia..........
Hawaii...........
Idaho............
Illinois.........
Indiana..........
Iowa.............
Kansas...........
Kentucky.........
Louisiana........
Maine............
Maryland.........
Massachusetts....
Michigan.........
Minnesota........
Mississippi......
Missouri.........
Montana..........
Nebraska.........
Nevada...........
New Hampshire....
New Jersey.......
Mew Mexico.......
New York.........
North Carolina...
North Dakota.....
Ohio.............
Oklahoma.........
Oregon...........
Pennsylvania.....
Rhode Island.....
South Carolina...
South Dakota.....
Tennessee........
Texas............
Utah.............
Vermont..........
Virginia.........
Washington.......
West Virginia....
Wisconsin........
Wyoming..........
Total............
</TABLE>
-30-
<PAGE>
Adverse economic conditions in states where a substantial number of
Obligors are located, such as _________________, may adversely affect such
Obligors' ability to make payments on the related Leases, and the Noteholders
could suffer a loss on their investment as a result.
Payment Status
The following table shows the payment status of the Cut-Off Date Pool, by
indicating the number of Leases, the aggregate Principal Balance of such Leases
and the percentage (by number of Leases and by aggregate Principal Balance) of
such Leases relative to all of the Leases in the Cut-Off Date Pool by reference
to whether such Leases were current as of the Cut-Off Date or were 30-59 days
delinquent:
<TABLE>
<CAPTION>
% OF INITIAL
POOL
% OF TOTAL AGGREGATE PRINCIPAL
PAYMENT STATUS NUMBER OF LEASES NUMBER OF LEASES PRINCIPAL BALANCE BALANCE
- ---------------- ---------------- ------------------- ----------------- ------------
<S> <C> <C> <C> <C>
Current.....................
30-59 Days Delinquent.......
Total.....................
</TABLE>
Leases by Equipment Type
The following table shows the type of Equipment securing or otherwise
related to the Leases, by the number of Leases, the aggregate Principal Balance
of such Leases, and the percentage (by number of Leases and by aggregate
Principal Balance) of such Leases relative to all of the Leases:
<TABLE>
<CAPTION>
% OF INITIAL
POOL
% OF TOTAL AGGREGATE PRINCIPAL
TYPE OF EQUIPMENTS NUMBER OF LEASES NUMBER OF LEASES PRINCIPAL BALANCE BALANCE
- ------------------ ---------------- ------------------- ----------------- ------------
<S> <C> <C> <C> <C>
Telecommunications............
Manufacturing and
Construction................
Computers and
Point-of-Sale...............
General Office................
Medical.......................
Printing......................
Other.........................
Total....................
</TABLE>
-31-
<PAGE>
Principal Balances
The following table shows the distribution of the Cut-Off Date Pool by
Principal Balance by indicating the number of Leases which have a Principal
Balance within a defined range and the aggregate Principal Balance of such
Leases, and the percentage (by number of Leases and by aggregate Principal
Balance) of such Leases relative to all of the Leases:
<TABLE>
<CAPTION>
% of Total
Number of Number of Aggregate % of Initial Pool
Principal Balance Leases Leases Principal Balance Principal Balance
------------------------------------- -------------- ------------ --------------------- ----------------------
<S> <C> <C> <C> <C>
$ 0 to $ 5,000.00.......
$ 5,000.01 to $ 25,000.00.......
$ 25,000.01 to $ 50,000.00.......
$ 50,000.01 to $ 100,000.00.......
$100,000.01 to $ 500,000.00.......
$500,000.01 to $1,000,000.00.......
Over $1,000,000.00...................
Total..............................
</TABLE>
Remaining Terms of Leases
The following table shows the remaining term of the Leases from the Cut-Off
Date to the scheduled expiration date of such Leases, by indicating the number
of Leases, the aggregate Principal Balance of such Leases, and the percentage
(by number of Leases and by aggregate Principal Balance) of such Leases relative
to all of the Leases:
<TABLE>
<CAPTION>
% of Total
Number of Number of Aggregate % of Initial Pool
Remaining Term of Leases Leases Leases Principal Balance Principal Balance
- --------------------------------- -------------- ------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
One Month to 12 Months...........
13 Months to 24 Months...........
25 Months to 36 Months...........
37 Months to 48 Months...........
49 Months to 60 Months...........
Over 60 Months...................
Total..........................
</TABLE>
-32-
<PAGE>
Types of Obligor
The Leases with a single Obligor (or group of affiliated Obligors) having
the largest aggregate Principal Balance as of the Cut-Off Date represented no
more than __% of the Initial Pool Principal Balance. The following table shows
the types of Obligor on Leases within the Cut-Off Date Pool, by the number of
Leases, the aggregate Principal Balance of such Leases, and the percentage (by
number of Leases and by aggregate Principal Balance) of such Leases relative to
all of the Leases:
<TABLE>
<CAPTION>
% of Total
Number of Number of Aggregate % of Initial Pool
Type of Obligor Leases Leases Principal Balance Principal Balance
- --------------------------------- -------------- ------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Service Organizations............
Manufacturing and
Construction....................
Retail and Wholesale Trade.......
Other............................
Financial Services...............
Professionals....................
Printing and Copy Centers........
Medical..........................
Total..........................
</TABLE>
CERTAIN STATISTICS RELATING TO DELINQUENCIES AND DEFAULTS
Delinquencies
The following table sets forth statistics relating to delinquencies on
leases within Vendor Services' owned and managed portfolio of receivables
similar to the Leases as of December 31, 1996 and as of June 30, 1997. Vendor
Services was acquired by Green Tree Financial Corporation in November 1996, and
current management, accordingly, cannot certify delinquency and default
experience for prior periods. However, current management does not believe that
Vendor Services' delinquency and default experience in prior periods was
substantially different from the experience presented here. For these purposes,
a "Delinquency" means that the obligor on the lease has failed to make a
required Scheduled Payment in an amount equal to at least 90% of the required
Scheduled Payment within 30 days of the due date. For these purposes, any
payment made by the obligor on a lease subsequent to the required payment date
is applied to the earliest payment which was unpaid. The statistics set forth
below relate to the entire portfolio of receivables similar to the Leases
serviced by Vendor Services as of the date specified, and not only to the
Leases; and, accordingly, such statistics are not necessarily indicative of the
future performance of the Leases. The following table is based, where
indicated, on the gross receivable balance of the leases, as it appears on the
accounting records of Vendor Services as of the date set forth below and not
solely the overdue payments.
<TABLE>
<CAPTION>
Percentage of Gross Receivable Balance of Leases
Gross Receivable Which Were Delinquent
-----------------------------------------------------------------------
Date of Balance of 31 to 60 61 to 90 91 to 120 Over 120
Calculation Leases Days Days Days Days Total
- -------------------- ------------------ ------------------ ------------- ------------- ------------ ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
12/31/96............
6/30/97.............
</TABLE>
Non-Accruals
The following table sets forth statistics relating to Non-Accruals on
receivables similar to the Leases within Vendor Services' owned and managed
portfolio as of, and for the 12-month period ending,
-33-
<PAGE>
December 31, 1996 and as of, and for the six-month period ending, June 30, 1997.
Such receivables did not constitute Vendor Services' entire portfolio of leases.
For these purposes, a "Non-Accrual" means that, as of the date indicated, the
obligor on the relevant lease had failed to make payments in an amount at least
equal to 90% of the required Scheduled Payment for at least 90 days beyond the
date required, or commenced a bankruptcy or insolvency proceeding. The
statistics set forth below relate to the portfolio of receivables similar to the
Leases serviced by Vendor Services for the period specified and not only to the
Leases; and, accordingly, such statistics are not necessarily indicative of the
future performance of the Leases. The following table is based, where indicated,
on the net investment of the leases (gross of any allowance for losses) as it
appears on the records of Vendor Services as of the date specified below:
<TABLE>
<CAPTION>
Percentage of
Aggregate net Aggregate Net Investment
Investment of of Leases Which Were
Date of Calculation Leases on Non-Accrual
- ------------------------------------ ------------------------ -----------------------------
(In thousands)
<S> <C> <C>
12/31/96............................
6/30/97.............................
</TABLE>
Losses and Recoveries
The following table sets forth statistics relating to gross losses and
losses net of recoveries on defaulted leases within Vendor Services' owned and
managed portfolio (of receivables similar to the Leases) during the 12-month
period ending December 31, 1996 and during the six-month period ending June 30,
1997. Such receivables did not constitute Vendor Services' entire portfolio of
leases. For these purposes, "gross losses" means total losses before recoveries
measured against the net investment of the leases (gross of any allowance for
losses), and "losses net of recoveries" means losses after recoveries measured
against the net investment of the leases (gross of any allowance for losses).
The statistics set forth below relate to the portfolio of receivables similar to
the Leases serviced by Vendor Services during the period indicated and not only
to the Leases; and, accordingly, such statistics are not necessarily indicative
of the future performance of the .
<TABLE>
<CAPTION>
Gross Losses as a Net Losses as a
Aggregate net Percentage of Net Percentage of Net
Date of Calculation Investment of Leases Investment Investment
- ------------------------------------- ------------------------ ----------------------- ---------------------
(In thousands)
<S> <C> <C> <C>
12/31/96.............................
6/30/97..............................
</TABLE>
Vendor Services' delinquency, non-accrual and net loss experience has
historically been affected by prevailing economic conditions, particularly in
industries and geographic regions where it has customer concentrations.
It has been Vendor Services' experience that, unlike consumer receivables,
collections from the obligors constitute a significant portion of recoveries on
defaulted receivables, in addition to the proceeds from liquidation of the
related equipment. The resale value of individual items of Equipment, which
would be collected by the Servicer in the event of a default under the related
Lease, will vary substantially, depending on such factors as the expected
remaining useful life of the Equipment at the time of the default and the
obsolescence of the Equipment, it is possible that the resale values for some
Equipment would be negligible or insufficient to justify repossession and
resale.
-34-
<PAGE>
WEIGHTED AVERAGE LIFE OF THE NOTES
THE FOLLOWING INFORMATION IS GIVEN SOLELY TO ILLUSTRATE THE EFFECT OF
PREPAYMENTS ON THE LEASES ON THE WEIGHTED AVERAGE LIFE OF THE NOTES UNDER THE
ASSUMPTIONS STATED BELOW AND IS NOT A PREDICTION OF THE PREPAYMENT RATE THAT
MIGHT ACTUALLY BE EXPERIENCED BY THE LEASES.
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 will be
primarily a function of the rate at which payments are made on the Leases.
Payments on the Leases may be in the form of Scheduled Payments or prepayments
(including, for this purpose, liquidations due to default).
The Constant Prepayment Rate prepayment model ("CPR") represents an assumed
constant rate of prepayment of Leases outstanding as of the beginning of each
month expressed as a per annum percentage. There can be no assurance that
Leases will experience prepayments at a constant prepayment rate or otherwise in
the manner assumed by the prepayment model. See "Risk Factors -- Yield and
Prepayment Considerations."
The weighted average lives in the following table were determined assuming
that (i) Scheduled Payments on the Leases are received in a timely manner and
prepayments are made at the percentages of the prepayment model set forth in the
table; (ii) the SPC does not exercise its right to purchase the Leases described
under "Description of the Notes -- Optional Purchase of the Leases"; (iii) the
Initial Pool Principal Balance is $________ and the Leases have the
characteristics described under "The Leases"; (iv) payments are made on the
Notes on the 20th day of each month commencing in January 1998; and (v) the
Notes are issued on December __, 1997. No representation is made that these
assumptions will be correct, including the assumption that the Leases will not
experience delinquencies or losses.
