<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
Commission file number 1-08916
-----------
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 Identification No.)
incorporation or organization)
1100 LANDMARK TOWERS, SAINT PAUL, MINNESOTA 55102-1639
----------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612) 293-3400
--------------
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ____________
-----------
AS OF JULY 31, 1997, 136,120,684 SHARES OF COMMON STOCK OF GREEN TREE FINANCIAL
CORPORATION WERE OUTSTANDING.
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED June 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
SIGNATURES 16
EXHIBIT INDEX 17
Certain information included in this Form 10-Q may include "forward-looking"
information, as defined in the Private Securities Litigation Reform Act of 1995
(the "Act"). Such forward-looking information may involve risks or uncertainties
which are described in the Cautionary Statements contained in the Company's Form
8-K filed with the Securities and Exchange Commission on July 12, 1996.
Investors are specifically referred to the Cautionary Statements for a
discussion of factors which could affect the Company's operations and financial
performance. Factors referenced in the Cautionary Statements include: prevailing
economic conditions; ability to access capital resources; short-term interest
rate fluctuations; the level of defaults and prepayments on loans made by the
Company; competition; and regulatory changes. Any forward looking information is
based upon management's reasonable estimate of future results or trends. The
Company does not undertake, and the Act specifically relieves the Company from,
any obligation to update any forward-looking statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,1997 December 31,1996
--------------- -----------------
(unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 593,761,000 $ 442,071,000
Cash deposits, restricted 186,304,000 171,484,000
Other investments 16,894,000 11,925,000
Interest only securities 1,349,721,000 1,157,185,000
Receivables:
Lease 592,169,000 564,348,000
Commercial finance 355,419,000 212,920,000
Consumer revolving credit 157,702,000 40,803,000
Other accounts receivable 106,632,000 85,503,000
Contracts and collateral 879,730,000 453,008,000
Servicing rights 58,869,000 --
Property, furniture and
fixtures 93,094,000 77,859,000
Goodwill 57,668,000 58,950,000
Other assets 29,914,000 21,988,000
-------------- --------------
Total assets $4,477,877,000 $3,298,044,000
============== ==============
Liabilities and Stockholders' Equity:
Notes payable $1,184,337,000 $ 472,181,000
Senior/Senior subordinated
notes 290,599,000 290,348,000
Accounts payable and
accrued liabilities 566,740,000 404,427,000
Investor payable 432,412,000 346,272,000
Income taxes, principally
deferred 634,632,000 539,362,000
-------------- --------------
Total liabilities 3,108,720,000 2,052,590,000
Common stock, $.01 par;
authorized 400,000,000
shares,issued 141,149,284
shares (1997) and
139,782,706 shares (1996) 1,411,000 1,398,000
Additional paid-in capital 425,885,000 373,573,000
Retained earnings 1,105,971,000 926,695,000
Net unrealized gain (loss)
on securities available
for sale (2,650,000) --
Minimum pension liability
adjustments (2,299,000) (2,299,000)
-------------- --------------
1,528,318,000 1,299,367,000
Less treasury stock,
5,286,100 shares (1997)
and 2,051,000 shares (1996)
at cost (159,161,000) (53,913,000)
-------------- --------------
Total stockholders' equity 1,369,157,000 1,245,454,000
-------------- --------------
Total liabilities and
stockholders' equity $4,477,877,000 $3,298,044,000
============== ==============
</TABLE>
See notes to unaudited financial statements.
3
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues:
Gain on contract sales $186,563,000 $115,624,000
Interest 87,887,000 52,977,000
Service 27,153,000 17,235,000
Commission and other 15,542,000 10,266,000
------------ ------------
317,145,000 196,102,000
Expenses:
Interest 36,376,000 17,167,000
Cost of servicing 20,787,000 12,175,000
General and administrative 85,639,000 45,112,000
------------ ------------
142,802,000 74,454,000
------------ ------------
Earnings before income taxes 174,343,000 121,648,000
Income taxes 66,250,000 46,226,000
------------ ------------
Net earnings $108,093,000 $ 75,422,000
============ ============
Earnings per common and
common equivalent share $.78 $.54
==== ====
Weighted average common and
common equivalent shares
outstanding 139,116,319 140,242,029
</TABLE>
See notes to unaudited financial statements.
4
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues:
Gain on contract sales $339,930,000 $213,111,000
Interest 163,316,000 98,159,000
Servicing 51,834,000 33,560,000
Commission and other 29,220,000 19,390,000
------------ ------------
584,300,000 364,220,000
Expenses:
Interest 66,194,000 28,531,000
Cost of servicing 40,166,000 24,337,000
General and administrative 155,528,000 82,668,000
------------ ------------
261,888,000 135,536,000
------------ ------------
Earnings before income taxes 322,412,000 228,684,000
Income taxes 122,516,000 86,900,000
------------ ------------
Net earnings $199,896,000 $141,784,000
============ ============
Earnings per common and
common equivalent share $1.42 $1.01
===== =====
Weighted average common and
common equivalent shares
outstanding 140,667,941 139,913,427
</TABLE>
See notes to unaudited financial statements.
5
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Servicing fees and net interest
payments collected $ 143,130,000 $ 106,408,000
Net principal payments collected 90,281,000 59,367,000
Interest on contracts 54,936,000 27,503,000
Interest on cash, investments and
receivables 52,654,000 31,697,000
Commissions 26,120,000 16,557,000
Other 5,143,000 (141,000)
--------------- ---------------
372,264,000 241,391,000
--------------- ---------------
Cash paid to employees and suppliers (189,538,000) (130,744,000)
Interest paid on debt (52,480,000) (27,449,000)
Income taxes paid (20,021,000) (25,080,000)
--------------- ---------------
(262,039,000) (183,273,000)
--------------- ---------------
NET CASH PROVIDED BY OPERATIONS 110,225,000 58,118,000
Purchase of contracts and leases (5,072,390,000) (3,171,967,000)
Proceeds from sale of contracts 4,336,525,000 3,468,454,000
Principal collections on contracts
and leases 440,993,000 68,971,000
Proceeds from sale of
commercial finance loans -- 199,950,000
Commercial and revolving
credit loans disbursed (1,901,585,000) (1,219,647,000)
Principal collections on
commercial and revolving
credit loans 1,697,510,000 976,283,000
Net cash deposits (14,820,000) (10,873,000)
--------------- ---------------
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES (403,542,000) 369,289,000
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, furniture
and fixtures (27,093,000) (15,230,000)
Net (purchases) sales of investments (4,968,000) 14,943,000
--------------- ---------------
NET CASH USED FOR INVESTING ACTIVITIES (32,061,000) (287,000)
--------------- ---------------
</TABLE>
6
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities 4,742,667,000 2,574,576,000
Repayments on credit facilities (4,030,510,000) (2,636,271,000)
Dividends paid (20,620,000) (17,120,000)
Common stock repurchased (105,248,000) --
Common stock issued 1,004,000 2,959,000
--------------- ---------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 587,293,000 (75,856,000)
--------------- ---------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 151,690,000 293,146,000
CASH AND CASH EQUIVALENTS BEGINNING
OF PERIOD 442,071,000 295,767,000
--------------- ---------------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 593,761,000 $ 588,913,000
=============== ===============
RECONCILIATION OF NET EARNINGS
TO NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES:
Net earnings $ 199,896,000 $ 141,784,000
Provision for income taxes 122,516,000 86,900,000
Depreciation and amortization 13,958,000 9,932,000
Net contract payments collected,less
interest only securities and
servicing rights recorded (170,875,000) (133,535,000)
Amortization of deferred servicing
revenue -- (11,023,000)
Amortization of servicing rights 5,497,000 --
Accretion of yield on interest
only securities (58,769,000) (35,214,000)
Net increase in cash deposits (14,820,000) (10,873,000)
Purchase of contracts and leases, net
of sales and principal collections (314,994,000) 365,458,000
Commercial and revolving credit
loans disbursed, net of sales and
principal collections (204,075,000) (43,414,000)
Net selling expenses on
sale of contracts 27,510,000 23,710,000
Increase(decrease)in interest payable 15,067,000 (193,000)
Income taxes paid (20,021,000) (25,080,000)
Increase in cash paid to employees
and suppliers (7,379,000) (32,885,000)
Other 2,947,000 33,722,000
--------------- ---------------
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES $ (403,542,000) $ 369,289,000
=============== ===============
</TABLE>
See notes to unaudited financial statements.
7
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
A. Basis of Presentation
The interim financial statements have been prepared by Green Tree Financial
Corporation ("the Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission applicable to quarterly
reports on Form 10-Q. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, all adjustments which
are of a normal recurring nature and are necessary for a fair presentation
have been included. However, results for interim periods are not necessarily
indicative of the results that may be expected for a full year. It is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and related notes and schedules included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Certain reclassifications have been made to the December 31, 1996 financial
statements to conform to the classifications used in the June 30, 1997
financial statements. These reclassifications had no effect on net earnings
or stockholders' equity as previously reported.
Effective January 1, 1997 the Company adopted Statement of Financial
Accounting Standards No. 125 ("SFAS 125"), Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. The
adoption of SFAS 125 did not have a material impact on the Company's financial
position or results of operations.
SFAS 125 requires prospective implementation as of January 1, 1997 and
retroactive application is not permitted. However, certain reclassifications
have been made to prior financial statements to conform to the current period
presentation. The previously classified excess servicing rights receivable
has been reclassified as interest only securities and is shown net of the
Company's previously classified allowance for losses on contracts sold.
Effective January 1, 1997 the portion of the Company's interest only
securities that exceeded contractually specified servicing fees is classified
as interest only securities and the remaining asset is classified as servicing
rights.
Among other provisions, SFAS 125 uses a "financial components" approach
relative to the recognition of financial assets and liabilities resulting from
the transfer of financial assets. Specifically, SFAS 125 requires that gain
recognition on the sale of financial assets be based on an allocated cost
basis method for the financial components sold. SFAS 125 also provides
guidance relative to the classification and ongoing measurement of the
financial components retained in connection with financial asset sales. Such
components are recorded at allocated cost. The Company retains interest only
securities and servicing rights upon the sale of its financial contracts.
8
<PAGE>
The Company classifies its interest only securities as available for sale and
carries these securities at fair value. Accordingly, unrealized gains and
losses are reported on a net basis as a separate component of stockholders'
equity.
Servicing rights are carried at allocated cost and amortized in proportion to
and over the estimated period of net servicing income. Servicing rights are
evaluated for impairment on an ongoing basis and, to the extent the recorded
amount exceeds the fair value of those servicing rights, a valuation allowance
is established through a charge to earnings. Upon subsequent measurement of
the fair value of these servicing rights in future periods, if the fair value
equals or exceeds the carrying amount, any previously recorded valuation
allowance would be deemed unnecessary and, therefore, represent current period
earnings only to the extent of such previously recorded allowance. No
valuation allowance was necessary at June 30, 1997.
B. Interest Only Securities
Interest only securities represent the right to receive certain cash flows
which exceed the amount of cash flows sold in the Company's securitized
contract sales. Interest only securities generally represent the value of
interest to be collected on the underlying financial contracts of each
securitization over the sum of the interest to be paid to security classes
sold, contractual servicing fees and credit losses.
These cash flows are projected and discounted over the expected life of the
financial contracts using prepayment, default, loss, and interest rate
assumptions that the Company believes market participants would use for
similar financial instruments.
In connection with the gain on sale of contracts and recording interest only
securities retained for the six-month period ended June 30, 1997 the Company
provided $187 million for projected credit losses on a discounted basis. For
the same period the Company incurred $105 million of credit losses.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Green Tree Financial Corporation ("Green Tree" or the "Company")is a
diversified financial services company that provides financing for
manufactured housing, home equity, home improvements, consumer products, and
equipment and provides consumer and commercial revolving credit. The Company's
financing products include both fixed term and revolving loans and leases.