In making an investment decision with respect to the Notes, investors
should consider a variety of possible prepayment scenarios, including the
limited scenarios described in the table below.
WEIGHTED AVERAGE LIFE OF THE NOTES
AT THE RESPECTIVE CPRS SET FORTH BELOW:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE LIFE (YEARS)
---------------------------------------------------------
% CPR % CPR % CPR % CPR % CPR
----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Class A-1 Notes..........
Class A-2 Notes..........
Class B Notes............
Class C Notes............
</TABLE>
-35-
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture. 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.
_____________, a _____________ headquartered in _____________, will be the
Trustee.
Pursuant to the Indenture, the Issuer will issue four classes of notes (the
"Notes"), consisting of two classes of senior notes, designated as the ___%
Lease-Backed Notes, Class A-1, in the original principal amount of $________,
and the ___% Lease-Backed Notes, Class A-2, in the original principal amount of
$________ (together, the "Class A Notes") and two classes of subordinated notes,
designated as the _______% Lease-Backed Notes, Class B, in the original
principal amount of $___________ (the "Class B Notes") and the _______% Lease-
Backed Notes, Class C, in the original principal amount of $___________ (the
"Class C Notes").
Payments on the Notes will be made by the Trustee on each Payment Date to
persons in whose names the Notes are registered as of the related Record Date
(the "Holders" or "Noteholders"). The Payment Date for the Notes will be the
20th day of each month (or if such 20th day is not a Business Day, the next
succeeding Business Day), commencing in January 1998. The Record Date for any
Payment Date will be the Business Day immediately preceding the Payment Date (so
long as the Notes are held in the book-entry form), or the last day of the prior
calendar month (if Definitive Notes have been issued).
A "Business Day" is any day (other than a Saturday, Sunday or legal
holiday) on which commercial banks in New York City, or any other location of
successor Servicer or Trustee, are open for regular business.
Each Class of Notes initially will be represented by one or more
certificates (the "Book-Entry Certificates") registered in the name of the
nominee of DTC (together with any successor depository selected by the Trustee,
the "Depository"), except as set forth below. Beneficial interests in each
Class of Notes will be available for purchase in minimum denominations of
$10,000 and integral multiples thereof in book-entry form only. The Issuer has
been informed by DTC that DTC's nominee will be Cede & Co. Accordingly, Cede &
Co. is expected to be the Holder of record of the Notes. Unless and until
Definitive Notes are issued under the limited circumstances described herein, no
Note Owner acquiring an interest in any Class of Notes will be entitled to
receive a certificate representing such Note Owner's interest in such Notes.
Until such time, ail references herein to actions by Noteholders of any Class of
Notes will refer to actions taken by the Depository upon instructions from its
participating organizations and all references herein to distributions, notices,
reports and statements to Noteholders of any Class of Notes will refer to
distributions, notices, reports and statements to the Depository or its nominee,
as the registered Holder of the Notes of such Class, for distribution to Note
Owners of such Class in accordance with the Depository's procedures. See "--
Book-Entry Registration" and "-- Definitive Notes."
Subject to applicable laws with respect to escheat of funds, any money held
by the Trustee or any paying agent in trust under the Indenture for the payment
of any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and, upon request of the Issuer, shall be deposited by the Trustee in the
Collection Account; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look
-36-
<PAGE>
only to the Issuer for payment thereof, and all liability of the Trustee or such
paying agent with respect to such money shall thereupon cease.
DISTRIBUTIONS
Principal of and interest on the Notes will be paid on each Payment Date,
solely from, and secured by, the Amount Available for such Payment Date, which
is equal to the sum of those Pledged Revenues on deposit in the Collection
Account as of the last Business Day preceding the related Determination Date
(the "Deposit Date") which were received by the Servicer during the related
Collection Period or which represent amounts paid by Vendor Services to purchase
Leases as of the end of such Collection Period (the "Available Pledged
Revenues") plus any Servicer Advances, plus amounts permitted to be withdrawn
therefor from the Residual Account, as described under "-- Residual
Realizations" below, plus any Class C Guaranty Payment.
"Pledged Revenues" will consist of (i) "Scheduled Payments" on the Leases
(which will consist of all payments under the Leases other than those portions
of such payments which, under the Leases, are to be (A) applied by the Servicer
to the payment of insurance charges, maintenance, taxes and other similar
obligations, or (B) retained by the Servicer in payment of Administrative Fees)
received on or after the Cut-Off Date and due during the term of the Leases,
without giving effect to end-of-term extensions or renewals thereof (including
all Scheduled Payments due prior to, but not received as of, the Cut-Off Date,
but excluding any Scheduled Payments due on or after, but received prior to, the
Cut-Off Date); (ii) any voluntary prepayments ("Prepayments") received on or
after the Cut-Off Date under the Leases; (iii) any amounts paid by Vendor
Services to purchase Leases due to a breach of representations and warranties
with respect thereto, as described under "The Leases -- Representations and
Warranties Made by Vendor Services"; (iv) any amounts paid by the SPC to
purchase the Leases as described under "Optional Purchase of Leases";
(v) Liquidation Proceeds derived from the liquidation of the Leases and the
disposition of the related Equipment, as described under "-- Liquidated Leases"
below; and (vi) any earnings on the investment of amounts credited to the
Collection Account.
On each Payment Date, the Trustee will be required to make the following
payments, first, from Available Pledged Revenues, and second, from amounts
permitted to be withdrawn from the Residual Account as described under "--
Residual Realizations" below, in the following order of priority (except as
otherwise described under "-- Events of Default; Rights Upon Event of Default"
below):
(i) the Servicing Fee if Vendor Services or an affiliate is no
longer the Servicer;
(ii) to reimburse the Servicer for unreimbursed Servicer Advances in
respect of a prior Payment Date;
(iii) interest on the Notes in the following order of priority:
(a) interest on the Class A Notes,
(b) interest on the Class B Notes, and
(c) interest on the Class C Notes;
(iv) an amount equal to the Monthly Principal Amount as of such
Payment Date, in respect of principal on the Notes in the amounts and in
the priority described under "-- Principal" below;
-37-
<PAGE>
(v) if Vendor Services or an affiliate is the Servicer, the
Servicing Fee; and
(vi) the remainder, if any, to the Issuer.
CLASS A INTEREST
Interest will be paid to the Holders of each Class of the Class A Notes on
each Payment Date, to the extent the Amount Available (after taking into account
any prior applications described under "-- Distributions" above) is sufficient
therefor, at the Interest Rate for such Class on the then outstanding Principal
Balance of such Class, and will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Such interest so payable on such Payment
Date will be equal to one-twelfth of the product of (i) the Interest Rate for
such Class and (ii) the Principal Balance of such class as of the immediately
preceding Payment Date (after giving effect to reductions in the Principal
Balance of such Class on such immediately preceding Payment Date). Interest on
each Class of the Class A Notes will accrue from and including the Closing Date
to but excluding January 20, 1998 (in the case of the first interest period),
and thereafter for each successive Payment Date from and including the most
recent prior Payment Date to which interest has been paid, to but excluding such
Payment Date.
In the event that, on a given Payment Date, the Amount Available is not
sufficient to make a full payment of interest to the Holders of Class A Notes,
the amount of interest to be paid on the Class A Notes will be allocated among
the Notes of each Class of Class A Notes pro rata in accordance with their
respective entitlements to interest (and within each such Class pro rata among
the holders of such Class), and the amount of such shortfall will be carried
forward and, together with interest thereon at the applicable Interest Rate,
added to the amount of interest such Holders will be entitled to receive on the
next Payment Date.
CLASS B INTEREST
Interest will be paid to the Holders of the Class B Notes on each Payment
Date, to the extent the remaining Amount Available (after taking into account
any prior applications described under "-- Distributions" above) is sufficient
therefor, at the Class B Interest Rate on the then outstanding Class B Principal
Balance, and will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Such interest so paid on such Payment Date will be equal
to one-twelfth of the product of (i) the Class B Interest Rate and (ii) the
Class B Principal Balance as of the immediately preceding Payment Date (after
giving effect to reductions in the Class B Principal Balance on such immediately
preceding Payment Date). Interest on the Class B Notes will accrue from and
including the Closing Date to but excluding January 20, 1998 (in the case of the
first interest period), and thereafter for each successive Payment Date from and
including the most recent prior Payment Date to which interest has been paid, to
but excluding such Payment Date.
In the event that, on a given Payment Date, the Amount Available, after
payment of interest on the Class A Notes, is not sufficient to make a full
payment of interest to the Holders of Class B Notes, the amount of interest to
be paid on the Class B Notes will be allocated among the Notes of such Class pro
rata, and the amount of such shortfall will be carried forward and, together
with interest thereon at the Class B Interest Rate, added to the amount of
interest such Holders will be entitled to receive on the next Payment Date.
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CLASS C INTEREST
Interest will be paid to the Holders of the Class C Notes on each Payment
Date, to the extent the remaining Amount Available (after taking into account
any prior applications described under "-- Distributions" above) is sufficient
therefor, at the Class C Interest Rate on the then outstanding Class C Principal
Balance, and will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Such interest so paid on such Payment Date will be equal
to one-twelfth of the product of (i) the Class C Interest Rate and (ii) the
Class C Principal Balance as of the immediately preceding Payment Date (after
giving effect to reductions in the Class C Principal Balance on such immediately
preceding Payment Date). Interest on the Class C Notes will accrue from and
including the Closing Date to but excluding January 20, 1998 (in the case of the
first interest period), and thereafter for each successive Payment Date from and
including the most recent prior Payment Date to which interest has been paid, to
but excluding such Payment Date.
In the event that, on a given Payment Date, the Amount Available, after
payment of interest on the Class A Notes and the Class B Notes, is not
sufficient to make a full payment of interest to the Holders of Class C Notes,
Green Tree will be obligated to pay such deficiency under the Class C Limited
Guaranty. If for any reason Green Tree fails to pay such amount, the amount of
interest to be paid on the Class C Notes will be allocated among the Notes of
such Class pro rata, and the amount of such shortfall will be carried forward
and, together with interest thereon at the Class C Interest Rate, added to the
amount of interest such Holders will be entitled to receive on the next Payment
Date.
PRINCIPAL
To the extent the remaining Amount Available (after taking into account any
prior applications described under "-- Distributions" above) is sufficient
therefor, the amount of principal to be paid on the Notes on each Payment Date
will equal the Monthly Principal Amount. The Class A, Class B and Class C Notes
will be entitled to receive on each Payment Date as payment of principal, in the
order of priority set forth below and to the extent of the Amount Available
after payment of all interest then due on the Notes, an amount equal to the
Class A Percentage, the Class B Percentage or the Class C Percentage, as
applicable, of the Monthly Principal Amount.
The "Monthly Principal Amount" for any Payment Date will equal the excess,
if any, of (i) the sum of the principal balances of the Notes as of such Payment
Date (determined prior to the payment of any principal in respect thereof on
such Payment Date), over (ii) the aggregate of the Principal Balance of each
Lease (the "Pool Principal Balance") as of the last day of the Collection Period
relating to such Payment Date.
The "Principal Balance" of any Lease as of the last day of any Collection
Period is the present value of the unpaid Scheduled Payments due on such Lease
after such last day of the Collection Period (excluding all Scheduled Payments
due on or prior to, but not received as of, such last day, as well as any
Scheduled Payments due after such last day and received on or prior thereto, and
assuming, for purposes of such calculation, that each Scheduled Payment is due
on the last day of the applicable Collection Period), after giving effect to any
Prepayments received on or prior to such last day, discounted monthly at the
rate of ___% per annum (the "Discount Rate"), which rate is equal to the
weighted average Interest Rate of the Class A, Class B and Class C Notes on the
Closing Date.
The Principal Balance of any Lease which became a Liquidated Lease during a
given Collection Period or which Vendor Services was obligated to purchase as of
the end of a given Collection Period due to a breach of representations and
warranties, will, for purposes of computing the Monthly Principal Amount, be
deemed to be zero on and after the last day of such Collection Period.
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A "Liquidated Lease" is any Lease (a) which the Servicer has charged off as
uncollectible in accordance with its credit and collection policies and
procedures (which shall be no later than the date as of which the Servicer has
repossessed and disposed of the related Equipment, or otherwise collected all
proceeds which, in the Servicer's reasonable judgment, can be collected under
such Lease), or (b) as to which 10% or more of a Scheduled Payment is delinquent
180 days or more.
The "Collection Period" for any Payment Date will be the calendar month
preceding the month in which such Payment Date occurs.
The "Initial Pool Principal Balance" is $__________ (which amount is equal
to the present value of the unpaid Scheduled Payments due on the Leases as of
the Cut-off Date, discounted at a rate equal to ___% (the "Statistical Discount
Rate"). The aggregate of the initial principal balances of the Notes will be
equal to or less than the Initial Pool Principal Balance.
The Class A Percentage for any Payment Date will equal a fraction,
expressed as a percentage, the numerator of which is the Class A Principal
Balance (equal to the sum of the Class A-1 Principal Balance plus the Class A-2
Principal Balance) as of such Payment Date and the denominator of which is the
sum of the Class A Principal Balance, the Class B Principal Balance and the
Class C Principal Balance as of such Payment Date. The Class A Percentage of
the Monthly Principal Amount will be paid, to the extent of the Amount Available
after payment of interest on the Notes, first to the Class A-1 Notes until the
Class A-1 Principal Balance has been reduced to zero, and then to the Class A-2
Notes until the Class A-2 Principal Balance has been reduced to zero.
The Class B Percentage for any Payment Date will equal a fraction,
expressed as a percentage, the numerator of which is the Class B Principal
Balance as of such Payment Date and the denominator of which is the sum of the
Class A Principal Balance, the Class B Principal Balance and the Class C
Principal Balance as of such Payment Date. The Class B Percentage of the
Monthly Principal Amount will be paid, to the extent of the Amount Available
after payment of interest on the Notes and payment of principal on the Class A
Notes, to the Class B Notes until the Class B Principal Balance has been reduced
to zero.
The Class C Percentage for any Payment Date will equal a fraction,
expressed as a percentage, the numerator of which is the Class C Principal
Balance as of such Payment Date and the denominator of which is the sum of the
Class A Principal Balance, the Class B Principal Balance and the Class C
Principal Balance as of such Payment Date. The Class C Percentage of the
Monthly Principal Amount will be paid, to the extent of the Amount Available
after payment of interest on the Notes and payment of principal on the Class A
and Class B Notes, to the Class C Notes until the Class C Principal Balance has
been reduced to zero.
Prior to any Payment Date, the Servicer may, but will not be required to,
advance to the Trustee an amount sufficient to cover delinquencies on the Leases
with respect to the prior Collection Period (a "Servicer Advance"). The
Servicer will be reimbursed for Servicer Advances from late payments on the
delinquent Leases and, if the Servicer later determines that such Servicer
Advance will not be recoverable from the delinquent Lease, from Available Funds
on the next Payment Date.
RESIDUAL REALIZATIONS
Cash flows realized from the sale or re-lease of the Equipment following
the scheduled expiration dates or voluntary early termination of the Leases,
other than Equipment subject to Liquidated Leases (the "Residual Realizations"),
will provide additional credit support for the Notes.
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The Residual Realizations will be deposited in the Residual Account. As provided
in the Indenture, funds on deposit in the Residual Account will be available to
cover shortfalls in the Available Pledged Revenues to pay interest and principal
payments then due on the Notes. If, however, the aggregate amount of Residual
Realizations applied to cover shortfalls in the Available Pledged Revenues on
all Payment Dates reaches $________ (the "Residual Amount Cap"), Residual
Realizations will thereafter not be available to cover shortfalls in the
Available Pledged Revenues. On each Payment Date, amounts on deposit in the
Residual Account representing Residual Realizations from the prior Collection
Period not applied to pay interest and principal then due on the Notes, will be
released to the SPC. Actual Residual Realizations may be more or less than the
residual value of the Equipment recorded on the accounting books of Vendor
Services (the "Book Value").
SUBORDINATION OF CLASS B NOTES AND CLASS C NOTES
The likelihood of payment of interest on each Class of Notes will be
enhanced by the application of the Amount Available to the payment of such
interest prior to the payment of principal on any of the Notes, as well as by
the preferential right of the Holders of Class A and Class B Notes to receive
such interest (1) in the case of the Class A Notes, prior to the payment of any
interest on the Class B Notes or the Class C Notes, and (2) in the case of the
Class B Notes, prior to the payment of any interest on the Class C Notes.
Likewise, the likelihood of payment of principal on Class A and Class B Notes
will be enhanced by the preferential right of the Holders of Notes of each such
Class to receive such principal, to the extent of the Amount Available, after
payment of interest on the Notes as aforesaid, (i) in the case of the Class A
Notes, prior to the payment of any principal on the Class B Notes or the Class C
Notes and (ii) in the case of the Class B Notes, prior to the payment of any
principal on the Class C Notes.
CLASS C LIMITED GUARANTY
In order to mitigate the effect of the subordination of the Class C Notes
and liquidation losses on the Leases, Green Tree Financial Corporation will
provide a guaranty (the "Class C Limited Guaranty") against losses that would
otherwise be borne by the Class C Notes. On each Payment Date, Green Tree
Financial Corporation will be obligated to make a payment (the "Class C Guaranty
Payment") equal to the amount, if any by which (i) interest and principal then
due on the Class C Notes, plus (ii) the Class C Liquidation Loss Amount (if
any), exceeds the Amount Available less amounts due in respect of interest and
principal on the Class A and Class B Notes on such Payment Date.
The "Class C Liquidation Loss Amount" for any Payment Date equals the
amount, if any, by which the aggregate principal balance of the Notes (after
giving effect to all payments of principal on such Payment Date) exceeds the
Lease Pool Principal Balance for such Payment Date.
LIQUIDATED LEASES
Liquidation Proceeds (which will consist generally of all amounts received
by the Servicer in connection with the liquidation of a Liquidated Lease and
disposition of the related Equipment, net of any related out-of-pocket
liquidation expenses) will be deposited in the Collection Account and constitute
Pledged Revenues to be applied to the payment of interest and principal on the
Notes in accordance with the priorities described under "-- Distributions"
above.
OPTIONAL PURCHASE OF LEASES
The SPC may purchase all of the Leases on any Payment Date following the
date on which the unpaid principal balance of the Notes is less than 10% of the
Initial Lease Pool Principal Balance. The
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purchase price to be paid in connection with such purchase shall be at least
equal to the unpaid principal balance of the Notes as of such Payment Date plus
interest to be paid on the Notes on such Payment Date. The proceeds of such
purchase shall be applied on such Payment Date to the payment of the remaining
principal balance of the Notes, together with accrued interest thereon.
TRUST ACCOUNTS
The Trustee will establish and maintain under the Indenture segregated
trust accounts (which need not be deposit accounts, but which shall constitute
"Eligible Accounts"), consisting of the "Collection Account," the "Servicing
Account," the "Residual Account" and the "Note Distribution Account"
(collectively, the "Trust Accounts"). An "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 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 bank holding company has capital and surplus)
of not less than $50,000,000 and the securities of such depository institution
or trust company (or, if such depository institution or trust company is a
subsidiary of a bank holding company system and such depository institution's or
trust company's securities are not rated, the securities of the bank holding
company) have a credit rating from each of the Rating Agencies (if rated by such
Rating Agency) which signifies "investment grade"; or (iv) an account that will
not cause any Rating Agency to reduce, qualify or withdraw its then-current
rating assigned to the Notes, as confirmed in writing by such 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 or
unsecured long-term debt have a credit rating from each of the Rating Agencies
(if rated by such Rating Agency), and which is subject to supervision and
examination by federal or state authorities.
The Servicer, as agent for the Trustee, may designate, or otherwise arrange
for the purchase by the Trustee of, investments to be made with funds in the
Trust Accounts, which investments shall be Eligible Investments (as defined in
the Indenture) that will mature not later than the business day preceding the
applicable monthly Payment Date. "Eligible Investments" include, among other
investments, obligations of the United States or of any agency thereof backed by
the full faith and credit of the United States; federal funds, certificates of
deposit, time deposits and bankers' acceptances sold by eligible financial
institutions; certain repurchase agreements with eligible institutions and other
investments which would not result in the reduction, qualification or withdrawal
of any rating of the Notes by any Rating Agency.
REPORTS TO NOTEHOLDERS
The Servicer will furnish to the Trustee, and the Trustee will include with
each distribution to a Noteholder, a statement in respect of the related Payment
Date setting forth, among other things:
(i) the amount of interest paid on each Class of Class A Notes,
including any unpaid interest from the prior Payment Date, and any
remaining unpaid interest on each Class of Class A Notes;
(ii) the amount of interest paid on the Class B Notes, including any
unpaid interest
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from the prior Payment Date, and any remaining unpaid interest on the Class
B Notes;
(iii) the amount of interest paid on the Class C Notes, including any
unpaid interest from the prior Payment Date, and any remaining unpaid
interest on the Class C Notes;
(iv) the amount of principal paid on each Class of Class A Notes;
(v) the amount of principal paid on the Class B Notes;
(vi) an amount of principal paid on the Class C Notes; and
(vii) the Principal Deficiency Amount, if any, for such Payment Date.
The Notes will be registered in the name of a nominee of DTC and will not
be registered in the names of the beneficial owners or their nominees. As a
result, unless and until Definitive Notes are issued in the limited
circumstances described under "-- Definitive Notes" below, beneficial owners
will not be recognized by the Trustee as Noteholders, as that term is used in
the Indenture. Hence, until such time, beneficial owners will receive reports
and other information provided for under the Indenture only if, when and to the
extent provided by DTC and its participating organizations.
BOOK-ENTRY REGISTRATION
Each Class of Notes will initially be represented by one or more Book-Entry
Certificates registered in the name of the nominee of DTC. The Issuer has been
informed by DTC that DTC's nominee will be Cede & Co. Noteholders may hold
their Notes through DTC, if they are participants of DTC ("Participants"), or
indirectly through organizations that are Participants.
DTC is a New York-chartered limited-purpose trust company, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the UCC
in effect in the State of New York, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities for
its Participants ("DTC Participants") and facilitates the clearance and
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. Indirect
access to the DTC system is also available to others such as securities brokers
and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). Transfers between DTC Participants will occur in
accordance with DTC rules.
Note Owners that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Notes may do so only through Participants and Indirect Participants. Note
Owners will receive all distributions from the Trustee through Participants and
Indirect Participants. Note Owners may experience some delay in their receipt
of payments, since such payments will be forwarded by the Trustee to DTC's
nominee. DTC will forward such payments to its Participants, which thereafter
will forward them to indirect Participants or Note Owners. Note Owners will not
be recognized by the Trustee as Noteholders and Note Owners will be permitted to
exercise the rights of Noteholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Notes among Participants on whose behalf it acts with respect to the Notes and
to receive and transmit distributions of amounts payable on the
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Notes. Participants and Indirect Participants with which Note Owners have
accounts similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Note Owners. Accordingly,
although Note Owners will not possess Notes, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Note Owner
to pledge Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Notes, may be limited due to
the lack of a physical certificate for such Notes.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Noteholder under the Indenture, only at the direction of one or more
Participants to whose accounts with DTC the Notes are credited. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Participants whose holdings include such
undivided interests.