The Company's insurance agencies market physical damage and term mortgage life
insurance and other credit protection relating to the customers' contracts it
services.
Results of Operations:
The following table shows the percentage change in revenues, expenses and
earnings for the three and six-month periods ended June 30, 1997 as compared
to the same period of 1996.
<TABLE>
<CAPTION>
Three-month Six-month
period-to-period period-to-period
increase June 30, increase June 30,
1996 to 1997 1996 to 1997
------------------ ------------------
<S> <C> <C>
Revenues:
Gain on contract sales 61.4% 59.5%
Interest 65.9 66.4
Service 57.5 54.5
Commission and other 51.4 50.7
Expenses:
Interest 111.9 132.0
Cost of servicing 70.7 65.0
General and administrative 89.8 88.1
Earnings before income taxes 43.3 41.0
Net earnings 43.3 41.0
</TABLE>
Gain on contract sales increased 61.4% and 59.5% for the three and six-month
periods ended June 30, 1997, respectively, over the same periods in 1996 as a
result of the increased dollar volume of contracts sold, higher interest rate
spreads and longer average terms on the contracts sold. For the quarter ended
June 30, 1997, total contract sales increased $466,364,000 or 22.4%.
10
<PAGE>
The following table sets forth the Company's fixed term contract originations
and sales for the three and six-month periods ended June 30, 1997 and 1996.
Dollar amounts are in thousands.
<TABLE>
<CAPTION>
Three-month Six-month
period ended period ended
June 30, June, 30
---------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Originations:
Manufactured Housing $1,494,619 $1,345,104 $2,508,335 $2,243,139
Home Equity/
Home Improvement 836,860 354,941 1,470,817 517,944
Consumer 310,817 280,443 483,064 421,990
Commercial and
Equipment 267,486 55,917 475,199 121,178
---------- ---------- ---------- ----------
Total $2,909,782 $2,036,405 $4,937,415 $3,304,251
========== ========== ============ ==========
Sales:
Manufactured Housing $1,319,986 $1,364,148 $2,369,986 $2,228,183
Home Equity/
Home Improvement 746,754 292,429 1,266,853 411,286
Consumer 315,614 264,300 446,664 583,280
Commercial and
Equipment 161,698 156,731 280,647 268,898
---------- ---------- ---------- ----------
Total $2,544,052 $2,077,608 $4,364,150 $3,491,647
========== ========== ============ ==========
</TABLE>
The Company's market share of contracts for financing new manufactured housing
increased in the first six months of 1997 compared to the same period in 1996.
During this same time period the manufactured housing market experienced a
slight decrease in new home shipments as compared to the prior year. The
Company's dollar volume of new manufactured housing contract originations rose
11.1% and 11.8% during the three and six-month periods ended June 30, 1997,
respectively, over the same periods in 1996. The number of new contracts
originated by the Company during the first six months of 1997 has grown from
1996 and the average contract size has also increased due to a trend in the
Company's manufactured home financing to more land-and-home contracts and
slight price increases by the manufactured housing manufacturers. The dollar
volume of previously owned manufactured housing contract originations rose
24.9% and 24.6% for the three and six months, respectively, compared to the
same periods in 1996.
The dollar volume of home equity/home improvement contract originations rose
135.8% for the quarter and 184% for the six-month period ended June 30, 1997
over the same periods of 1996 to $1,471,000,000. Consumer originations rose
10.8% and 14.5% for the three and six-month periods ended June 30, 1997
compared to the same periods in 1996 to $483,064,000. Commercial and Equipment
fixed term loan and lease originations increased 378.4% for the quarter and
292.1% for the six months ended at June 30, 1997 over the same periods in 1996
to $475,199,000. The overall growth in these originations resulted from
expanding the number of relationships with dealers and the growth in the
Company's home equity originations network, as well as the addition of the
equipment leasing business.
11
<PAGE>
The following table reflects the composition of the Company's servicing
portfolio at June 30, 1997 and 1996. Dollar amounts are in thousands.
<TABLE>
<CAPTION>
June 30,
------------------------
1997 1996
---- ----
<S> <C> <C>
Servicing Portfolio:
Fixed term contracts $22,238,000 $15,483,000
Commercial revolving credit 1,258,000 866,000
Consumer revolving credit 159,000 9,000
----------- -----------
Total $23,655,000 $16,358,000
=========== ===========
</TABLE>
Interest income is realized from interest only securities, commercial finance
and revolving credit receivables, contract and lease inventory, cash deposits,
and short-term investments. Interest income grew 65.9% and 66.4% during the
three and six-month periods ended June 30, 1997 compared to the same periods
in 1996 primarily from increased earnings on the Company's commercial finance
and lease receivables and the increase in interest only securities. Due to
higher origination levels, contract inventory for the six-months ended June
30, 1997 was higher on average than the same period in 1996 which also
contributed to the increase in interest income.
The increase in servicing income of 57.5% and 54.5% during the three and six-
month periods ended June 30, 1997, respectively, compared to the same periods
of 1996 resulted from the growth in the Company's average servicing portfolio.
The Company's servicing income as a percentage of the serviced portfolio
increased as a result of the product mix of the portfolio changing to products
with higher servicing fees.
Commissions and other income, which includes commissions earned on new
insurance policies written and renewals on existing policies, grew 51.4% and
50.7% during the three and six-month periods ended June 30, 1997,
respectively, compared to the same periods in 1996. This growth is primarily
a result of the increase in net written insurance premiums as the Company's
contract originations and servicing portfolio continue to grow.
Interest expense increased 111.9% and 132.0% during the three and six-month
periods ended June 30, 1997 as a result of higher interest rates and the
Company maintaining a higher level of borrowings to fund its loan
originations, commercial finance, and lease portfolios during the first six
months of 1997 compared to 1996.
Green Tree's dollar amount of cost of servicing increased 70.7% for the
quarter and 65.0% for the six-month period ended June, 30 1997, compared to
the same periods in 1996 as the Company's total average servicing portfolio
grew 44.4%. The Company's cost of servicing as a percentage of the serviced
portfolio increased as a result of the product mix change in the portfolio
towards products which require more servicing resources.
General and administrative expenses rose 89.8% and 88.1% for the three and
six-month periods ended June, 30 1997. As a percentage of total finance
volumes, these expenses have slightly increased compared to the
12
<PAGE>
same periods in 1996. The dollar growth is due primarily to an increase in
personnel and other costs related to the continued expansion of the Company's
new divisions as well as the increased volume of contracts the Company
originated during the first six months of 1997.
Capital Resources and Liquidity:
The Company's business requires continued access to the capital markets for
the purchase, warehousing and sale of contracts. To satisfy these needs, the
Company employs a variety of capital resources.
Historically, the most important liquidity source for the Company has been its
ability to sell contracts in the secondary markets through loan
securitizations. During the second quarter of 1997 the Company completed five
securitizations, two backed by manufactured housing loans, two by home equity
and/or home improvement loans and one by consumer and equipment loans. Each
securitized sale employed a senior/subordinate structure with a portion of the
subordinate bonds enhanced by a corporate guarantee.
Servicing fees and net interest payments collected, which has been the
Company's principal source of cash, increased during the six-month period
ended June 30, 1997 compared to the same period in 1996. Contributing to this
growth is an increase in servicing revenue collected by the Company on its
growing servicing portfolio, and growth in the interest only securities from
the Company's ongoing securitizations.
Net principal payments collected were positive for the six-month period ended
June 30, 1997 and 1996 as a result of an increase in the contract principal
payments collected by the Company but not yet remitted to the investors/owners
of the contracts. These increases are a result of customer payoffs and the
growth of the Company's servicing portfolio of contracts which have been sold.
Interest on contracts increased significantly during the first six months of
1997 compared to the same period in 1996 as a result of the Company having a
larger average outstanding contract portfolio.
Interest on cash, investments and receivables increased during the first six
months of 1997 compared to the same period in 1996 primarily as a result of
the increase in lease, commercial finance, and revolving credit receivables.
Cash paid to employees and suppliers increased $58,794,000 in the first six
months of 1997 compared to the same period in 1996. This increase relates to
the growth in the Company's total general and administrative expenses and
servicing costs and the increase in the taxes paid in 1997 on the annual bonus
of the chief executive officer pursuant to the terms of an employment
agreement.
13
<PAGE>
Dividends paid by the Company increased 20.4% in the first six months of 1997
compared to the same period in 1996 as the Company's quarterly average
dividend rate increased 20% over the 1996 quarterly average dividend rate for
the first six months.
The Company has a $2,000,000,000 commercial paper program which is used
primarily for purposes of financing its contract inventory prior to the sale
of those receivables in the form of securitization. This program is backed by
both committed bank facilities and master repurchase agreements with various
investment banking firms. As of June 30, 1997 the Company had issued and
outstanding $758 million in notes under this program. During the second
quarter, the Company established a financing conduit for it's equipment
leasing business. As of June 30, 1997, the principal balance of the conduit
was $409 million. Other short-term debt outstanding at June 30, 1997 totaled
$17 million dollars.
The Company has a three-year unsecured revolving line of credit totaling
$750,000,000 which expires April 15, 1999, as well as a 364 day unsecured
revolving line of credit totaling $750,000,000. As of June 30, 1997 the
Company had no borrowings outstanding under these facilities. In addition,
master repurchase agreements are in place with a variety of investment banking
firms totaling $2,300,000,000 which are subject to the availability of
eligible collateral. There were no outstanding balances under the master
repurchase agreements as of June 30, 1997.
Financial Accounting Standards Board Statement No. 128
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which the Company is required to adopt on
December 31, 1997. This adoption requires the Company to change the method
currently used to compute earnings per share and to restate prior periods. The
impact of this simplified "Earnings Per Share" methodology is not expected to
have a material impact on earnings per share.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the Company's business is such that it is routinely
a party or subject to items of pending or threatened litigation.
Although the ultimate outcome of certain of these matters cannot
be predicted, management believes, based upon information
currently available and the advice of counsel, that the
resolution of these routine legal matters will not result in any
material adverse effect on its consolidated financial condition.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Green Tree's Annual Meeting of Shareholders was held May 15,
1997. At the meeting the shareholders elected two directors of
the Company and ratified the selection of KPMG Peat Marwick LLP
as the independent auditors of the Company for the fiscal year
ending December 31, 1997.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. (A) EXHIBITS
10(e). Amendment to the Master Repurchase Agreement between
Green Tree Financial Corp.-Three and Merrill Lynch
Mortgage Capital Inc. dated June 1, 1997.
10(q). Reverse Repurchase Agreement between Green Tree Financial
Corporation and Smith Barney Mortgage Capital Group Inc.
dated June 1, 1997.
11(a). Computation of Primary Earnings Per Share.
11(b). Computation of Fully Diluted Earnings Per Share.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(B) REPORTS ON FORM 8-K
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN TREE FINANCIAL CORPORATION
DATE: August 14, 1997 //s// Edward L. Finn
--------------------------------
Edward L. Finn
Executive Vice President and
Chief Financial Officer
DATE: August 14, 1997 //s// Joel H. Gottesman
--------------------------------
Joel H. Gottesman
Senior Vice President,
General Counsel and Secretary
16
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
------ -------
10(e). Amendment to the Master Repurchase
Agreement between Green Tree Financial
Corp.-Three and Merrill Lynch Mortgage
Capital Inc. dated June 1, 1997.
10(q). Reverse Repurchase Agreement between
Green Tree Financial Corporation and
Smith Barney Mortgage Capital Group Inc.
dated June 1, 1997.