Except as required by law, Vendor Services, the SPC, the Issuer, and the
Trustee will not have any liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the Notes held by
DTC's nominee, or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Trustee.
Under such circumstances, in the event that a successor securities depository is
not obtained, Definitive Notes are required to be printed and delivered. See "-
- - Definitive Notes."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuer believes to be reliable, but the
Issuer takes no responsibility for the accuracy or completeness thereof.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of Notes among participants of DTC, DTC is under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
DEFINITIVE NOTES
The Notes of each Class will be issued in registered, certificated form to
the Note Owners of such Class or their nominees ("Definitive Notes"), rather
than to the Depository or its nominee, only if (i) the Depository advises the
Trustee in writing that it is no longer willing or able to discharge properly
its responsibilities as Depository with respect to the Notes of such Class, and
the Trustee is unable to locate a qualified successor, or (ii) Note Owners
representing not less than 50% of the principal balance of such Class advise the
Trustee and the Depository through Participants in writing that the continuation
of a book-entry system through the Depository is no longer in the best interest
of the Note Owners of such Class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Depository is required to notify all Participants of
the availability through the Depository of Definitive Notes. Upon surrender by
the Depository of the definitive certificate representing the Notes of the
affected Class and instructions for registration, the Trustee will issue the
Notes of such Class as Definitive Notes, and thereafter the Trustee will
recognize the Note Owners of such Definitive Notes as Noteholders under the
Indenture.
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Distributions of principal and interest on the Notes will be made by the
Trustee directly to Noteholders in accordance with the procedures set forth
herein and in the Indenture. Interest payments and any principal payments on
each Payment Date will be made to Noteholders in whose names the Definitive
Notes were registered at the close of business on the related Record Date.
Distributions will be made by check mailed to the address of such Noteholder as
it appears on the register maintained by the Trustee. The final payment on any
Note, however, will be made only upon presentation and surrender of such Note at
the office or agency specified in the notice of final distribution to
Noteholders. The Trustee will provide such notice to registered Noteholders
mailed not later than the fifth day of the month of such final distributions.
Definitive Notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which initially will be the Trustee (in such
capacity, the "Transfer Agent and Registrar"). No service charge will be
imposed for any registration of transfer or exchange, but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith. The Transfer Agent and
Registrar will not be required to register the transfer or exchange of
Definitive Notes for the period from the Record Date preceding the due date for
any payment to the Payment Date with respect to such Definitive Notes.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT
The Issuer and the Trustee may, without consent of the 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 Notes and the Indenture
obligations by a permitted successor to the Issuer (as described under "--
Certain Covenants"); (iii) to add additional covenants for the benefit of the
Noteholders, or to surrender any rights or power conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with the
Trustee; (v) to cure any ambiguity or correct or supplement any provision in the
Indenture or in any supplemental indenture which may be inconsistent with any
other provision of the Indenture; (vi) to provide for the acceptance of the
appointment of a successor Trustee or to add to or change any of the provisions
of the Indenture or in any supplemental 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; (viii) to avoid a reduction,
qualification or withdrawal of any rating of the Notes; or (ix) to add any
provisions to, or change in any manner or eliminate any of the provisions of,
the Indenture or to modify in any manner the rights of the Holders of the Notes
under the Indenture, provided that such action shall not (a) result in a
reduction, qualification or withdrawal of the then-current ratings of the Notes,
or (b) as evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any Noteholder.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT
With the consent of the Holders representing a majority of the principal
balance of each Class of the Notes then outstanding (a "Note Majority"), the
Issuer and the Trustee may execute a supplemental indenture to add provisions to
change in any manner or eliminate any provisions of, the Indenture, or modify in
any manner the rights of the Noteholders.
Without the consent of the Holder of each outstanding Note affected
thereby, however, no supplemental indenture may: (i) change the date, timing or
method of determination 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
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any such payment or 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 each Class of the Notes then
outstanding the consent of the Holders of which is required for any such
supplemental indenture or for any waiver of compliance with certain provisions
of the Indenture or of certain defaults thereunder and their consequences;
(iv) modify or alter the provisions of the Indenture regarding the voting of
Notes held by the Issuer, any other obligor on the Notes, the Issuer or an
affiliate of any of them; (v) reduce the percentage of the Notes the consent of
the Holders of which is required to direct the Trustee to sell or liquidate the
Pledged Revenues if the proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes;
(vi) reduce the percentage of each Class of the Notes then outstanding required
to amend the sections of the Indenture which specify the applicable percentage
of each Class of the Notes then outstanding necessary to amend the Indenture or
certain other related agreements; (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; or (viii) result in a reduction, qualification or withdrawal of the
rating of any Class of Notes by a Rating Agency, as confirmed in writing by each
Rating Agency.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
"Events of Default" under the Indenture will consist of: (i) a default for
five calendar days or more in the payment of interest due on any Note;
(ii) failure to pay the unpaid principal amount of any Class of Notes on the
Stated Maturity Date or any redemption date for such Class; (iii) a default in
the observance or performance in any material respect of any covenant or
agreement of the Issuer made in the Indenture, or any representation or warranty
made by the Issuer 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 calendar days after notice thereof
is given to the Issuer by the Trustee or to the Issuer and the 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 Issuer.
If an Event of Default should occur and be continuing with respect to the
Notes, the 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.
If the Notes have been declared due and payable following an Event of
Default, the Trustee may institute proceedings to collect amounts due or
foreclose on Pledged Revenues, exercise remedies as a secured party, sell the
related Pledged Revenues or elect to have the Issuer maintain possession of the
Pledged Revenues and continue to apply collections on the Pledged Revenues as if
there had been no declaration of acceleration. The Trustee, however, will be
prohibited from selling the Pledged Revenues following an Event of Default,
unless (i) the Holders of all the outstanding Notes consent to such sale;
(ii) the proceeds of such sale distributable to Holders of the Notes are
sufficient to pay in full the principal of and the accrued interest on all the
outstanding Notes at the date of such sale; or (iii) the Trustee determines that
the Pledged Revenues 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 Trustee obtains the consent of
the Holders of 66 2/3% of the aggregate outstanding amount of the Notes.
Following a declaration upon an Event of Default that the Notes are immediately
due and payable, any proceeds of liquidation of the Pledged Revenues, will be
applied in the following order of priority: (i) to the reimbursement of the
Trustee for its expenses; (ii) to the payment of interest
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and then principal on the Class A Notes; (iii) to the payment of interest and
then principal on the Class B Notes; (iv) to the payment of interest and then
principal on the Class C Notes; and (v) the remainder, if any, to the Issuer.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the 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 the Notes, if the 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 will have the right to direct the
time, method and place of conducting any proceeding or any remedy available to
the 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 will have the right to institute any proceeding with
respect to the Indenture, unless (i) such Holder previously has given to the
Trustee written notice of a continuing Event of Default, (ii) the Holders of not
less than 25% in principal amount of the outstanding Notes have made written
request of the Trustee to institute such proceeding in its own name as Trustee,
(iii) such Holder or Holders have offered the Trustee reasonable indemnity,
(iv) the Trustee has for 60 days failed to institute such proceeding, and (v) no
direction inconsistent with such written request has been given to the 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
Trustee, the 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 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, the Trustee and the Noteholders, by accepting the Notes, will
covenant that they will not at any time institute against the Issuer any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Neither the Trustee nor the Issuer in its individual capacity, nor any
Holder of a Note including, without limitation, the SPC, 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 Notes or for any
agreement or covenant of the Issuer contained in the Indenture.
CERTAIN COVENANTS
The Indenture will provide that the Issuer 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 Issuer's obligation to make due
and punctual payments upon the Notes and the performance or observance of every
agreement and covenant of the Issuer under the Indenture, (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation, (iv) the Issuer has been advised that the rating of the Notes
then in effect would not be reduced or withdrawn by the Rating Agencies as a
result of such merger or consolidation, (v) the Issuer has received an opinion
of counsel to the effect that such consolidation or merger would have no
material adverse tax consequence to the Issuer or to any Noteholder, and
(vi) the Issuer or the Person (if other than the Issuer) formed by or surviving
such
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consolidation or merger has a net worth, immediately after such consolidation or
merger, that is (a) greater than zero and (b) not less than the net worth of the
Issuer immediately prior to giving effect to such consolidation or merger.
The Issuer will not, among other things, (i) except as expressly permitted
by the Indenture, sell, transfer, exchange or otherwise dispose of any of the
Trust Assets, (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 Issuer, (iii) dissolve or liquidate in whole or in part,
(iv) permit the validity or effectiveness of the Indenture to be impaired or
permit any person to be released from any covenants or obligations with respect
to the Notes under the indenture except as may be expressly permitted thereby,
or (v) except as expressly permitted by the Indenture or the Contribution and
Servicing Agreement, 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 Issuer or any part thereof, or any interest
therein or proceeds thereof.
The Issuer may not engage in any activity other than as specified under
"The SPC and the Issuer." The Issuer will not incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the Notes and the
Indenture or otherwise in accordance with the Indenture and the Contribution and
Servicing Agreement.
ANNUAL COMPLIANCE STATEMENT
The Issuer will be required to file annually with the Trustee a written
statement as to the fulfillment of its obligations under the Indenture.
TRUSTEE'S ANNUAL REPORT
The Trustee will be required to mail each year to all Noteholders a brief
report relating to its eligibility and qualification to continue as 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
Issuer to the Trustee in its individual capacity, the property and funds
physically held by the Trustee as such and any action taken by it that
materially affects the Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing
the Notes upon the delivery to the related Trustee for cancellation of all such
Notes or, with certain limitations, upon deposit with the Trustee of funds
sufficient for the payment in full of all of such Notes.
THE TRUSTEE
___________________ will be the Trustee. The Trustee may resign at any
time, in which event the Issuer will be obligated to appoint a successor
trustee. The Issuer may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the Indenture, if the Trustee becomes
insolvent or if the rating assigned to the long-term unsecured debt obligations
of the Trustee (or the holding company thereof) by the Rating Agencies shall be
lowered below the rating of "BBB", "Baa3" or equivalent rating or be withdrawn
by any Rating Agency. In such circumstances, the Issuer 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 a successor trustee.
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DESCRIPTION OF THE CONTRIBUTION AND SERVICING AGREEMENT
TRANSFER AND ASSIGNMENT OF LEASES AND EQUIPMENT
On the Closing Date, Vendor Services will transfer to the SPC pursuant to
the Transfer Agreement all of its right, title and interest in the Leases and
the related Equipment, including all security interests created thereby and
therein, the right to receive all Scheduled Payments and Prepayments received on
the Leases on or after the Cut-Off Date (including all Scheduled Payments due
prior to, but not received as of, the Cut-Off Date, but excluding any Scheduled
Payments due on or after, but received prior to, the Cut-Off Date), all rights
under insurance policies maintained on the Equipment pursuant to the Leases, all
documents contained in the Lease Files and all proceeds derived from any of the
foregoing. Pursuant to the Contribution and Servicing Agreement, on the Closing
Date, the SPC will transfer all of its rights in the Leases and certain rights
to Residual Realizations, together with all its rights under the Transfer
Agreement, to the Issuer.
The Contribution and Servicing Agreement will designate the Servicer as
custodian to maintain possession, as the Issuer's agent, of the Leases and all
documents related thereto. To facilitate servicing and save administrative
costs, the documents will not be physically segregated from other similar
documents that are in the Servicer's possession. UCC financing statements will
be filed on the Closing Date in the applicable jurisdictions reflecting the
transfer of the Leases by Vendor Services to the SPC, by the SPC to the Issuer,
and the pledge of the Leases by the Issuer to the Trustee, and Vendor Services's
accounting records and computer systems will also reflect such assignments and
pledge. The Leases will not, however, be stamped or otherwise physically marked
to reflect their assignment to the Issuer. If, through fraud, negligence or
otherwise, a subsequent purchaser were able to take physical possession of the
Leases without knowledge of the assignment, the Issuer's interest in the Leases
could be defeated. See "Risk Factors -- Certain Legal Aspects of the Leases"
and "Certain Legal Aspects of the Leases."
COLLECTIONS ON LEASES
The Trustee will establish and maintain a Servicing Account, into which the
Servicer will deposit, no later than the second Business Day after receipt
thereof, all Scheduled Payments, Prepayments, Liquidation Proceeds, Residual
Realizations and other amounts received by the Servicer in respect of the Leases
on and after the Cut-Off Date. The Servicer will thereafter transfer to the
Collection Account, no later than the third Business Day after deposit thereof
in the Servicing Account, the following amounts:
(i) all Scheduled Payments made by or on behalf of Obligors under
the Leases;
(ii) all Prepayments;
(iii) all amounts constituting Liquidation Proceeds on Liquidated
Leases;
(iv) any and all payments made by Vendor Services pursuant to the
Transfer Agreement in connection with the purchase of any Leases as a
result of a breach of a representation or warranty with respect thereto, as
described under "The Leases -- Representations and Warranties Made by
Vendor Services"; and
(v) the amount paid by the SPC to purchase the Leases, as described
under "Description of the Notes -- Optional Purchase of Leases."
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The Servicer will transfer all Residual Realizations from the Servicing
Account to the Residual Account no later than the third Business Day after
deposit thereof in the Servicing Account.
So long as no Event of Termination shall have occurred and be continuing
with respect to the Servicer, the Servicer may make the remittances to be made
by it to the Collection Account net of amounts (which amounts may be netted
prior to any such remittance for a Collection Period) otherwise to be
distributed to it in payment of its Servicing Fee.
The Servicer will be entitled to withdraw from the Collection Account any
amounts deposited therein in error or required to be repaid to an Obligor, based
on the Servicer's good-faith determination that such amount was deposited in
error or must be returned to the Obligor.
Under the Contribution and Servicing Agreement, the Servicer is required to
establish in its own name one or more "Insurance, Maintenance and Tax Accounts,"
into which are to be deposited any payments made by or on behalf of Obligors
which constitute (a) insurance charges paid by an Obligor to the lessor or
secured party under a Lease (unless such payments are made directly by the
Obligor to the applicable insurance company, or Vendor Services has previously
paid such charges), (b) any insurance payments or recoveries paid by an
insurance company or comparable third party and related to the damage to, or
destruction of, the Equipment related to such Lease (unless paid directly by
such insurance company or comparable third party directly to the Obligor),
(c) any payments made by or on behalf of Obligors which constitute amounts paid
by an Obligor to the lessor or secured party under a Lease in respect of the
maintenance of the related Equipment, and (d) taxes paid by the Obligor and
related to the applicable Lease or the Equipment related thereto (unless such
payment is made directly by the Obligor to the applicable taxing authority or
authorities, or Vendor Services has previously paid such taxes). The Servicer
may withdraw amounts from the Insurance, Maintenance and Tax Accounts, when and
if appropriate, to pay when due (or may pay from its own funds and thereafter
reimburse itself from amounts in the Insurance, Maintenance and Tax Accounts)
(1) all insurance charges in the amounts received under clause (a) above,
(2) any amounts payable under any applicable maintenance contract or otherwise
with respect to the maintenance of the related Equipment in the amounts received
under clause (c) above, and (3) all taxes in the amounts received under clause
(d) above. Amounts on deposit in the Insurance, Maintenance and Tax Accounts
which represent amounts received by the Servicer pursuant to clause (b) above
shall be applied by the Servicer as follows: if equipment is purchased to
replace the Equipment that was damaged or destroyed, and such replacement
equipment is (in the reasonable opinion of the Servicer) of comparable use and
equivalent value to the Equipment that was damaged or destroyed, or if the
Equipment is to be repaired, the Servicer shall release such amount so received
from the insurance company or comparable third party in payment or reimbursement
for such replacement equipment or such repair; and if this replacement option is
not exercised and the Equipment is not to be repaired, then the Servicer shall
treat such amount as Liquidation Proceeds and transfer that portion thereof
which would be allocable to the Notes (as described in "Description of the
Notes -- Liquidated Leases") from the Insurance, Maintenance and Tax Account to
the Collection Account.
On or before the first Business Day preceding each Payment Date (the
"Determination Date"), the Servicer is required to determine the amount of
Available Pledged Revenues for such Payment Date, the amount of interest payable
on the Notes on such Payment Date, the Monthly Principal Amount for such Payment
Date, the Principal Deficiency Amount (if any) for such Payment Date, and the
amount, if any, by which such Available Pledged Revenues, when applied in
accordance with the priorities described under "Description of the Notes --
Distributions," are insufficient to pay the interest and principal payable on
the Notes on such Payment Date (a "Payment Shortfall"). If there is a Payment
Shortfall for such Payment Date, amounts on deposit in the Residual Account
(subject to the
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Residual Amount Cap) will be applied to the payment of interest and principal on
the Notes to the extent necessary to cure such Payment Shortfall. The Servicer
shall further give notice to the Trustee of (1) any remaining Payment Shortfall
(after giving effect to the previous application of funds in the Residual
Account as aforesaid), (2) the Principal Deficiency Amount (if any), and (3) if
such Payment Date is the Stated Maturity Date for any Class of Notes, the
remaining unpaid principal balance of such Class of Notes (after giving effect
to previous application of funds in the Residual Account as aforesaid).
SERVICING
Pursuant to the Contribution and Servicing Agreement, Vendor Services will
be engaged to act as Servicer on behalf of the Issuer. The Servicer is
generally obligated under the Contribution and Servicing Agreement to service
the Leases in accordance with customary and usual procedures of institutions
which service equipment Leases, installment sale contracts, promissory notes,
loan and security agreements and other similar types of receivables comparable
to the Leases and, to the extent more exacting, the degree of skill and
attention that the Servicer exercises from time to time with respect to all
comparable such contracts that it services for itself or others. In performing
such duties, so long as Vendor Services is the Servicer, it shall comply in all
material respects with its credit and collection policies and procedures in
effect from time to time (which credit and collection policies currently in
effect are described under "Green Tree Vendor Services Corporation --
Underwriting and Servicing"). The Servicer may delegate certain of its
servicing responsibilities with respect to the Leases to third parties, provided
that the Servicer will remain obligated to the Issuer for the proper performance
of all such servicing responsibilities.
The Servicer will use its best efforts to sell or re-lease any Equipment
upon the termination of the Lease to which such Equipment is subject (whether as
a result of early termination following an Obligor default or upon scheduled
expiration of the Lease), in a timely manner and in a manner so as to maximize,
to the extent possible under then prevailing market conditions, the net proceeds
from such Equipment. The Servicer may, in its discretion, choose to dispose of
Equipment through a new lease or in some other manner which provides for payment
for the Equipment over time. In any such event, the Servicer will be required
to pay from its own funds an amount which, in its reasonable judgment, is equal
to the fair market value of such Equipment (less any related out-of-pocket
liquidation expenses), and the Servicer will be entitled to all payments
received thereafter in respect of such Equipment. Any such amounts so paid by
the Servicer will be deemed to constitute additional Liquidation Proceeds or
Residual Realization, depending on the reason for the disposition of the
Equipment, with respect to the related Lease and Equipment.
Under the Contribution and Servicing Agreement, the Servicer is responsible
for, among other things: freviewing and certifying that the Lease Files are
complete; monitoring and tracking any property and sales taxes to be paid by
Obligors; billing, collection and recording of payments from Obligors;
communicating with and providing billing records to Obligors; deposit of funds
into the Collection Account; receiving payments as the Issuer's agent on the
insurance policies maintained by the Obligors and communicating with insurers
with respect thereto; issuance of reports to the Trustee specified in the
Indenture and in the Contribution and Servicing Agreement; repossession and
remarketing of Equipment following Obligor defaults; and paying the fees and
ordinary expenses of the Trustee.
The Servicer shall, to the extent the proceeds of such liquidation are
sufficient therefor, be entitled to recover all reasonable out-of-pocket
expenses incurred by it in the course of liquidating a Lease and disposing of
the related Equipment, which amounts may be retained by the Servicer from such
proceeds to the extent of such expenses. The Servicer is entitled under the
Contribution and
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Servicing Agreement to retain, from liquidation proceeds, a reserve for out-of-
pocket liquidation expenses in an amount equal to such expenses, in addition to
those previously incurred, as it reasonably estimates will be incurred. Upon
completion of such liquidation, the remainder of any such reserve, after
reimbursement to the Servicer of all out-of-pocket liquidation expenses, shall
constitute Liquidation Proceeds and be deposited in the Collection Account.
Under the Contribution and Servicing Agreement, the Servicer, subject to
certain limitations, is permitted to grant payment extensions on a Lease in
accordance with its credit and collection policies and procedures if the
Servicer believes in good faith that such extension is necessary to avoid a
termination and liquidation of such Lease and will maximize the amount to be
received by the Issuer with respect to such Lease. Under the Contribution and
Servicing Agreement, the Servicer, subject to certain limitations, is permitted
to grant modifications or amendments to a Lease in accordance with its credit
and collection policies and procedures.
Prepayments. The Servicer may in its discretion allow a Prepayment of any
Lease, but only if the amount paid by or on behalf of the Obligor (or, in the
case of a partial Prepayment, the sum of such amount and the remaining Principal
Balance of the Lease after application of such amount) is at least equal to the
Required Payoff Amount of such Lease. To the extent any Prepayment exceeds the
Required Payoff Amount of a Lease, such excess will be paid to the Depositor.
Evidence as to Compliance. On or before March 31 of each year, the
Servicer must deliver to the Trustee a report of a nationally recognized
accounting firm stating that such firm has examined certain documents and
records relating to the servicing of equipment leases and loans serviced by the
Servicer and stating that, on the basis of such procedures, such servicing has
been conducted in compliance with the Contribution and Servicing Agreement,
except for any exceptions set forth in such report.
Certain Matters Regarding the Servicer. The Servicer may not resign from
its obligations under the Contribution and Servicing Agreement except upon a
determination that its duties thereunder are no longer permissible under
applicable law. No such resignation will become effective until a successor
servicer has assumed the Servicer's obligations and duties under the
Contribution and Servicing Agreement. The Servicer can be removed as Servicer
only upon the occurrence of an Event of Termination as discussed below.
The Servicer must keep in place throughout the term of the Contribution and
Servicing Agreement (i) a policy or policies of insurance covering errors and
omissions by the Servicer, and (ii) a fidelity bond. Such policy or policies
and such fidelity bond shall be in such form and amount as is generally
customary among persons that service a portfolio of equipment leases having an
unpaid balance of at least $100 million and which are generally regarded as
servicers acceptable to institutional investors.
Servicing Compensation and Payment of Expenses. Compensation to the
Servicer will include a monthly fee (the "Servicing Fee"), which will be payable
to the Servicer from the Amount Available on each Payment Date, in an amount
equal to the product of one-twelfth of ________% per annum multiplied by the
Lease Pool Principal Balance as of the last day of the second preceding
Collection Period (or, in the case of the Servicing Fee with respect to the
Collection Period commencing on the Cut-Off Date, the Pool Principal Balance as
of the Cut-Off Date), plus any late fees, late payment interest, documentation
fees, insurance administration charges and other administrative fees and charges
and a portion of any extension fees (collectively, the "Administrative Fees")
collected with respect to the Leases during the prior Collection Period and any
investment earnings on collections prior to deposit thereof in the Collection
Account. The Servicer is authorized under the Contribution and Servicing
Agreement, in its discretion, to waive any Administrative Fees or extension fees
that may be collected
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in the ordinary course of servicing any Lease.