11(a). Computation of Primary Earnings Per Share.
11(b). Computation of Fully Diluted Earnings Per
Share.
12. Computation of Ratio of Earnings to
Fixed Charges.
27. Financial Data Schedule.
17
<PAGE>
Exhibit 10(e)
AMENDED AND RESTATED REVERSE REPURCHASE
TRI-PARTY CUSTODIAL AGREEMENT
by and among
____________________________
MERRILL LYNCH MORTGAGE CAPITAL INC.,
Buyer
MERRILL LYNCH CREDIT CORPORATION,
Buyer
GREEN TREE FINANCE CORP. -- THREE,
Seller
and
FIRST BANK NATIONAL ASSOCIATION,
Custodian
____________________________
Dated as of June 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Certain Defined Terms...................................... 2
Section 1.02. Reference to Time.......................................... 8
<CAPTION>
ARTICLE II
SERVICING ARRANGEMENT
<S> <C> <C>
Section 2.01. Documents Maintained by the Servicer....................... 8
Section 2.02. List of MH Contracts, List of Home Improvement Loans,
List of Home Equity Loans and List of Contracts............ 8
Section 2.03. Release of Loan Files for Servicing........................ 9
Section 3.01. General Provisions......................................... 9
Section 3.02. Custodial Accounts......................................... 10
Section 3.03. Assignment of MH Contracts to the Custodian;
UCC Filings................................................ 10
Section 3.04. Assignment of Contracts to the Custodian;
UCC Filings................................................ 11
Section 3.05. Transfer of Home Improvement Loans; Delivery of Documents.. 11
Section 3.06. Transfer of Home Equity Loans; Delivery
of Documents............................................... 12
Section 3.07. Issuance and Transfer of Trust Receipts.................... 13
Section 3.08. Trust Receipt Register..................................... 14
Section 3.09. Margin Percentage; Actual Margin Percentage................ 14
<CAPTION>
ARTICLE IV
OWNERSHIP AND TRANSFER OF ASSETS
<S> <C> <C>
Section 4.01. The Trust Receipts......................................... 14
Section 4.02. Repurchase Date............................................ 15
Section 4.03. Voluntary Transfer of Assets............................... 15
Section 4.04. Voluntary Repurchase of Assets............................. 16
Section 4.05. Payment of Price Differential.............................. 18
Section 4.06. Objections of Buyer or Seller.............................. 18
Section 4.07. No Service Charge for Sale or Transfer of Assets........... 19
Section 4.08. Simultaneous Transfers..................................... 19
Section 4.09. Buyer May Reject Assets.................................... 19
Section 4.10. Persons Deemed Owners...................................... 19
Section 4.11. Unilateral Transfer of Assets Owned by Seller.............. 19
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.12. Unilateral Transfer of Assets Owned by a Person Other Than
Seller..................................................... 19
Section 4.13. Modification of the Repurchase Date........................ 20
Section 4.14. Transfers to Third Parties................................. 20
Section 4.15. Buyer to Provide Pricing Rate and Dollar................... 20
Section 4.16. Single Transaction; Repurchase Date........................ 21
Section 4.17. Custodian's Selection of Assets............................ 21
Section 4.18. Automatic Transfer of Assets due to Decline in Repo Value.. 21
<CAPTION>
ARTICLE V
THE CUSTODIAN
<S> <C> <C>
Section 5.01. Representations and Warranties of the Custodian............ 23
Section 5.02. Custodian of Documents..................................... 24
Section 5.03. Charges and Expenses....................................... 24
Section 5.04. No Adverse Interests....................................... 25
Section 5.05. Inspections................................................ 25
Section 5.06. Insurance.................................................. 25
Section 5.07. Limitation of Liability.................................... 25
Section 5.08. Indemnification............................................ 25
<CAPTION>
ARTICLE VI
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 6.01. Amendment.................................................. 26
Section 6.02. Governing Law.............................................. 26
Section 6.03. New York Jurisdiction; Waiver of Jury Trial................ 26
Section 6.04. Notices.................................................... 26
Section 6.05. Severability of Provisions................................. 27
Section 6.06. No Partnership............................................. 28
Section 6.07. Counterparts............................................... 28
Section 6.08. Assignment................................................. 28
Section 6.09. Headings................................................... 28
Section 6.10. Appointment of Agent....................................... 28
</TABLE>
<PAGE>
THIS AGREEMENT, made as of the date appearing on the cover page hereof by and
among Merrill Lynch Mortgage Capital Inc., a Delaware corporation, as Buyer,
Merrill Lynch Credit Corporation, as Buyer, Green Tree Finance Corp. -- Three, a
Minnesota corporation, as Seller, and First Bank National Association, a
national banking association, as Custodian:
WITNESSETH:
Green Tree Financial Corporation ("Green Tree") in the ordinary course of
its business originates or buys MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts, and sells MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts on the secondary market;
Seller desires to obtain financing secured by an ownership interest in such
MH Contracts, Home Improvement Loans, Home Equity Loans and Contracts;
In order to facilitate such transactions, Seller and Buyer desire to engage
the Custodian to act as custodian of the MH Contracts, Home Improvement Loans,
Home Equity Loans and Contracts for the benefit of Buyer and Seller and their
permitted assigns as their interests may appear;
The ownership by any party of any MH Contract, Home Improvement Loan, Home
Equity Loan or Contract shall be confirmed by delivery to Buyer of a Trust
Receipt issued by the Custodian substantially in the form set forth at Exhibit A
hereto, with appropriate insertions, as provided therein;
Green Tree acts as servicer with respect to the MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts; and
Seller intends to enter into Transactions from time to time with Buyer
pursuant to the Amended and Restated Master Repurchase Agreement between Buyer
and Seller, each such Transaction providing for the sale and repurchase of
certain MH Contracts, Home Improvement Loans, Home Equity Loans or Contracts;
NOW, THEREFORE:
In consideration of the premises and the mutual agreements hereinafter set
forth, Buyer, Seller and the Custodian agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Whenever used in this Agreement,
unless the context otherwise requires, the following words shall have the
meanings set forth below:
"Actual Margin Percentage" means, as to any Transaction, the percentage
obtained by application of the following formula:
1 + ((OPA x DP) - RP)
----------------
(OPA x DP)
where:
OPA = aggregate Outstanding Principal Amount
DP = Dollar Price
RP = Repurchase Price.
"Agreement" shall mean this Amended and Restated Reverse Repurchase Tri-
Party Custodial Agreement.
"Assets" means MH Contracts, Home Improvement Loans, Home Equity Loans and
Contracts, as applicable.
"Business Day" means any day other than (a) a Saturday or a Sunday or (b)
another day on which banking institutions in the States of Minnesota or New York
are authorized or obligated by law, executive order, or governmental decree to
be closed.
"Buyer" means Merrill Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation and any successor thereto.
"Computer Tape" means a computer tape generated by Green Tree which
provides information relating to the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts.
"Consumer Products" refers to consumer goods consisting of motorcycles,
marine products (including boats, boat trailers and outboard motors), pianos and
organs, horse trailers, sport vehicles (including snowmobiles, personal
watercraft and all-terrain vehicles), trucks, personal aircraft, recreational
vehicles and any other asset as shall be acceptable to Buyer in its sole
discretion, financed by Seller pursuant to a Contract.
"Contract" refers to promissory notes financing home improvements (which
are not treated as Home Improvement Loans), certain closed-end home equity loans
(which are not treated as Home Equity Loans) and any retail installment contract
between
2
<PAGE>
Seller and a third party obligor pursuant to which Seller finances a Consumer
Product, all rights to receive payments which are due pursuant thereto, and any
"purchase money security interest" (as defined in the Uniform Commercial Code)
created in favor of Seller in the Consumer Product financed thereunder, the
ownership of which is evidenced by a Trust Receipt issued pursuant to this
Agreement. This definition of "Contract" shall include home improvement loans
and home equity loans that Seller believes may not respectively satisfy the
representations set forth in Exhibit B and Exhibit C and are thus not included
in the definition of "Home Improvement Loan" and "Home Equity Loan."
"Contract File" means, as to each Contract, (a) the original copy of the
Contract, including the executed evidence of the obligation of the obligor; (b)
either (i) the original title document for the related Consumer Product or a
duplicate certified by the appropriate governmental authority which issued the
original thereof or the application for such title document or (ii) if the laws
of the jurisdiction in which the related Consumer Product is located do not
provide for the issuance of title documents for goods of the type including the
Consumer Product, other evidence of ownership of the related Consumer Product
which is customarily relied upon in such jurisdiction as evidence of title to
such goods; (c) evidence of one or more of the following types of perfection of
the security interest in the related Consumer Product granted by such Contract,
as appropriate: (i) notation of such security interest on the title document,
(ii) a financing statement meeting the requirements of the UCC, with evidence of
recording indicated thereon (if required to perfect a security interest in the
related Consumer Product under the UCC as in force in the relevant state), (iii)
in the case of a Contract secured by a security interest in an aircraft,
evidence of filing with the Federal Aviation Administration Aircraft Registry or
(iv) such other evidence of perfection of a security interest in goods of the
type including the Consumer Product as is customarily relied upon in the
jurisdiction in which the related Consumer Product is located; (d) the
assignment of the Contract from the originator (if other than the Seller or a
wholly-owned subsidiary of the Seller) to the Seller or a wholly-owned
subsidiary of the Seller; (e) any extension, modification or waiver
agreement(s); (f) a credit application signed by the obligor, or a copy thereof;
and (g) if required by Buyer in its sole discretion with respect to such
Contract, a certificate of insurance or application form for insurance signed by
the obligor, or copies thereof.
"Custodial Account" means an account as defined in and established pursuant
to Section 3.02.
"Custodian" means First Bank National Association, acting in its custodial
capacity, and any successor thereto.
3
<PAGE>
"Defaulted Asset" means, with respect to any monthly payment period, an MH
Contract, Home Improvement Loan, Home Equity Loan or Contract in respect of
which payments exceeding $25 in the aggregate were delinquent 120 days or more
as of the last day of such monthly payment period.
"Dollar Price" means, with respect to the Assets, a valuation percentage
provided to the Custodian by the Buyer that reflects the Buyer's perception of
the Market Value of the Assets.
"Home Equity Loans" shall refer to the home equity loans other than such
home equity loans included in the definition of "Contract" secured by first,
second or third liens on single family residential real property (including,
without limitation, condominiums and planned unit developments) certain
documents relating to which have been delivered to the Custodian pursuant to
this Agreement and the ownership of which is evidenced by a Trust Receipt issued
pursuant to this Agreement.
"Home Equity Loan File" refers to the Loan File described in Section 3.05
hereof.
"Home Improvement Loans" refers to home improvement installment loan
contracts and promissory notes other than such home improvement loans included
in the definition of "Contract", the ownership of which is evidenced by a Trust
Receipt issued pursuant to this Agreement.
"Home Improvement Loan File" refers to the Loan File described in Section
3.05 hereof.
"Land-and-Home Contract" means a MH Contract that is secured by a mortgage
or deed of trust on real estate on which the related manufactured home is
situated, and which manufactured home is considered or classified as part of the
real estate under the laws of the jurisdiction in which it is located.
"Land-and-Home Contract File" means, as to each Land-and-Home Contract, (a)
the original copy of the Land-and-Home Contract; (b) the original related
mortgage with evidence of recording thereon (or, if the original mortgage has
not yet been returned by the applicable recording office, a copy thereof,
certified by such recording office, which will be replaced by the original
mortgage when it is so returned) and any title document for the related
manufactured home; (c) the assignment of the Land-and-Home Contract from the
originator (if other than the Seller) to the Seller; (d) if such Land-and-Home
Contract was originated by the Seller, an endorsement of such Land-and-Home
Contract by the Seller; and (e) any extension, modification or waiver
agreements(s).