Events of Termination. An Event of Termination under the Contribution and
Servicing Agreement will occur if (a) the Servicer fails to make any payment or
deposit required under the Contribution and Servicing Agreement and such failure
continues for five business days after notice from the Trustee or after
discovery by the Servicer; (b) the Servicer fails to deliver to the Trustee and
the Issuer the Servicer's Certificate by the third Business Day prior to the
related Payment Date; (c) the Servicer fails to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
the Contribution and Servicing Agreement (and, if Vendor Services is the
Servicer, the Transfer Agreement), and such failure (i) materially and adversely
affects the rights of the Issuer or Noteholders, and (ii) continues unremedied
for 30 days after written notice thereof has been given to the Servicer by the
Issuer, the Trustee or any Noteholder; (d) certain events of bankruptcy or
insolvency occur with respect to the Servicer; or (e) any representation,
warranty or statement of the Servicer made in the Contribution and Servicing
Agreement or any certificate, report or other writing delivered pursuant thereto
proves to be incorrect in any material respect, and such incorrectness (i) has a
material adverse effect on the Issuer or Noteholders, and (ii) continues uncured
for 30 days after written notice thereof has been given to the Servicer by the
Issuer, the Trustee or any Noteholder. The Servicer is required under the
Contribution and Servicing Agreement to give the Trustee, the Issuer and each
Rating Agency notice of an Event of Termination promptly after having obtained
knowledge of such event.
Federal bankruptcy laws limit the termination of contracts solely by reason
of the fact that the party obligated to provide such performance is subject to
federal bankruptcy proceedings. In such a circumstance, the Trustee may be
unable to terminate the Servicer unless it could demonstrate that independent
grounds (whether or not arising from the same facts causing the Servicer to be
subject to bankruptcy proceedings) exist to declare an Event of Termination and
the court supervising the bankruptcy proceeding determines that such grounds
warrant termination of the Servicer.
Rights upon Event of Termination. So long as an Event of Termination
remains unremedied, the Trustee may, and at the written direction of a Note
Majority shall, terminate all of the rights and obligations of the Servicer
under the Contribution and Servicing Agreement in and to the Leases, whereupon a
successor servicer (which, unless and until the Trustee appoints a new servicer,
will be the Trustee) will succeed to all the responsibilities, duties and
liabilities of the Servicer under the Contribution and Servicing Agreement and
will be entitled to similar compensation arrangements; provided, however, that
any successor servicer be liable for any acts or omissions of the prior Servicer
occurring prior to a transfer of the Servicer's servicing and related functions
or for any breach by such Servicer of any of its obligations contained in the
Contribution and Servicing Agreement.
A Note Majority may waive any default by the Servicer in the performance of
its obligations under the Contribution and Servicing Agreement and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Event of Termination arising therefrom shall be deemed to have
been remedied. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
AMENDMENT
The Contribution and Servicing Agreement may be amended by the parties
thereto (i) to cure any ambiguity, (ii) to correct or supplement any provision
therein that may be inconsistent with any other provision therein, or (iii) to
make any other provisions with respect to matters or questions arising under the
Contribution and Servicing Agreement that are not inconsistent with the
provisions thereof, provided that such action will not adversely affect in any
material respect the interests of the Noteholders. The Contribution and
Servicing Agreement may also be amended by the parties thereto
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with the consent of a Note Majority for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the
Contribution and Servicing Agreement or of modifying in any manner the rights of
the Noteholders; provided, however, that no such amendment (a) that reduces in
any manner the amount of, or accelerates or delays the timing of, any payment
received on or with respect to Leases that are required to be distributed on any
Note or that reduces the aforesaid percentage required to consent to any such
amendment or any waiver under the Contribution and Servicing Agreement, may be
effective without the consent of the Holder of each such Note, or (b) will be
effective unless each Rating Agency confirms that such amendment will not result
in a reduction, qualification or withdrawal of the ratings on the Notes.
TERMINATION OF THE CONTRIBUTION AND SERVICING AGREEMENT
The obligations created by the Contribution and Servicing Agreement will
terminate (after distribution of all interest and principal then due to
Noteholders) on the earlier of (i) the Payment Date next succeeding the later of
the final payment or other liquidation of the last Lease or the disposition of
all Equipment acquired upon termination of any Lease; or (b) the Payment Date on
which the SPC repurchases the Leases as described under "Description of the
Notes -- Optional Purchase of Leases." However, Vendor Services's
representations, warranties and indemnities will survive any termination of the
Contribution and Servicing Agreement.
CERTAIN LEGAL ASPECTS OF THE LEASES
ENFORCEMENT OF SECURITY INTERESTS IN THE EQUIPMENT
Due to the administrative burden and expense, no assignments of the UCC
financing statements evidencing the security interest of Vendor Services in the
Equipment (to the extent that such financing statements have been filed against
the Obligor, as discussed under "Green Tree Vendor Services Corporation --
Documentation") will be filed to reflect the SPC's, the Issuer's or the
Trustee's interests therein. While failure to file such assignments does not
affect the Issuer's interest in the Leases (including Vendor Services's interest
in the related Equipment), it does expose the Issuer and the Noteholders to the
risk that Vendor Services could release its security interest in the Equipment
of record, and it could complicate the Issuer's enforcement, as assignee, of
Vendor Services's security interest in the Equipment. While these risks should
not affect the perfection or priority of the interest of the Trustee in the
Leases or rights to payment thereunder, they may adversely affect the right of
the Trustee to receive proceeds of disposition of the Equipment subject to a
Liquidated Lease, which are to be allocated to the payment of the Notes as
described under "Description of the Notes -- Liquidated Leases." Additionally,
statutory liens for repairs or unpaid taxes and other liens arising by operation
of law may have priority even over prior perfected security interests assigned
to the Trustee in the Equipment.
In the event of a default by the Obligor under a Lease intended for
security, the Servicer on behalf of the Issuer may take action to enforce Vendor
Services' interest in the related Equipment by repossession and resale or re-
lease of the Equipment. Under the UCC in most states, a creditor can, without
prior notice to the debtor, repossess assets securing a defaulted contract by
the Obligor's voluntary surrender, or by "self-help" repossession that does not
involve a breach of the peace and by judicial process. In the event of
bankruptcy or insolvency of the Obligor these remedies may require the
permission of a bankruptcy court or may otherwise not be immediately available.
See "-- Insolvency Matters" below.
In the event of a default by the Obligor under a Lease intended for
security, some jurisdictions
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require that the Obligor be notified of the default and be given a time period
within which it may cure the default prior to repossession. Generally, this
right of reinstatement may be exercised on a limited number of occasions in any
one-year period.
The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the debtor 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 and that any such sale be
conducted in a commercially reasonable manner.
Under most state laws, an Obligor under a Lease intended for security has
the right to redeem collateral for its obligations prior to actual sale by
paying the lessor or secured party the unpaid balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, to the extent provided for in the
written agreement of the parties, reasonable attorneys' fees.
In addition, because the market value of equipment of the type subject to
the Leases generally declines with age, due to obsolescence, the net disposition
proceeds of Equipment at any time during the term of the Leases may not equal or
exceed the Principal Balance on the related Lease. Because of this, and because
other creditors may in certain cases have rights in the related Equipment
superior to those of the Issuer, the Servicer may not be able to recover the
entire amount due on a defaulted Lease in the event that the Servicer elects to
repossess and dispose of such Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from an Obligor under a Lease intended for security
for any deficiency on repossession and resale of the asset securing the unpaid
balance of such Obligor's Lease. However, some states impose prohibitions or
limitations on deficiency judgments. In most jurisdictions, the courts, in
interpreting the UCC, would impose upon a creditor an obligation to repossess
the equipment in a commercially reasonable manner and to "mitigate damages" in
the event of an Obligor's failure to cure a default. The creditor would be
required to exercise reasonable judgment and follow acceptable commercial
practice in seizing, selling or re-leasing the equipment and to offset the net
proceeds of such disposition against its claim. In addition, an Obligor may
successfully invoke an election of remedies defense to a deficiency claim in the
event that the Servicer's repossession and sale of the Equipment is found to be
a retention discharging the Obligor from all further obligations under the UCC.
If a deficiency judgment were granted, the judgment would be a personal judgment
against the Obligor for the shortfall, but a defaulting Obligor may have limited
assets 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.
Many states have adopted a version of Article 2A of the UCC ("Article 2A").
Article 2A purports to codify many provisions of existing common law. Although
there is little precedental authority regarding how Article 2A will be
interpreted, it may, among other things, limit enforceability of any
"unconscionable" provision in a Lease, provide an Obligor with remedies
including the right to cancel the Lease for any lessor breach or default, and
may add to or modify the terms of "consumer leases" and leases where the Obligor
is a "merchant lessee." However, each Lease contains an acknowledgement by the
Obligor that the Equipment was acquired for business purposes, and Vendor
Services will represent in the Contribution and Servicing Agreement that no
Lease is a "consumer lease" under Article 2A. Article 2A, moreover, recognizes
typical commercial lease "hell or high water" rental payment clauses and
validates reasonable liquidated damages provisions in the event of lessor or
Obligor defaults. Article 2A also recognizes the concept of freedom of contract
and permits the parties in a commercial context a wide latitude to vary
provisions of the law.
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<PAGE>
INSOLVENCY MATTERS
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may also limit the ability of the Servicer to repossess and
resell or re-lease Equipment or obtain a deficiency judgment. In the event of
the bankruptcy or reorganization of an Obligor, various provisions of the
Bankruptcy Code of 1978 (the "Bankruptcy Code") and related laws may interfere
with or eliminate the ability of the Servicer to enforce the Issuer's rights
under the Leases. For example, although the bankruptcy or reorganization of an
Obligor would constitute an event of default under such Lease, the Bankruptcy
Code provides generally that rights and obligations under an unexpired lease or
an executory contract may not be terminated or modified solely because of a
provision in the lease or executory contract conditioned upon the commencement
of a case under the Bankruptcy Code. If bankruptcy proceedings were instituted
in respect of an Obligor under such a Lease, the Issuer could be prevented from
continuing to collect payments due from or on behalf of such Obligor or
exercising any remedies assigned to the Issuer without the approval of the
bankruptcy court, and, with respect to a Lease intended as security, the
bankruptcy court could permit the Obligor, as owner of the Equipment, to use or
dispose of the Equipment and provide the Issuer with a lien on substitute
collateral, so long as the court held that such substitute collateral
constituted "adequate protection" within the meaning of the Bankruptcy Code.
In the case of a Lease that is deemed not to be intended as security, the
Bankruptcy Code grants to the bankruptcy trustee or the debtor-in-possession a
right to elect to assume or reject any executory contract or unexpired lease.
Any such rejection by the lessee would result in the return of the leased
equipment to the lessor. Any rejection of such a lease or contract constitutes
a breach of such lease or contract, entitling the non-breaching party to a claim
for breach of contract, which claim would be payable only from the assets of the
debtor's bankruptcy estate. The net proceeds from any resulting judgment would
be deposited into the Collection Account by the Servicer. See "Description of
the Notes -- Liquidated Leases."
In the event that, as a result of the bankruptcy or reorganization of an
Obligor, the related Lease becomes a defaulted Lease, the amount available to be
withdrawn from, or drawn on, the Cash Collateral Account has been reduced to
zero and the Lease has become a defaulted Lease without breach of any
representation or warranty of Vendor Services, no recourse would be available
against Vendor Services and the Noteholders could suffer a loss with respect to
such Lease.
These UCC and bankruptcy provisions, in addition to the possible decrease
in the value of a repossessed item of Equipment, may limit the amount realized
on the sale of Equipment securing the Leases to less than the amount due
thereunder.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain United States federal
income tax considerations relevant to the purchase, ownership and disposition of
the Notes by the holders thereof. Dorsey & Whitney LLP, counsel to the Issuer
("Counsel"), will deliver their opinion regarding certain federal income tax
matters discussed below. The opinion of Counsel addresses only those issues
specifically identified below as being covered by such opinion; however, the
opinion of Counsel also states that the additional discussion set forth below
accurately sets forth Counsel's advice with respect to material tax issues. The
opinion of Counsel is not binding on the Internal Revenue Service (the "IRS").
There can be no assurance that the IRS will take a similar view of such issues,
and no assurance can be given that the opinion of Counsel would be sustained if
challenged by the IRS. No ruling on any of the issues discussed below will be
sought from the IRS.
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<PAGE>
This summary does not purport to be a complete analysis of all the
potential federal income tax consequences relating to the purchase, ownership
and disposition of the Notes. Moreover, the discussion does not address all
aspects of taxation that may be relevant to particular purchasers in light of
their individual circumstances (including the effect of any foreign, state or
local tax laws) or to certain types of purchasers (including dealers in
securities, insurance companies, financial institutions and tax-exempt entities)
subject to special treatment under United States federal income tax laws. The
discussion below assumes that the Notes are held as capital assets.
The discussion of the United States federal income tax consequences set
forth below is based upon currently existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), judicial decisions and administrative
interpretations, all of which are subject to change, which changes may be
retroactive. Because individual circumstances may differ, each prospective
purchaser of the Notes is strongly urged to consult its own tax advisor with
respect to its particular tax situation and the tax effects of any state, local,
foreign, or other tax laws and possible changes in the tax laws.
As used herein, the term "United States Holder" means a beneficial owner of
a Note who or which is for United States federal income tax purposes either
(i) a citizen or resident of the United States, (ii) a corporation, partnership
or other entity created or organized in or under the laws of the United States
or of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust, (A) for taxable years beginning after December 31, 1996 (or after
August 20, 1996, if the trustee has made an applicable election), with respect
to which a court within the United States is able to exercise primary
supervision over its administration, and one or more United States fiduciaries
have the authority to control all of its substantial decisions, or
(B) otherwise, the income of which is subject to U.S. federal income tax
regardless of its source. The term also includes certain former citizens of the
United States whose income and gain on the Notes will be subject to United
States taxation. As used herein, the term "United States Alien Holder" means a
beneficial owner of a Note that is not a United States Holder.
TREATMENT OF THE NOTES
In the opinion of Counsel, the Notes will be treated as indebtedness for
United States federal income tax purposes. Under the terms of the Notes and the
Indenture, each Noteholder agrees and acknowledges upon its purchase of the
Notes and by acceptance of the Notes that it will also treat the Notes as
indebtedness for such purposes.
TREATMENT OF THE ISSUER
In the opinion of Counsel, the Issuer will not be characterized as an
"association" or "publicly traded partnership" taxable as a corporation for
United States federal income tax purposes. If the Issuer were treated as either
an association or a publicly traded partnership taxable as a corporation, the
resulting entity would be subject to federal income taxes at corporate tax rates
on its taxable income generated by ownership of the Leases, and certain
distributions by the entity would not be deductible in computing the entity's
taxable income. Such an entity-level tax could result in reduced distributions
to Noteholders.
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable to a United States Holder
as ordinary interest income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for federal income tax
purposes.
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<PAGE>
ORIGINAL ISSUE DISCOUNT
Under applicable regulations, a Note will be considered issued with
original issue discount ("OID") if the "stated redemption price at maturity" of
the 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 regulations if it does not exceed
.25% of the stated redemption price at maturity of a Note multiplied by the
number of full years until its maturity date or, in the case of the Notes which
have more than one principal payment, the weighted average maturity date. It is
anticipated that the Notes will not be considered issued with more than de
minimis OID. Under the OID regulations, a holder of a Note issued with a de
minimis amount of OID must include an allocable portion of such OID in income 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. If the Notes are issued
with more than de minimis OID, such OID would be includible in the income of
Noteholders as interest over the term of the Notes under a constant yield
method. Any amount included in income as OID would not, however, be includible
again when the amount is actually received. If the yield on a class of Notes is
not materially different from its coupon, this treatment will have no
significant effect on Noteholders using the accrual method of accounting. Cash
method Noteholders, however, may be required to report income with respect to
Notes issued with OID in advance of the receipt of cash attributable to such
income. Each Noteholder should consult its own tax advisor regarding the impact
of the OID rules if the Notes are issued with OID and the consequences to such
holder as a result of special rules in the Code which are applicable to debt
instruments whose principal payments may be accelerated by reason of prepayments
of other obligations securing such debt instruments.
MARKET DISCOUNT
If a United States Holder purchases a Note at a price that is less than its
remaining principal amount or, in the case of a Note issued with OID, its
adjusted issue price, by 0.25% or more of its remaining redemption amount
multiplied by the number of whole years to maturity, the Note will be considered
to bear "market discount" in the hands of such United States Holder. In such
case, principal payments received by the United States Holder, or gain realized
by the United States Holder on the disposition of the Note, generally will be
treated as ordinary interest income to the extent of the market discount that
accrued on the Note while held by such United States Holder and that has not
previously been included in income. Market discount generally accrues on a
straight-line basis over the remaining term of a Note except that, at the
election of the United States Holder, market discount may accrue on a constant
yield basis. A United States Holder may not be allowed to deduct immediately all
or a portion of the interest expense on any indebtedness incurred or continued
to purchase or to carry such Note. A United States Holder may elect to include
market discount in income currently as it accrues (either on a straight-line
basis or, if the United States Holder so elects, on a constant yield basis), in
which case the interest deferral rule set forth in the preceding sentence will
not apply. Such an election will apply to all bonds acquired by the United
States Holder on or after the first day of the first taxable year to which such
election applies and may be revoked only with the consent of the IRS. A United
States Holder may not be allowed to deduct immediately all or a portion of the
interest expense on any indebtedness incurred or continued, or short-sale
expenses incurred, to purchase or carry such a Note; provided, that, if such a
Noteholder elected to include market discount in income currently as it accrues,
the foregoing deferral rule will not apply.
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<PAGE>
AMORTIZABLE BOND PREMIUM
If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity, such holder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium using a constant yield method over the remaining term of
the Note. The amount amortized in any year will be treated as a reduction of the
United States Holder's interest income from the Note in such year. A United
States Holder that elects to amortize bond premium must reduce its tax basis in
the Note by the amount of the premium amortized in any year. An election to
amortize bond premium applies to all taxable debt obligations then owned or
thereafter acquired by the United States Holder and may be revoked only with the
consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (not including any amount
attributable to accrued but unpaid interest) and such holder's adjusted tax
basis in the Note. To the extent attributable to accrued but unpaid interest,
the amount realized by a United States Holder would be treated as a payment of
interest. A United States Holder's adjusted tax basis in a Note will equal the
cost of the Note to such holder, increased by the amount of any OID and market
discount previously included in income by such holder with respect to such Note
and reduced by any amortized bond premium and any principal payments received by
such holder.
Subject to the discussion of market discount above, gain or loss realized
on the sale, exchange or retirement of a Note by a United States Holder will be
capital gain or loss, and will be long-term capital gain or loss if at the time
of the sale, exchange or retirement the Note has been held for more than one
year. The excess of net long-term capital gains over net short-term capital
losses is taxed at a lower rate than ordinary income for certain non-corporate
taxpayers, but not for corporate taxpayers. The distinction between capital gain
or loss and ordinary income or loss is also relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE NOTEHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO THE PROSPECTIVE NOTEHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME TAX LAWS AND ANY
RECENT OR POSSIBLE CHANGES IN APPLICABLE TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act ("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
Notes might be deemed
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<PAGE>
to constitute prohibited transactions under ERISA and the Code if assets of the
Issuer 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 Issuer 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 Issuer 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 in an entity other than an instrument which is treated as indebtedness
under applicable local law and which has no substantial equity features.
Although there can be no assurances in this regard, it appears that the Notes
should be treated as debt without substantial equity features for purposes of
the Plan Assets Regulation and that the Notes do not constitute equity interests
in the Issuer 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 Issuer or the
Trustee, 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") 96-23, regarding transactions effected by
"in-house asset managers"; PTCE 90-1, regarding investments by insurance company
pooled separate accounts; PTCE 95-60, regarding transactions effected by
"insurance company general accounts"; PTCE 91-38, regarding investments by bank
collective investment funds; and PTCE 84-14, regarding transactions effected by
"qualified professional asset managers."
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 ANY OF THE NOTES SHOULD
CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE ASSETS OF THE ISSUER
WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF EXEMPTIVE RELIEF FROM THE
PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND THEIR POTENTIAL CONSEQUENCES.
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<PAGE>
RATINGS OF THE NOTES
It is a condition of issuance that each of __________ and __________ (i)
rate each Class of the Class A Notes in its highest rating category, (ii) rate
the Class B Notes at least "___" and "___," respectively, and (iii) rate the
Class C Notes at least "___." The rating of each Class of Notes addresses the
likelihood of the timely receipt of interest and payment of principal on such
Class of Notes on or before the Stated Maturity Date for such Class of Notes.
The rating of the Class A and Class B Notes will be based primarily upon the
Pledged Revenues, the Residual Realizations and the subordination provided by
(1) the Class B Notes and the Class C Notes, in the case of the Class A Notes
and (2) the Class C Notes, in the case of the Class B Notes. The rating of Class
C Notes will be based primarily in the Class C Limited Guaranty provided by
Green Tree. There is no assurance that any such rating will not be lowered or
withdrawn by the assigning Rating Agency if, in its judgment, circumstances so
warrant. If Green Tree's long-term debt rating were lowered, it is likely that
the rating of the Class C Notes would be lowered as well. In the event that a
rating or ratings with respect to the Notes is qualified, reduced or withdrawn,
no person or entity will be obligated to provide any additional credit
enhancement with respect to the Notes so qualified, reduced or withdrawn.
The rating of the Notes should be evaluated independently from similar
ratings on other types of securities. A rating is not a recommendation to buy,
sell or hold the Notes, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings of the Notes do not
address the likelihood of payment of principal on any Class of Notes prior to
the Stated Maturity Date thereof, or the possibility of the imposition of United
States withholding tax with respect to non-United States Persons.
USE OF PROCEEDS
The proceeds from the offering and sale of the Notes, after paying the
expenses of the Issuer, will be paid by the Issuer to the SPC and by the SPC to
Vendor Services in connection with the transfer of the Leases and Vendor
Services' interests in the Equipment.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement ), the underwriters named below (the "Underwriters"),
through their representative, Lehman Brothers Inc. (the "Representative"), have
severally agreed to purchase from the Issuer the following respective Initial
Principal Amount of Notes (the "Notes") at the initial public offering price
less the underwriting discounts set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
Initial Initial Initial Initial
Principal Principal Principal Principal
Amount of Amount of Amount of Amount of
U.S. Underwriters Class A-1 Notes Class A-2 Notes Class B Notes Class C Notes
- ---------------------------- ----------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Lehman Brothers Inc........
Total....................