4
<PAGE>
"List of Home Equity Loans" means the list, as amended from time to time,
identifying each Home Equity Loan deposited hereunder, which list (a) identifies
each Home Equity Loan and (b) sets forth as to each Home Equity Loan (i) the
outstanding principal balance, (ii) the amount of monthly payment due from the
obligor, (iii) the rate and (iv) the maturity date.
"List of Home Improvement Loans" means the list, as amended from time to
time, identifying each Home Improvement Loan deposited hereunder, which list (a)
identifies each Home Improvement Loan and (b) sets forth as to each Home
Improvement Loan (i) the outstanding principal balance, (ii) the amount of
monthly payment due from the obligor, (iii) the rate and (iv) the maturity date.
"List of MH Contracts" means the list, as amended from time to time,
identifying each MH Contract deposited hereunder, which list (a) identifies each
MH Contract and (b) sets forth as to each MH Contract (i) the outstanding
principal balance, (ii) the amount of monthly payment due from the obligor,
(iii) the rate and (iv) the maturity date.
"List of Contracts" means the list, as amended from time to time,
identifying each Contract deposited hereunder, which list (a) identifies each
Contract and (b) sets forth as to each Contract (i) the outstanding principal
balance, (ii) the amount of monthly payment due from the obligor, (iii) the rate
and (iv) the maturity date.
"Loan Files" means the MH Contract File, the Land-and-Home Contract File,
the Home Improvement Loan File, the Home Equity Loan File, and the Contract
File.
"MH Contract File" means, as to each MH Contract, other than a Land-and-
Home Contract, (a) the original copy of the MH Contract, (b) either (i) the
original title document for the related manufactured home or a duplicate
certified by the appropriate governmental authority which issued the original
thereof or the application for such title document or (ii) if the laws of the
jurisdiction in which the related manufactured home is located do not provide
for the issuance of title documents for manufactured housing, other evidence of
ownership of the related manufactured home which is customarily relied upon in
such jurisdiction as evidence of title to a manufactured housing unit, (c)
evidence of one or more of the following types of perfection of the security
interest in the related manufactured home granted by such MH Contract, as
appropriate: (i) notation of such security interest on the title document, (ii)
a financing statement meeting the requirements of the UCC, with evidence of
recording indicated thereon, or (iii) such other evidence of perfection of a
security interest in a manufactured housing unit
5
<PAGE>
as is customarily relied upon in the jurisdiction in which the related
manufactured home is located, (d) the assignment of the MH Contract from the
originator (if other than the Seller) to the Seller and (e) any extension,
modification or waiver agreement(s).
"MH Contracts" means the manufactured housing installment sales contracts
and installment loan agreements subject to this Agreement, including any Land-
and-Home Contracts, the ownership of which is evidenced by a Trust Receipt
issued pursuant to this Agreement.
"Margin Coverage" means the amount, expressed as a percentage, by which the
Margin Percentage exceeds 100%.
"Margin Percentage" means the percentage defined in Section 3.08.
"Master Repurchase Agreement" means the amended and restated master
repurchase agreement between Buyer and Seller relating to the MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts.
"Outstanding Principal Amount" means, as to any MH Contract, Home
Improvement Loan, Home Equity Loan and Contract, the outstanding principal
amount thereof as reflected on the most recent Computer Tape received by the
Custodian; provided, however, that any Defaulted Asset and any Rejected Asset
-------- -------
shall be assigned an Outstanding Principal Amount of zero.
"Owner" means, with respect to any Asset, the Person reflected in the Trust
Receipt Register as being the owner thereof and the holder of the related Trust
Receipt.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Price Differential" means, with respect to any Transaction, the aggregate
amount obtained by daily application of the Pricing Rate for such Transaction to
the Purchase Price for such Transaction on a 360 day per year basis for the
actual number of days during the period commencing on (and including) the date
such Transaction is entered into and ending on (but excluding) the date of
determination (reduced by any amount of such Price Differential previously paid
by Seller to Buyer with respect to such Transaction).
"Price Differential Payment Date" means the Business Day of each week on
which the aggregate amount of the accrued and unpaid Price Differential is to be
transferred to Buyer's Custodial
6
<PAGE>
Account pursuant to Section 4.05, which, unless Buyer and Seller otherwise
notify the Custodian in writing, shall be the last Business Day of each week.
"Pricing Rate" means, with respect to any Transaction, the rate provided to
the Custodian and Seller by Buyer in the Transfer Instructions.
"Purchase Price" means, with respect to any Transaction, the price to be
paid by Buyer for the MH Contracts, Home Improvement Loans, Home Equity Loans or
Contracts. The Purchase Price for any Transaction shall be deemed to include
any accrued and unpaid Price Differential from the Transaction entered into on
the preceding Business Day.
"Rejected Asset" means any MH Contract, Home Improvement Loan, Home Equity
Loan or Contract that Buyer has rejected pursuant to Section 4.09.
"Remittance Date" means the fifteenth day of each calendar month, or if
such day is not a Business Day, the next succeeding Business Day.
"Repo Value" means, as to any Asset or group of Assets, the product of:
(a) the product of the aggregate Outstanding Principal Balance and
the Dollar Price; and
(b) the amount by which one exceeds the Margin Coverage.
"Repurchase Date" means, for any Transaction, the date on which the related
Assets are to be repurchased pursuant to the Master Repurchase Agreement.
"Repurchase Price" means, with respect to any Transaction on any date, the
price to be paid by Seller to repurchase the related Assets as if such date were
the Repurchase Date for such Transaction, which Repurchase Price shall be
provided to the Custodian by Buyer and Seller.
"Required Balance" means, as to any Transaction, the related aggregate
Outstanding Principal Amount of Assets obtained by dividing:
(a) the amount obtained by dividing the related Repurchase Price by
the Dollar Price; and
(b) the amount by which one exceeds the Margin Coverage.
7
<PAGE>
"Secured Home Improvement Loans" refers to Home Improvement Loans which are
secured by first, second or third mortgages on property, whether conventional or
insured by the Federal Housing Administration.
"Seller" means Green Tree Finance Corp. --- Three, and any successor
thereto.
"Servicer" means Green Tree and any successor thereto.
"Transaction" means a reverse repurchase arrangement under the Master
Repurchase Agreement.
"Transfer Instructions" means, with respect to a Transaction pursuant to
Section 4.03, the Required Balance, the Purchase Price and the Pricing Rate as
provided to the Custodian and Seller by Buyer.
"Trust Receipt" means a receipt issued by the Custodian substantially in
the form attached hereto as Exhibit A.
"Trust Receipt Register" means the register maintained by the Custodian
reflecting as to each MH Contract, Home Equity Loan and Contract the Owner
thereof.
"Unsecured Home Improvement Loans" refers to Home Improvement Loans which
are not secured by mortgaged property.
Section 1.02. Reference to Time. All references to time herein shall be
deemed to refer to New York City time unless otherwise provided.
ARTICLE II
SERVICING ARRANGEMENT
Section 2.01. Documents Maintained by the Servicer. The Servicer shall
retain possession of all documents and files relating to the MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts, (other than as set forth in
Sections 3.03 and 3.05 hereof). All documents so held by Servicer shall be held
by it as agent of the Custodian for the benefit of the Owner of the related
Assets as indicated on the Trust Receipt Register maintained by the Custodian
pursuant to Section 3.07.
Section 2.02. List of MH Contracts, List of Home Improvement Loans, List
of Home Equity Loans and List of Contracts. The Custodian shall maintain the
most recent version of the List of MH Contracts, the List of Home Improvement
Loans, the List of Home Equity Loans and the List of Contracts as such
8
<PAGE>
list may be amended from time to time. The Custodian shall receive a printed
copy of the amended List of Home Improvement Loans, amended List of MH
Contracts, amended List of Home Equity Loans and amended List of Contracts with
each revised copy of the applicable Computer Tape. If a Computer Tape received
by the Custodian is not accompanied by such amended lists, the Custodian shall
immediately produce such printed lists from the related Computer Tape. The most
recently amended List of MH Contracts, amended List Home Equity Loans and
amended List of Contracts received by the Custodian shall be the definitive List
of MH Contracts, List of Home Improvement Loans, List of Home Equity Loans and
List of Contracts for all purposes under this Agreement.
Section 2.03. Release of Loan Files for Servicing. From time to time,
after delivery of any portion of the Loan Files to Custodian, as appropriate for
servicing and repossession in connection with any related Asset, Custodian
shall, upon written request of a servicing officer of Seller and delivery to
Custodian of a receipt signed by such servicing officer in substantially the
form set forth on Exhibit F hereto, cause the Loan File to be released to Seller
and shall execute such documents as Seller shall deem necessary to the
prosecution of any such proceedings. Custodian shall stamp the face of any such
Assets to be released to Seller with a notation that the Asset has been assigned
to Custodian. Such receipt shall obligate Seller to return the original Asset
and the related Loan File to Custodian when its need by Seller has ceased unless
the Asset shall be liquidated or repurchased by Seller pursuant to the Master
Repurchase Agreement. Upon request of a servicing officer, Custodian shall
perform such other acts as reasonably requested by Seller and otherwise
cooperate with Seller in the enforcement of the Owners' rights and remedies with
respect to the Assets. Notwithstanding the foregoing, the Custodian shall not
release any portion of a Loan File to Seller if such release would result in
Seller having in its custody documents relating to more than 1% of the aggregate
number of Loan Files held by the Custodian hereunder.
ARTICLE III
CUSTODIAL ARRANGEMENT
Section 3.01. General Provisions. In accordance with the provisions of
this Agreement, the Custodian shall issue Trust Receipts with respect to Assets
held by it hereunder indicating that the Custodian holds such Assets as
custodian and bailee for the Owner named in such Trust Receipt. The ownership
of Assets may be transferred from time to time in the manner provided herein.
Each Trust Receipt shall serve as confirmation of the ownership (subject to the
Seller's right to service the Assets) of the MH Contracts, Home Improvement
Loans, Home Equity Loans and
9
<PAGE>
Contracts, as applicable, assigned to the Custodian listed on the schedule
attached to such Trust Receipt. Each particular Transaction shall relate
exclusively to either MH Contracts, Home Equity Loans or Contracts. No Person
shall own a fractional ownership interest in any MH Contract, Home Improvement
Loan, Home Equity Loan or Contract. No Transaction shall be entered into with
respect to a group of MH Contracts, a group of Home Improvement Loans, a group
of Home Equity Loans or a group of Contracts having an aggregate Outstanding
Principal Balance on the date of commencement of such Transaction of less than
$5,000,000.
Section 3.02. Custodial Accounts. The Custodian shall establish separate
custody accounts for Buyer and Seller (in each case, a "Custodial Account") for
purposes of holding cash and Assets owned by the related party. Buyer and
Seller may direct the Custodian in writing respecting the transfer, disbursement
and/or reinvestment of any cash on deposit in such Party's Custodial Account.
Section 3.03. Assignment of MH Contracts to the Custodian; UCC Filings.
(a) Seller may, from time to time, assign MH Contracts to the Custodian
for credit to Seller's Custodial Account by executing and delivering an
assignment in the form attached hereto as Exhibit B. Such MH Contracts shall,
upon assignment, be subject to this Agreement. On the Business Day prior to the
date of each such assignment Seller shall provide to the Custodian a schedule of
the related MH Contracts with information indicated thereon corresponding to the
information set forth in the List of MH Contracts. On or before the Business Day
preceding the initial assignment of MH Contracts by Seller to Buyer hereunder,
Seller shall provide to the Custodian evidence of the filing of a financing
statement under the Uniform Commercial Code with the Secretary of State of the
State of Minnesota reflecting the Custodian as the secured party with respect to
all MH Contracts that are or may become subject to this Agreement. The Custodian
shall, upon request of Buyer, provide to Buyer the schedule and the evidence
referred to in both of the preceding sentences.
(b) Seller shall file or cause to be filed all amendments to such
financing statement and all continuation statements as may be necessary to
perfect the interest of the Custodian in the MH Contracts; provided, however,
-------- -------
that if Seller shall fail to file or cause to be filed such amendments and
continuation statements, the Custodian shall make such filings. All financing
statements, amendments thereto and continuation statements shall be filed at the
expense of Seller.
(c) Prior to a Land-and-Home Contract becoming subject to this Agreement,
and thereby becoming eligible for inclusion in a
10
<PAGE>
Transaction, Seller shall deliver, or cause to be delivered, to Custodian the
Land-and-Home Contract File.
Section 3.04. Assignment of Contracts to the Custodian; UCC Filings.
(a) Seller may, from time to time, assign Contracts to the Custodian for
credit to Seller's Custodial Account by executing and delivering an assignment
in the form attached hereto as Exhibit D. Such Contracts shall, upon
assignment, be subject to this Agreement. On the Business Day prior to the date
of each such assignment Seller shall provide to the Custodian a schedule of the
related Contracts with information indicated thereto corresponding to the
information set forth in the List of Contracts. On or before the Business Day
preceding the initial assignment of Contracts by Seller to Buyer hereunder,
Seller shall provide to the Custodian evidence of the filing of a financing
statement under the Uniform Commercial Code with the Secretary of State of the
State of Minnesota reflecting the Custodian as the secured party with respect to
all Contracts that are or may become subject to this Agreement. The Custodian
shall, upon request of Buyer, provide to Buyer the schedule and the evidence
referred to in both of the preceding sentences.
(b) Seller shall file or cause to be filed all amendments to such
financing statement and all continuation statements as may be necessary to
perfect the interest of the Custodian in the Contracts; provided, however, that
-------- -------
if Seller shall fail to file or cause to be filed such amendments and
continuation statements, the Custodian shall make such filings. All financing
statements, amendments thereto and continuation statements shall be filed at the
expense of Seller.
(c) Prior to a home equity or home improvement loan included in the
definition of "Contract" becoming subject to this Agreement, and thereby
becoming eligible for inclusion in a Transaction, Seller shall deliver, or cause
to be delivered, to Custodian, the Home Equity Loan File and the Home
Improvement Loan File.
Section 3.05. Transfer of Home Improvement Loans; Delivery of Documents.
Prior to a Home Improvement Loan becoming subject to this Agreement, and thereby
becoming eligible for inclusion in a Transaction, Seller shall deliver, or cause
to be delivered, to Custodian the following documents:
(i) The List of Home Improvement Loans, as amended.
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(ii) An Assignment executed by Seller substantially in the
form of Exhibit D hereto.
(iii) The original contract and note relating to the Home
Improvement Loan.
(iv) The original Mortgage, in the case of Home Improvement
Loans other than Unsecured Home Improvement Loans, with evidence of
recording thereon, or, if the original Mortgage has not yet been returned
from the recording office, a copy of the original Mortgage, certified as
true and complete by such recording office, which copy shall be replaced by
the original Mortgage as soon as practicable after the original Mortgage is
returned from the recording office.
(v) The blanket assignment of Mortgage, in the case of
Home Improvement Loans other than Unsecured Home Improvement Loans,
assigned in blank, which assignment shall be in form and substance
acceptable for recording. In the event that the Home Improvement Loan was
acquired by Seller in a merger, the assignment must be by "[Seller],
successor by merger to name of predecessor"; and in the event that the Home
Improvement Loan was acquired or originated by Seller while doing business
under another name, the assignment must be by "[Seller], formerly known as
[previous name]".
Seller shall file or cause to be filed all amendments to the financing
statement, all assignments of mortgage and all continuation statements as may be
necessary to perfect the interests of Custodian in the Home Improvement Loans
and the collateral related thereto; provided, however, that if Seller shall fail
-------- -------
to file or cause to be filed such amendments, assignments of mortgage and
continuation statements, Custodian shall make such filings. All financing
statements, assignments of mortgage, amendments and continuation statements
shall be filed at the expense of Seller.
All documents held by the Custodian with respect to a Home Improvement
Loan, including those delivered to the Custodian pursuant to Section 3.05, are
referred to herein as the "Custodian's Home Improvement Loan File".
Section 3.06. Transfer of Home Equity Loans; Delivery of Documents. Prior
to a Home Equity Loan becoming subject to this Agreement, and thereby becoming
eligible for inclusion in a Transaction, Seller shall deliver, or cause to be
delivered, to Custodian the following documents:
(1) The List of Home Equity Loans, as amended.
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(2) An Assignment executed by Seller substantially in the form of
Exhibit C hereto.
(3) The original contract and note relating to the Home Equity Loan.
(4) The original Mortgage with evidence of recording thereon, or, if
the original Mortgage has not yet been returned from the recording office,
a copy of the original Mortgage, certified as true and complete by such
recording office, which copy shall be replaced by the original Mortgage as
soon as practicable after the original Mortgage is returned from the
recording office.
(5) The blanket assignment of Mortgage, assigned in blank, which
assignment shall be in form and substance acceptable for recording. In the
event that the Home Equity Loan was acquired by Seller in a merger, the
assignment must be by "[Seller], successor by merger to name of
predecessor"; and in the event that the Home Equity Loan was acquired or
originated by Seller while doing business under another name, the
assignment must be by "[Seller], formerly known as [previous name]".
Seller shall file or cause to be filed all amendments to the financing
statement, all assignments of mortgage and all continuation statements as may be
necessary to perfect the interests of Custodian in the Home Equity Loans and the
collateral related thereto; provided, however, that if Seller shall fail to file
-------- -------
or cause to be filed such amendments, assignments of mortgage and continuation
statements, Custodian shall make such filings. All financing statements,
assignments of mortgage, amendments and continuation statements shall be filed
at the expense of Seller.
All documents held by the Custodian with respect to a Home Equity Loan,
including those delivered to the Custodian pursuant to Section 3.06, are
referred to herein as the "Custodian's Home Equity Loan File".
Section 3.07. Issuance and Transfer of Trust Receipts.
(a) Upon assignment of Assets to the Custodian as described in Sections
3.03, 3.04, 3.05 and 3.06 hereof and upon notice to the Custodian by Seller that
Seller has assigned a pool of Assets to Buyer in a Transaction under the Master
Repurchase Agreement, the Custodian shall issue a Trust Receipt relating to such
Transaction to Buyer with respect to such pool of Assets.
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(b) Each Trust Receipt may be assigned by endorsement by the registered
holder thereof on the assignment form set forth thereon.
(c) Upon presentation to the Custodian of a Trust Receipt endorsed as
aforesaid, the Custodian shall issue a new Trust Receipt with respect to the
Assets being assigned in the name of the assignee and a new Trust Receipt with
respect to the Assets being retained in the name of the assignor.
Section 3.08. Trust Receipt Register. The Custodian shall cause to be kept
at its Corporate Trust Office the Trust Receipt Register in which, subject to
such reasonable regulations as it may prescribe, the Custodian shall reflect the
ownership of Assets as confirmed by Trust Receipts as herein provided. The Trust
Receipt Register shall not contain any information concerning the amount of cash
on deposit in any Custodial Account. The Trust Receipt Register shall be deemed
to contain proprietary information and only the Custodian and Buyer shall have
access to such information.
Section 3.09. Margin Percentage; Actual Margin Percentage.
(a) The margin percentage (the "Margin Percentage") for all Assets subject
to this Agreement shall be as mutually agreed upon by the Buyer and the Seller
but in no event less than 110%. Unless the Custodian is otherwise notified in
writing by the Buyer and the Seller, the Margin Percentage to be used in
calculating the Repo Value and the Required Balance of Assets and to be used in
making the determination required by Section 4.18 shall be 110%.
(b) The Custodian shall, in connection with each Transaction hereunder,
calculate the Actual Margin Percentage on the date such Transaction is entered
into. Such Actual Margin Percentage shall be stated on the Trust Receipt
delivered on the date of such calculation.
ARTICLE IV
OWNERSHIP AND TRANSFER OF ASSETS
Section 4.01. The Trust Receipts.
(a) The Trust Receipts shall confirm an Owner's ownership interest in the
related Assets and shall be executed by manual signature on behalf of the
Custodian by an authorized officer of the Custodian.
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(b) Each Trust Receipt shall be deemed to include the Custodian's
certification that the Custodian has reviewed the documents constituting the
related Custodian's MH Contract Files, Custodian's Home Improvement Loan Files,
Custodian's Home Equity Loan Files or Custodian's Contract Files, as applicable,
and such documents (i) appear regular on their face, (ii) are in the possession
and control of the Custodian, (iii) in the case of Home Equity Loans, concern
the related Home Equity Loans described in such Home Equity Loan Files and (iv)
in the case of Home Improvement Loans, concern the related Home Improvement
Loans described in such Home Improvement Loan Files.
(c) All Trust Receipts shall be dated as of the date the related
Transaction is entered into.
(d) Each Trust Receipt shall have attached thereto a schedule listing all
MH Contracts, Home improvement Loans, Home Equity Loans and Contracts, as
applicable, relating to such Trust Receipt. Any exceptions or deficiencies in
the Custodian's Home Equity Loan File, Home Improvement Loan File or Land-and-
Home Contract File will be set forth in an attached exception report.
(e) A separate Trust Receipt shall be issued for each Transaction and each
Trust Receipt shall relate to only one variety of Assets (i.e., MH Contracts,
Home Improvement Loans, Home Equity Loans or Contracts).
(f) The schedule of related Assets attached to a Trust Receipt shall
contain so much of the List of MH Contracts, List of Home Improvement Loans,
List of Home Equity Loans or List of Contracts, as applicable, as pertains to
each Asset listed on such schedule.
(g) All Trust Receipts delivered by the Custodian hereunder shall be
executed originals with the schedule of Assets referred to therein attached
thereto.
Section 4.02. Repurchase Date. The Repurchase Date for each Transaction
shall, unless otherwise agreed to by Buyer and Seller as contemplated by Section
4.13, be the first Business Day following the date on which the Transaction is
entered into.
Section 4.03. Voluntary Transfer of Assets.
(a) On any Business Day that Buyer and Seller enter into a Transaction
under the Master Repurchase Agreement, Buyer shall telephonically advise the
Custodian of the Transfer Instructions. Transfer Instructions shall be
communicated to the Custodian prior to 10:00 a.m. on the date the Transaction is
entered into.
(b) In the case of any Transaction:
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(i) The Custodian shall, immediately upon receiving such Transfer
Instructions:
(1) Determine the Required Balance;
(2) Determine whether related Assets having an aggregate
Outstanding Principal Amount at least equal to the Required
Balance are on deposit in Seller's Custodial Account;
(3) Promptly advise Buyer and Seller by telephone or by
facsimile transmission if it determines
that the Assets referred to in (1) above are not so
deposited and take no further action under this Section 4.03
until it determines that such Assets are so deposited;
(4) Upon determining that the Required Balance is on deposit in
Seller's Custodial Account, the Custodian shall take the
actions contemplated by clauses (ii) through (v) of this
subsection (b);
(ii) The Custodian shall select, in accordance with Section 4.17,
Assets having an aggregate Outstanding Principal Amount as of the
date of commencement of the Transaction at least equal to the
Required Balance;
(iii) The Custodian shall determine that Buyer has deposited in
immediately available funds into its Custodial Account, prior to
3:00 p.m. on the date the Transaction is entered into, the
Purchase Price for the related Assets;
(iv) The Custodian shall, by annotation of the Trust Receipt Register
and issuance of a Trust Receipt, transfer from the Custodial
Account of Seller to the Custodial Account of Buyer the Assets
subject to the Transaction; and
(v) The Custodian shall, simultaneously with the transfer of Assets
described in (b)(iv) above, transfer from the Custodial Account
of Buyer to the Custodial Account of Seller cash in immediately
available funds in an amount equal to the Purchase Price
indicated on the Transfer Instructions.