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any of such Notes are purchased. The Issuer has been advised by the
Representative that the Underwriters propose initially to offer the Notes to the
public at the respective public offering prices set forth on the cover page of
this
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<PAGE>
Prospectus, and to certain dealers at such price, less a concession not in
excess of __% per Class A-1 Note, __% per Class A-2 Note, __% per Class B Note
and ___% per Class C Note. The Underwriters may allow and such dealers may
reallow to other dealers a discount not in excess of __% per Class A-1 Note, __%
per Class A-2 Note, __% per Class B Note and __ % per Class C Note. After the
Notes are released for sale to the public, the offering prices and other selling
terms may be varied by the Representative.
Green Tree Financial Corporation has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The Notes are new issues of securities with no established trading market.
The Issuer has been advised by the Representative that the Underwriters intend
to make a market in the Notes in the United States but are not obligated to do
so and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Notes.
Funds in the Trust Accounts may, from time to time, be invested in Eligible
Investments acquired from the Underwriters.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Issuer by Dorsey & Whitney LLP. Brown & Wood LLP will act as counsel to the
Underwriters. The Indenture, the Contribution and Servicing Agreement, the
Transfer Agreement and the Notes will be governed by the laws of the State of
Minnesota.
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<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE TERM PAGE
---- ---- ---- ----
<S> <C> <C> <C>
</TABLE>
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<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER, THE SERVICER, THE SPC, THE TRUSTEE OR THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN ORDER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER, SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference........................... i
Available Information..................................................... ii
Reports to Noteholders.................................................... ii
Table of Contents......................................................... iii
Summary................................................................... 1
Risk Factors.............................................................. 13
The Issuer and the SPC.................................................... 17
Green Tree Vendor Services Corporation.................................... 18
The Leases................................................................ 21
Weighted Average Life of the Notes........................................ 35
Description of the Notes.................................................. 36
Description of the Contribution and Servicing Agreement................... 49
Certain Legal Aspects of the Leases....................................... 54
Federal Income Tax Consequences........................................... 57
ERISA Considerations...................................................... 60
Ratings of the Notes...................................................... 61
Use of Proceeds........................................................... 61
Underwriting.............................................................. 61
Legal Matters............................................................. 62
Index of Principal Terms.................................................. 63
</TABLE>
_______________
Until ________, 1998, all dealers effecting transactions in the Notes,
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 when acting as underwriters and with respect to their unsold
allotments or subscriptions.
GREEN TREE LEASE
FINANCE 1997-1, LLC
ISSUER
% LEASE-BACKED NOTES,
CLASS A-1
% LEASE-BACKED NOTES,
CLASS A-2
% LEASE-BACKED NOTES,
CLASS B
% LEASE-BACKED NOTES,
CLASS C
GREEN TREE VENDOR
SERVICES CORPORATION
SERVICER
__________
PROSPECTUS
__________
LEHMAN BROTHERS
DECEMBER ___, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in connection
with the offering of the Lease-Backed Notes, other than underwriting discounts
and commissions, described in this Registration Statement:
Securities and Exchange Commission Registration Fee $303.03
Printing and Engraving *
Legal Fees and Expenses *
Blue Sky Filing and Counsel Fees *
Accounting Fees and Expenses *
Trustee Fees and Expenses *
Rating Agencies' Fees *
Miscellaneous Expenses *
Total $ *
___________
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Green Tree Lease Finance 1997-1, LLC is a limited liability company formed
under the laws of Delaware. Section 18-108 of the Delaware Limited Liability
Company Act provides that a Delaware limited liability company may indemnify any
member or manager or other person from and against any and all claims and
demands whatsoever. The Limited Liability Company Agreement of Green Tree Lease
Finance 1997-1, LLC provides, in effect, that, subject to certain limited
exceptions, such company will indemnify its managers and named officers to the
extent permitted by the Delaware Limited Liability Company Act.
Green Tree Lease Finance II, Inc. is incorporated under the laws of
Minnesota. Section 302A.521 of the Minnesota Statutes provides that a
corporation shall indemnify any person made or threatened to be made a party to
a proceeding by reason of the former or present official capacity of such person
against judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in certain
instances. A decision as to required indemnification is made by a disinterested
II-1
<PAGE>
majority of the Board of Directors present at a meeting at which a disinterested
quorum is present, or by a designated committee of the Board, by special legal
counsel, by the shareholders or by a court.
The Bylaws of Green Tree Lease Finance II, Inc. provide, in effect, that,
subject to certain limited exceptions, such corporation will indemnify its
officers and directors to the extent permitted by the Minnesota Business
Corporation Act.
Green Tree Financial Corporation is incorporated under the laws of
Delaware. Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation, by reason of the fact that such person was an officer, director,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise). The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, for criminal proceedings, had no reasonable cause to believe
that his conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where and officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually and reasonably
incurred.
The Certificate of Incorporation and Bylaws of Green Tree Financial
Corporation provide, in effect, that, subject to certain limited exceptions,
such corporation will indemnify its officers and directors to the extent
permitted by the Delaware General Corporation Law.
II-2
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
The Exhibits filed as part of this Registration Statement are:
<S> <C>
1.1* -- Form of Underwriting Agreement.
3.1* -- Certificate of Formation of Green Tree Lease Finance 1997-1, LLC.
3.2* -- LLC Agreement of Green Tree Lease Finance 1997-1, LLC.
3.3* -- Articles of Incorporation of Green Tree Lease Finance II, Inc.
3.4* -- By-Laws of Green Tree Lease Finance II, Inc.
3.5 -- Certificate of Incorporation of Green Tree Financial Corporation
(incorporated by reference to Exhibit 1.2 to Green Tree Financial
Corporation's Registration S Statement No. 33-60869.)
3.6 -- By-Laws of Green Tree Financial Corporation (incorporated by
reference to Exhibit 3.2 to Green Tree Financial Corporation's
Registration Statement No. 33-60869.
4.1* -- Form of Transfer Agreement.
4.2* -- Form of Contribution and Servicing Agreement.
5.1* -- Opinion and consent of Dorsey & Whitney LLC with respect to
legality (to be filed by amendment).
8.1* -- Opinion and consent of Dorsey & Whitney LLC with respect to tax
matters (to be filed by amendment).
23.1* -- Consent of Dorsey & Whitney LLC (included as part of Exhibit 5.1).
23.2* -- Consent of Dorsey & Whitney LLC (included as part of Exhibit 8.1).
24.1 -- Power of attorney from officers and directors of Green Tree Lease
Finance II, Inc. (included on page (II-6).
24.2 -- Power of attorney from officers and directors of Green Tree
Financial Corporation (included on page (II-7).
25.1* -- Statement of eligibility of Trustee
- ----------------------------
</TABLE>
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Each of the undersigned, Green Tree Lease Finance 1997-1, LLC, Green Tree
Lease Finance II, Inc. and Green Tree Financial Corporation (collectively, the
"Registrants"), hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of any Registrant 's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
The Registrants hereby undertake:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The Registrants hereby undertake to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Green Tree
Lease Finance 1997-1, LLC certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of St. Paul, State of Minnesota, on the
24th day of October, 1997.
GREEN TREE LEASE FINANCE 1997-1, LLC
By: GREEN TREE LEASE FINANCE II, INC.
By: /s/ Joel H. Gottesman
--------------------------------
Joel H. Gottesman
Senior Vice President
and Secretary
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Green Tree
Lease Finance II, Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Paul, State of Minnesota, on the 24th day of
October, 1997.
GREEN TREE LEASE FINANCE II, INC.
By: /s/ Joel H. Gottesman
--------------------------------
Joel H. Gottesman
Senior Vice President
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 24, 1997. Each person whose signature to this
Registration Statement appears below hereby constitutes and appoints Joel H.
Gottesmann and Scott T. Young and each of them, as his true and lawful attorney-
in-fact and agent, with full power of substitution, to sign on his behalf
individually and in the capacity stated below and to perform any acts necessary
to be done in order to file all amendments and post-effective amendments to this
Registration Statement, and any and all instruments or documents filed as part
of or in connection with this Registration Statement or the amendments thereto
and each of the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitutes, shall do or cause to be done by
virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Robert D. Potts Chairman of the Board and October 24, 1997
- -------------------------
Robert D. Potts President
(Principal Executive Officer
and Director)
/s/ Edward L. Finn Executive Vice President October 24, 1997
- -------------------------
Edward L. Finn (Principal Financial and
Accounting Officer)
/s/ Joel H. Gottesman Director October 24, 1997
- -------------------------
Joel H. Gottesman
/s/ Paul A. Boyum Director October 24, 1997
- -------------------------
Paul A. Boyum
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Green Tree
Financial Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Paul, State of Minnesota, on the 24th day of
October, 1997.
GREEN TREE FINANCIAL CORPORATION
By /s/ Scott T. Young
------------------------------
Scott T. Young
Vice President and Controller
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 24, 1997. Each person whose signature to this
Registration Statement appears below hereby constitutes and appoints Joel H.
Gottesmann and Scott T. Young and each of them, as his true and lawful attorney-
in-fact and agent, with full power of substitution, to sign on his behalf
individually and in the capacity stated below and to perform any acts necessary
to be done in order to file all amendments and post-effective amendments to this
Registration Statement, and any and all instruments or documents filed as part
of or in connection with this Registration Statement or the amendments thereto
and each of the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitutes, shall do or cause to be done by
virtue hereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Lawrence M. Coss Chairman of the Board and October 24, 1997
- ------------------------
Lawrence M. Coss Chief Executive Officer
(Principal Executive Officer
and Director)
/s/ Edward L. Finn Executive Vice President and October 24, 1997
- ------------------------
Edward L. Finn Chief Financial Officer
/s/ Scott T. Young Vice President and Controller October 24, 1997
- ------------------------
Scott T. Young
(Principal Accounting Officer)
/s/ Richard G. Evans Director October 24, 1997
- -------------------------
Richard G. Evans
/s/ W. Max McGee Director October 24, 1997
- -------------------------
W. Max McGee
/s/ Robert S. Nickoloff Director October 24, 1997
- -------------------------
Robert S. Nickoloff
/s/ Robert D. Potts Director October 24, 1997
- -------------------------
Robert D. Potts
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1* -- Form of Underwriting Agreement.
3.1* -- Certificate of Formation of Green Tree Lease Finance 1997-1, LLC.
3.2* -- LLC Agreement of Green Tree Lease Finance 1997-1, LLC.
3.3* -- Articles of Incorporation of Green Tree Lease Finance II, Inc.
3.4* -- By-Laws of Green Tree Lease Finance II, Inc.
3.5 -- Certificate of Incorporation of Green Tree Financial Corporation
(incorporated by reference to Exhibit 1.2 to Green Tree Financial
Corporation's Registration St Statement No. 33-60869.)
3.6 -- By-Laws of Green Tree Financial Corporation (incorporated by
reference to Exhibit 3.2 to Green Tree Financial Corporation's
Registration Statement No. 33-6 0869.
4.1* -- Form of Transfer Agreement.
4.2* -- Form of Contribution and Servicing Agreement.
5.1* -- Opinion and consent of Dorsey & Whitney LLC with respect to
legality (to be filed by amendment).
8.1* -- Opinion and consent of Dorsey & Whitney LLC with respect to tax
matters (to be filed by amendment).
23.1* -- Consent of Dorsey & Whitney LLC (included as part of Exhibit 5.1).
23.2* -- Consent of Dorsey & Whitney LLC (included as part of Exhibit 8.1).
24.1 -- Power of attorney from officers and directors of Green Tree Lease
Finance II, Inc. (included on page (II-6).
24.2 -- Power of attorney from officers and directors of Green Tree
Financial Corporation (included on page (II-7).
25.1* -- Statement of eligibility of Trustee
- ----------------------------
</TABLE>
* To be filed by amendment.