(c) Any provision of this Agreement to the contrary notwithstanding, any
proposed Transaction between Buyer and Seller
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shall not be entered into and the Custodian is not authorized to transfer any
funds from Buyer's Custodial Account as contemplated by Section 4.04(b)(v),
until Buyer has received at its offices in New York, New York via facsimile or
otherwise no later than 2:00 p.m Eastern Standard Time on the date on such
Transaction and followed by a hard copy via overnight courier, a Trust Receipt
bearing the original signature (or facsimile) of an authorized officer of the
Custodian with the schedule of Assets referred to therein attached thereto.
Section 4.04. Voluntary Repurchase of Assets. The repurchase of Assets in
connection with any Transaction shall occur in the following manner:
(a) On the Repurchase Date Buyer shall telephonically advise the Custodian
of the Repurchase Price to be paid by Seller or the aggregate Outstanding
Principal Amount of MH Contracts, Home Improvement Loans, Home Equity Loans or
Contracts, as applicable, to be repurchased by Seller. Seller shall, with the
approval of Buyer communicated telephonically to the Custodian, provide the
Custodian with a list of the Assets to be repurchased. Such list shall be
delivered in writing to the Custodian and Buyer not later than 10:00 a.m. on the
Repurchase Date, shall contain so much of the List of MH Contracts, List of Home
Improvement Loans, List of Home Equity Loans or List of Contracts, as
applicable, as pertains to each listed Asset and shall be accompanied by a
current Computer Tape.
(b) If the Custodian is advised of an aggregate Outstanding Principal
Amount of Assets to be repurchased by the Seller rather than a Repurchase Price
to be paid by the Seller, the Custodian shall:
(i) Determine the Repurchase Price of the aggregate Outstanding
Principal Amount of Assets credited to the Buyer's Custodial
Account prior to such repurchase;
(ii) Determine the Repo Value of the remaining aggregate Outstanding
Principal Amount of Assets credited to the Buyer's Custodial
Account after such repurchase; and
(iii) Determine the Repurchase Price of the aggregate Outstanding
Principal Amount of Assets to be repurchased by subtracting the
amount obtained pursuant to clause (ii) above from the amount
obtained pursuant to clause (i) above.
(c) Upon being advised of the Repurchase Price pursuant to subsection (a),
the Custodian shall:
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(i) Immediately telephonically relay such Repurchase Price to the
Seller;
(ii) Determine whether such Repurchase Price is on deposit in
immediately available funds in Seller's Custodial Account;
(iii) Determine whether the listed Assets are on deposit in Buyer's
Custodial Account;
(iv) Calculate the Required Balance; and
(v) Determine:
(1) If the Custodian is not provided with a written list of
Assets pursuant to Section 4.04(a), whether Assets having an
aggregate Outstanding Principal Amount at least equal to the
Required Balance calculated pursuant to clause (iii) above
are on deposit in the Buyer's Custodial Account; or
(2) If the Custodian is provided with a written list of Assets
pursuant to Section 4.04(a), whether the listed Assets are
on deposit in the Buyer's Custodial Account.
(d) If the Custodian determines that funds in an amount equal to the
Repurchase Price are on deposit in Seller's Custodial Account and that the
Assets referred to above in clause (c) are credited to Buyer's Custodial
Account, it shall transfer an amount equal to such Repurchase Price to Buyer's
Custodial Account and shall credit to Seller's Custodial Account the Assets set
forth on the list provided to the Custodian pursuant to Section 4.04(a).
(e) If the Custodian determines that funds in an amount equal to such
Repurchase Price and/or the required Assets are not so deposited and credited,
it shall immediately notify Buyer and Seller of such circumstance by telephone
or facsimile transmission and the Custodian shall not be required to take the
actions described in clause (c) above until such time as it shall determine that
such funds and such Assets are so deposited and credited.
(f) Repurchase Instructions shall be communicated to the Custodian prior to
10:00 a.m. on the Repurchase Date.
Section 4.05. Payment of Price Differential. On each Price Differential
Payment Date the Custodian shall telephonically contact Buyer to confirm the
aggregate amount of the unpaid Price
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Differential from all Transactions and shall, on such date, transfer such amount
from Seller's Custodial Account to Buyer's Custodial Account. In the event that
cash in such amount is not available for transfer from Seller's Custodial
Account the Custodian shall immediately notify Buyer and Seller of such
circumstance by telephone or telecopy and shall effect such transfer when cash
in such amount becomes so available. The Custodian shall send written
confirmation of such transfer to Buyer and Seller on such date.
Section 4.06. Objections of Buyer or Seller. In the event that either Buyer
or Seller shall object to any of the information provided by any Person with
respect to a Transaction, the Custodian shall immediately notify the non-
objecting party. Buyer and Seller shall mutually instruct the Custodian as to
how such objection is to be resolved.
Section 4.07. No Service Charge for Sale or Transfer of Assets. No service
charge shall be made for any sale or transfer of Assets or the issuance of Trust
Receipts, but the Custodian may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any sale or
transfer of Assets or the issuance of Trust Receipts.
Section 4.08. Simultaneous Transfers. The payment of cash for MH Contracts,
Home Equity Loans or Contracts and the related transfer of Assets pursuant to
any provision of this Agreement shall be deemed to occur simultaneously.
Section 4.09. Buyer May Reject Assets. Buyer may, in its sole discretion,
refuse to purchase any Asset offered for sale by Seller under, or offered as
additional Assets pursuant to Paragraph 4(a) or for substitution pursuant to
Paragraph 9 of, the Master Repurchase Agreement or may, by notice to the
Custodian, require an immediate repurchase of any such Asset in the manner
provided by Section 4.04. Seller shall have no right to object to such
repurchase.
Section 4.10. Persons Deemed Owners. The Custodian shall treat as the Owner
of any Asset for all purposes whatsoever the person indicated as the Owner
thereof on the Trust Receipt Register, and the Custodian shall not be affected
by notice to the contrary.
Section 4.11. Unilateral Transfer of Assets Owned by Seller. The Custodian
shall, with respect to any Assets of which Seller is the Owner, follow the
instructions of Seller regarding the release and transfer of such Assets from
this Agreement and shall do such other acts and execute such other documents as
may be deemed reasonably necessary by Seller to effect such release and
transfer. Such release and transfer shall be effected by the
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Custodian solely on the instructions of Seller and without any instructions or
other communication from any other party. All costs, fees and expenses relating
to such release and transfer shall be borne by Seller.
Section 4.12. Unilateral Transfer of Assets Owned by a Person Other Than
Seller. The Custodian shall, with respect to Assets of which the Owner is a
Person other than Seller:
(i) Upon the Custodian receiving written certification from Buyer
that an event of default under the Master Repurchase Agreement has occurred and
is continuing (a "Repurchase Agreement Default"), follow the instructions of the
non-defaulting party including instructions regarding the release of the related
Assets from this Agreement and the transfer of such Assets and shall do such
other acts and execute such other documents as may be deemed reasonably
necessary by such non-defaulting party to comply with such instructions.
(ii) Upon receipt by the Custodian of a written certification of
Buyer of a breach of a representation or warranty by the Custodian under this
Agreement, follow the instructions of the Owner regarding the release from this
Agreement and the transfer of such Assets and shall do such other acts and
execute such other documents as may be deemed reasonably necessary to comply
with such instructions.
(iii) Upon the Custodian receiving written certification from the
registered holder of a Trust Receipt other than Buyer that an event of default
under a repurchase agreement between such Owner and Buyer has occurred and is
continuing, follow the instructions of the registered holder including
instructions regarding the release of the related Assets from this Agreement and
the transfer of such Assets and shall do such other acts and execute such other
documents as may be deemed reasonably necessary by such registered holder to
comply with such instructions.
Section 4.13. Modification of the Repurchase Date. The Repurchase Date in
any Transfer Instructions may be modified by telephonic notice of the new
Repurchase Date to the Custodian from Buyer and Seller. The Custodian shall send
written confirmation of such new Repurchase Date to Buyer and Seller by
facsimile transmission on the date of such notice.
Section 4.14. Transfers to Third Parties. Buyer and Seller agree and advise
the Custodian that, notwithstanding any provision of this Agreement to the
contrary, Buyer may engage in repurchase transactions with the Assets owned by
it and may otherwise pledge or hypothecate such Assets, provided that no such
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transaction shall relieve Buyer of its obligations under this Agreement or the
Master Repurchase Agreement.
Section 4.15. Buyer to Provide Pricing Rate and Dollar Price. On each
Business Day that the Custodian is required to calculate the Repo Value or the
Required Balance of any Assets, the Buyer shall contact the Custodian prior to
10:00 a.m. and provide a single Pricing Rate and Dollar Price for all Assets. If
the Buyer has not provided such Pricing Rate and Dollar Price prior to 10:00
a.m., the Custodian shall contact the Buyer and solicit such Pricing Rate and
Dollar Price. If the Buyer has not provided a Pricing Rate and Dollar Price on a
particular Business Day after having been contacted by the Custodian, the
Custodian shall use the Pricing Rate and Dollar Price most recently provided by
the Buyer for all purposes on such day. All communications between the Buyer and
the Custodian pursuant to this Section 4.15 shall be by telephone or by
facsimile transmission.
Section 4.16. Single Transaction; Repurchase Date.
(a) All Assets subject to a repurchase arrangement under the Master
Repurchase Agreement on any particular date shall be deemed to be part of a
single Transaction. Accordingly, only one Transaction shall be in existence from
one Business Day to the next.
(b) The Repurchase Date for each Transaction shall, unless otherwise agreed
to by the Buyer and the Seller as contemplated by Section 4.13, be the first
Business Day following the date on which the Transaction is entered into.
Section 4.17. Custodian's Selection of Assets.
(a) Any selection of Assets by the Custodian for transfer from one
Custodial Account to another shall be done by means of a random selection.
(b) In connection with any selection by the Custodian of Assets to be
transferred, the Custodian shall select Assets until the aggregate Outstanding
Principal Amount thereof equals the Required Balance subject to such transfer;
provided, however, that if at some point in the selection process the aggregate
Outstanding Principal Amount of the Assets selected is less than such Required
Balance and the selection of an additional Asset causes such aggregate amount to
be greater than such Required Balance, the Custodian shall select such
additional Asset and transfer it along with the other Assets selected.
Section 4.18. Automatic Transfer of Assets due to Decline in Repo Value.
The Custodian shall perform the following procedures on each Business Day at
approximately 10:00
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a.m. after having satisfied the conditions of Section 4.02 and prior to
conducting any procedures pursuant to Sections 4.04 and 4.05:
(a) The Custodian shall determine the Repo Value of the Assets owned by
the Buyer.
(b) The Custodian shall determine the aggregate unpaid Repurchase Price.
(c) The Custodian shall then determine the Required Balance for the
Repurchase Price determined in subsection (b) above.
(d) The Custodian shall calculate the excess (the "Short-fall"), if any of
the Required Balance determined pursuant to subsection (c) over the aggregate
Outstanding Principal Amount of Assets owned by the Buyer.
(e) If the Shortfall is at least equal to the lesser of:
(i) $100,000; and
(ii) 20% of the excess of the Required Balance over the Repo Value;
then the Custodian shall automatically conduct the procedures set forth in
subsection (f), (g), (h) and (i) below. If, however, the Shortfall is less than
the lesser of $100,000 and 20% of the excess of the Required Balance over the
Repo Value, then the Custodian shall immediately telephonically notify the Buyer
of the amount of the Shortfall and shall conduct the aforementioned procedures
only if directed to do so by the Buyer. Notwithstanding any provision of this
Agreement to the contrary, the Buyer in its sole discretion may direct the
Custodian to conduct such procedures if any Shortfall exists.
(f) The Custodian shall, if required pursuant to subsection (e) above,
transfer cash or Assets from the Seller's Custodial Account such that the
aggregate Outstanding Principal Amount of the Assets credited to the Buyer's
Custodial Account is at least equal to the Required Balance of Assets in such
account.
(g) If Assets having an aggregate Outstanding Principal Amount at least
equal to the related Shortfall are credited to the Seller's Custodial Account,
the Custodian shall transfer Assets in at least such amount from the Seller's
Custodial Account to the Buyer's Custodial Account without any request,
instruction or other communication from the Buyer or the Seller.
(h) If Assets having an aggregate Outstanding Principal Amount at least
equal to the related Shortfall are not currently
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credited to the Seller's Custodial Account, the Custodian shall transfer such
Assets as are available and then shall transfer cash from such Custodial Account
in an amount so as to make the aggregate Outstanding Principal Amount of the
Assets credited to the Buyer's Custodial Account at least equal to the Required
Balance of Assets of such account. The Buyer and the Seller agree that any cash
transferred pursuant to this subsection (h) shall be attributed to the reduction
of the current Repurchase Price under the Master Repurchase Agreement.
(i) If the aggregate Outstanding Principal Amount of the Assets and the
cash currently credited to the Seller's Custodial Account and available for the
transfers contemplated by subsections (g) and (h) are not sufficient so as to
make the aggregate Outstanding Principal Amount of the Assets credited to the
Buyer's Custodial Account at least equal to the Required Balance of the Assets
in such account, the Custodian shall immediately notify the Buyer and the Seller
of such circumstance by telephone communication followed as soon as practicable
by written communication. After providing such notification the Custodian shall
monitor the Seller's Custodial Account and shall effect the transfers
contemplated by subsections (g) and (h) upon determining that the requisite
amount of Assets and/or cash are credited thereto.
ARTICLE V
THE CUSTODIAN
Section 5.01. Representations and Warranties of the Custodian. With respect
to each Trust Receipt, the Custodian hereby represents and warrants to, and
covenants with the party indicated thereon as the Owner of the related Assets,
that as of the date such Trust Receipt is provided:
(a) The Custodian is duly organized, validly existing and in good standing
under the laws of the United States;
(b) The Custodian has the full power and authority to hold each Asset
(whether acting alone or through an agent) and to execute, deliver and perform,
and to enter into and consummate all transactions contemplated by this
Agreement, has duly authorized the execution, delivery and performance of this
Agreement, has duly executed and delivered this Agreement and this Agreement
constitutes a legal, valid and binding obligation of the Custodian, enforceable
against it in accordance with its terms, except as enforcement of such terms may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable remedies;
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(c) Neither the execution and delivery of this Agreement, the filing of a
financing statement indicating that the Custodian is the secured party with
respect to certain Assets, the issuance of the Trust Receipts, the consummation
of the transactions contemplated hereby or thereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement will conflict with or
result in a breach of any of the terms, conditions or provisions of the
Custodian's charter or by-laws or any legal restriction or any agreement or
instrument to which the Custodian is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation, order, judgment or decree
to which the Custodian or its property is subject;
(d) The Custodian does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in this
Agreement;
(e) To the Custodian's knowledge after due inquiry, there is no litigation
pending or threatened, which if determined adversely to the Custodian, would
adversely affect the execution, delivery or enforceability of this Agreement, or
any of the duties or obligations of the Custodian thereunder, or which would
have a material adverse effect on the financial condition of the Custodian;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Custodian of or compliance by the Custodian with this
Agreement or the consummation of the transactions contemplated hereby;
(g) The Custodian is a separate and independent entity from Seller, the
Custodian does not own a controlling interest in Seller either directly or
through affiliates and no director or officer of the Custodian is also a
director or officer of Seller;
(h) The Custodian shall maintain Custodial Accounts for Buyer and Seller as
custody accounts for the purpose of holding funds on deposit therein and
reflecting Assets owned by the related party. The Custodian shall administer
such accounts in the same manner it administers similar accounts established for
the same purpose; and
(i) The Custodian shall monitor the financing statements filed with respect
to the Assets naming it as the secured party and shall cause Seller to file or,
if Seller shall fail to file in a timely manner, shall itself file such
amendments and continuation statements with respect thereto necessary in order
to
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maintain the perfected security interest of the Custodian in the Assets.
Section 5.02. Custodian of Documents. The Custodian, either directly or by
acting through an agent, shall hold all documents relating to any Asset that
comes into its possession for the exclusive use and benefit of the Owner of such
Asset and shall make disposition thereof only in accordance with the
instructions furnished by such Owner. The Custodian shall segregate and maintain
continuous custody of all such documents received by it in secure facilities in
accordance with customary standards for such custody and shall not release such
documents or transfer such documents to any other party, including any
subcustodian, without the express written consent of the related Owner.
Section 5.03. Charges and Expenses. Seller will pay all fees of the
Custodian in connection with the performance of its duties hereunder in
accordance with written agreements to be entered into from time to time between
the Custodian and Seller, including fees and expenses of counsel incurred by the
Custodian in the performance of its duties hereunder; provided, however, that
-------- -------
the Custodian shall in no event acquire any lien upon any Asset deposited under
this Agreement, or any claim against Buyer or any Owner, by reason of the
failure of Seller to pay any of such charges or expenses.
Section 5.04. No Adverse Interests. The Custodian covenants and warrants to
Buyer, Seller and each Owner, that: (i) as of the related date on which the
Custodian receives evidence of the perfection of its interest in the related
Assets, it holds no adverse interest, by way of security or otherwise, in any
Asset; and (ii) the execution of this Agreement and the creation of the
custodial relationship hereunder does not create any interest, by way of
security or otherwise of the Custodian in or to any Asset, other than the
Custodian's rights as custodian hereunder.
Section 5.05. Inspections. Upon reasonable prior written notice to the
Custodian, any Owner and such Owner's agents, accountants, attorneys and
auditors will be permitted during normal business hours to examine the
Custodian's documents, records and other papers in possession of or under the
control of the Custodian relating to the Assets owned by such Owner.
Section 5.06. Insurance. The Custodian shall, at its own expense, maintain
at all times during the existence of this Agreement and keep in full force and
effect, (1) fidelity insurance, (2) theft of documents insurance, (3) forgery
insurance subject to deductibles, all as is customary for amounts and with
insurance companies reasonably acceptable to Buyer and Seller. A certificate of
the respective insurer as to each such policy or a blanket policy for such
coverage shall be furnished to any Owner,
25
<PAGE>
upon request, containing the insurer's statement or endorsement that such
insurance shall not terminate prior to receipt by such party, by registered
mail, of ten (10) days' advance notice thereof.
Section 5.07. Limitation of Liability. The Custodian shall be subject to no
liability under this Agreement to Owners except for liabilities arising from the
Custodian's negligence or willful misconduct in connection with its performance
of such obligations and duties as are specifically set forth herein. The
Custodian shall not be liable for any action or non-action by it in reliance on
advice of counsel believed by it in good faith to be competent to give such
advice. The Custodian may rely and shall be protected in acting upon any written
notice, order, request, direction or other document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties.
Section 5.08. Indemnification. Seller agrees to indemnify the Custodian
against, and to hold it harmless from, any liabilities, and any related out-of-
pocket expenses, which it may incur in connection with this Agreement or the
Trust Receipts, other than any liabilities and expenses arising out of the
Custodian's negligence or bad faith. The Custodian agrees to indemnify Buyer,
Seller and any Owner against out-of-pocket expenses which it may incur in
connection with this Agreement and which is directly and proximately caused by
the Custodian's negligence or willful misconduct.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Amendment. This Agreement may be amended from time to time by
the Custodian, Buyer and Seller by written agreement signed by such Parties.
Section 6.02. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York governing agreements made and
to be performed therein, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 6.03. New York Jurisdiction; Waiver of Jury Trial. The Custodian,
Buyer and Seller hereby agree to submit to the courts of the State of New York
in any action or proceeding arising out of this Agreement. The Custodian, Buyer
and Seller each hereby waives the right of trial by jury in any litigation
arising hereunder.
26
<PAGE>
Section 6.04. Notices. All demands, notices and communications hereunder,
except as otherwise provided herein, shall be in writing and shall be deemed to
have been duly given if personally delivered at or mailed by registered mail,
postage prepaid, or sent by facsimile transmission, to:
(a) in the case of the Custodian:
First Bank National Association
c/o First Trust National Association
180 East Fifth Street
2nd Floor
St. Paul, Minnesota 55101
Attention: Structured Finance
Telephone: (612) 244-0011
Telecopy: (612) 244-0089
with a copy to:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Specialized Finance Services
Telephone: (612) 244-1196
Telecopy: (612) 244-1537
(b) in the case of Buyer:
Merrill Lynch Mortgage Capital Inc.
Merrill Lynch Headquarters
World Financial Center
North Tower
8th Floor
New York, New York 10281
Attention: James B. Cason
Telephone: (212) 449-1219
and
Merrill Lynch Credit Corporation
c/o Merrill Lynch Mortgage Capital Inc.
101 Hudson Street
12th Floor
Jersey City, New Jersey 07302
Attention: Robert Eckstrom
Telephone: (201) 557-2516
Telecopy: (201) 557-1369
(c) in the case of Seller:
27
<PAGE>
Green Tree Finance Corp. -- Three
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102
Attention: Chief Financial Officer
Telephone: (612) 293-3420
Telecopy: (612) 293-5746
Section 6.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 6.06. No Partnership. Nothing herein contained shall be
deemed or construed to create a co-partnership or joint venture between the
parties hereto.
Section 6.07. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 6.08. Assignment. No party hereto shall sell, pledge, assign
or otherwise transfer this Agreement without the prior written consent of the
other parties hereto.
Section 6.09. Headings. Section headings are for reference purposes
only and shall not be construed as a part of this Agreement.
Section 6.10. Appointment of Agent. Merrill Lynch Credit Corporation
("MLCC") hereby appoints Merrill Lynch Mortgage Capital Inc. ("MLMCI") as its
agent for purposes of giving consent or approval, giving or receiving notices,
holding and releasing Trust Receipts and such other purposes as MLCC may direct.
28
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller and Custodian have caused their names to
be signed hereto by their respective officers thereunto duly authorized, all as
of the day and year first above written.
MERRILL LYNCH MORTGAGE CAPITAL INC.,
as Buyer
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
MERRILL LYNCH CREDIT CORPORATION,
as Buyer
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
GREEN TREE FINANCE. CORP. -- THREE,
as Seller
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
FIRST BANK NATIONAL ASSOCIATION,
as Custodian
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
29
<PAGE>
Exhibit A
FORM OF TRUST RECEIPT
30
<PAGE>
THIS TRUST RECEIPT IS
NOT A NEGOTIABLE
INSTRUMENT.
TRUST RECEIPT/1/ [Date]
-
[ADDRESSEE]
Re: Ownership Interest in Manufactured
Housing Conditional Sales MH Contracts, Home
Improvement Loans, Home Equity Loans or Retail
Installment Contracts under the Amended and
Restated Master Repurchase Agreement
----------------------------------------------
Gentlemen:
First Bank National Association, in its capacity as custodian (the
"Custodian") under an Amended and Restated Tri-Party Custodial Agreement (the
"Agreement"), by and among Merrill Lynch Mortgage Capital Inc. ("Buyer") Merrill
Lynch Credit Corporation, Green Tree Finance Corp. -- Three and the Custodian,
hereby confirms your ownership interest, under the terms and conditions of the
Agreement, of the manufactured housing conditional sales contracts (the "MH
Contracts"), home improvement Loans (the "Home Improvement Loans"), home equity
loans (the "Home Equity Loans") or retail installment contracts ("Contracts"),
as applicable, listed on the schedule attached hereto. Any exceptions or
deficiencies in the Custodian's Home Equity Loan File, Home Improvement Loan
File or Land-and-Home Contract File will be set forth in an attached exception
report. The Custodian shall act as custodian and bailee exclusively for you and
your assigns with respect to each such MH Contract, Home Improvement Loan, Home
Equity Loan or Contracts, as applicable ("Assets"). Furthermore the Custodian,
as agent for MLMCI and MLCC, hereby confirms the following information relating
to the Transaction under the Agreement:
================================================================================
Purchase Price: $______________Pricing Rate: _________%
Dollar Price: $______________Repurchase Date: ______
Margin Percentage: _______%Repurchase
Price: $________
Minimum Aggregate OutstandingActual Margin
Principal Amount of Assets: Percentage: ________%
$_________________
Amount of Price DifferentialActual Aggregate
- -------------------------
/1/ A separate Trust Receipt shall be issued for each Transaction and
- each Trust Receipt shall relate to only one variety of Assets.
31
<PAGE>
Paid: $______________ Outstanding Principal
Amount of
Assets: $_________
This Trust Receipt may be assigned, in whole only, by endorsement by the
registered holder on the assignment form set forth below. Upon presentation of
this Trust Receipt to the Custodian endorsed as aforesaid, the Custodian shall
issue a new Trust Receipt with respect to the Assets in the name of the
assignee.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned in the Agreement.
Upon the Custodian receiving written certification from the registered
holder of this Trust Receipt, if such holder is other than Buyer, that an event
of default under a repurchase agreement between the holder and Buyer has
occurred and is continuing, the Custodian shall follow the instructions of the
registered holder including instructions regarding the release of the related
Assets from the Agreement and the transfer of such Assets and shall do such
other acts and execute such other documents as may be deemed reasonably
necessary by the registered holder to comply with such instructions.
FIRST BANK NATIONAL ASSOCIATION,
as Custodian
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
32
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
----------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
the beneficial interest evidenced by the within Trust Receipt and hereby
authorizes the transfer of registration of such interest to assignee on the
Trust Receipt Register of the Custodian.
I (We) further direct the Custodian to issue a new Trust Receipt relating
to the same Assets as the within Trust Receipt to the above named assignee and
deliver such Trust Receipt to the following address:
- -------------------------------------------------------------------------------.
- -------------------------------------------------------------------------------.
Dated:
------------------------------
Signature by or on behalf of
assignor
Following is the identifying information for the Assets referred to in this
Trust Receipt:
33
<PAGE>
Exhibit B
---------
FORM OF ASSIGNMENT
FOR MH Contracts
34
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that he is the ________________________ of
Green Tree Finance Corp. -- Three, a Minnesota corporation ("Seller"), and that
as such he is duly authorized to execute and deliver this Assignment pursuant to
the Amended and Restated Tri-Party Custodial Agreement dated as of June 1, 1997
(the "Custodial Agreement") by and among Merrill Lynch Mortgage Capital Inc.,
Merrill Lynch Credit Corporation, Seller and First Bank National Association, as
Custodian (the "Custodian").
Seller does hereby assign to the Custodian under the terms of the Custodial
Agreement to be held on behalf of Seller and its transferees, as their interests
may appear, (i) all Seller's right, title and interest in and to the
manufactured housing installment sales contracts described on the List of MH
Contracts attached hereto (the "MH Contracts") and the proceeds thereof
(including, without limitation, all security interests created thereby and any
and all rights to receive payments which are due pursuant thereto from and after
the date specified on such List of MH Contracts), (ii) all rights under any
hazard insurance policy relating to a manufactured home securing an MH Contract
for benefit of the creditor of such MH Contract and all rights under any blanket
hazard insurance policy and the proceeds from the MH Contract holders' errors
and omissions protection policy to the extent they relate to such manufactured
homes, (iii) all rights under any FHA/VA regulation related to any FHA/VA
Contract, (iv) all documents contained in the Contract Files and/or Land-and-
Home Contract File and (v) all proceeds in any way derived from the foregoing.
The undersigned on behalf of Seller hereby certifies that the MH Contracts
and such List of MH Contracts are the MH Contracts and List of MH Contracts
referred to in the UCC-1 financing statement filed by Seller on __________ __,
1997 (file number _________________).
GREEN TREE FINANCE CORP. -- THREE
By
Its
35
<PAGE>
Exhibit C
---------
FORM OF ASSIGNMENT FOR
HOME EQUITY LOANS
36
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that the undersigned is the
_________________ of Green Tree Finance Corp. -- Three, a Minnesota corporation
("Seller"), and that as such the undersigned is duly authorized to execute and
deliver this Assignment pursuant to the Amended and Restated Tri-Party Custodial
Agreement dated as of June 1, 1997 (the "Custodial Agreement"), by and among
Merrill Lynch Mortgage Capital Inc., Merrill Lynch Credit Corporation, Seller
and First Bank National Association, as Custodian (the "Custodian").
Seller does hereby assign to Custodian under the terms of the
Custodial Agreement to be held on behalf of Seller and its transferees, as their
interests may appear, (i) all Seller's right, title and interest in and to the
Home Equity Loans described on the List of Home Equity Loans attached hereto and
the proceeds thereof (including, without limitation, all liens created thereby
and any and all rights to receive payments, including principal and interest,
which are due pursuant thereto from and after the date specified on such List of
Home Equity Loans and all recourse rights against third persons), (ii) all
rights under any hazard insurance policy relating to real property securing a
Home Equity Loan for benefit of the creditor of such Home Equity Loan and all
rights under any blanket hazard insurance policy and the proceeds from the Home
Equity Loan holders' errors and omissions protection policy to the extent they
relate to such real property, (iii) all documents contained in the Home Equity
Loan Files and (iv) all proceeds in any way derived from the foregoing.
The undersigned on behalf of Seller hereby certifies that the Home
Improvement Loans and such List of Home Improvement Loans are the Home
Improvement Loans and List of Home Improvement Loans referred to in the UCC-1
financing statement filed by Seller on __________ __, 1997 (file number
_________________).
Dated: _______________, 19__
GREEN TREE FINANCE CORP. -- THREE
By:
-------------------------------
Name:
Title:
37
<PAGE>
Exhibit D
---------
FORM OF ASSIGNMENT FOR
HOME IMPROVEMENT LOANS
38
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that the undersigned is the
_________________ of Green Tree Finance Corp. -- Three, a Minnesota corporation
("Seller"), and that as such the undersigned is duly authorized to execute and
deliver this Assignment pursuant to the Tri-Party Custodial Agreement dated as
of June 1, 1997 (the "Custodial Agreement"), by and among Merrill Lynch Mortgage
Capital Inc., Merrill Lynch Credit Corporation, Seller and First Bank National
Association, as Custodian (the "Custodian").
Seller does hereby assign to Custodian under the terms of the
Custodial Agreement to be held on behalf of Seller and its transferees, as their
interests may appear, (i) all Seller's right, title and interest in and to the
Home Improvement Loans described on the List of Home Improvement Loans attached
hereto and the proceeds thereof (including, without limitation, all liens
created thereby and any and all rights to receive payments, including principal
and interest, which are due pursuant thereto from and after the date specified
on such List of Home Improvement Loans and all recourse rights against third
persons), (ii) all rights under any FHA insurance and any hazard insurance
policy relating to real property securing a Home Improvement Loan for benefit of
the creditor of such Home Improvement Loan and all rights under any blanket
hazard insurance policy and the proceeds from the Home Improvement Loan holders'
errors and omissions protection policy to the extent they relate to such real
property, (iii) all rights under any FHA regulation related to any Title I Loan,
(iv) all documents contained in the Home Improvement Loan Files and (v) all
proceeds in any way derived from the foregoing.
The undersigned on behalf of Seller hereby certifies that the Home
Improvement Loans and such List of Home Improvement Loans are the Home
Improvement Loans and List of Home Improvement Loans referred to in the UCC-1
financing statement filed by Seller on __________ __, 1997 (file number
_________________).
Dated: _______________, 19__
GREEN TREE FINANCE CORP. -- THREE
By:
-------------------------------
Name:
Title:
39
<PAGE>
Exhibit E
---------
FORM OF ASSIGNMENT FOR
RETAIL INSTALMENT CONTRACTS
40
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that he is the ________________________ of
Green Tree Finance Corp. -- Three, a Minnesota corporation ("Seller"), and that
as such he is duly authorized to execute and deliver this Assignment pursuant to
the Amended and Restated Tri-Party Custodial Agreement dated as of June 1, 1997
(the "Custodial Agreement") by and among Merrill Lynch Mortgage Capital Inc.,
Merrill Lynch Credit Corporation, Seller and First Bank National Association, as
Custodian (the "Custodian").
Seller does hereby assign to the Custodian under the terms of the Custodial
Agreement to be held on behalf of Seller and its transferees, as their interests
may appear, (i) all Seller's right, title and interest in and to the retail
installment contracts described on the List of Contracts attached hereto (the
"Retail Installments Contracts") and the proceeds thereof (including, without
limitation, all security interests created thereby and any and all rights to
receive payments which are due pursuant thereto from and after the date
specified on such List of Retail Installments Contracts), (ii) all documents
contained in the Contract Files and (iii) all proceeds in any way derived from
the foregoing.
The undersigned on behalf of Seller hereby certifies that the Contracts and
such List of Retail Installments Contracts are the Retail Installments Contracts
and List of Retail Installments Contracts referred to in the UCC-1 financing
statement filed by Seller on __________ __, 1997 (file number
_________________).
GREEN TREE FINANCE CORP. -- THREE
By
Its
41
<PAGE>
Exhibit F
---------
FORM OF REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPTS
To: Merrill Lynch Mortgage Capital Inc.
First Bank National Association
c/o First Trust, N.A.
Document Collateral Services, SPFTMZO4
Attention: Customer Service
180 E. Fifth Street
St. Paul, Minnesota 55101
Re: The Custodial Agreement, dated as of June 1, 1997 (the
"Custodial Agreement"), among Merrill Lynch Mortgage Capital,
Inc. ("Buyer"), Merrill Lynch Credit Corporation ("Buyer"),
Green Tree Finance Corp. -- Three ("Seller"), and
________________________________________________ ("Custodian")
In connection with the administration of the Purchased Eligible Assets
held by you as the Custodian on behalf of the Registered Holder, we request the
release, and acknowledge receipt, of the (Home Equity Loan File/Home Improvement
Loan File/[specify documents]) for the Purchased Eligible Assets described
below, for the reason indicated.
Name, Address & Zip Code:
- ------------------------
Loan Number:
- -----------
Reason for Requesting Documents (unless otherwise indicated the Eligible Assets
- -------------------------------
was paid in full or rescinded (check only if applicable))
1. Repurchase of Purchased Eligible Assets due to a breach of a
- --- Representation or Warranty under the Repurchase Agreement. (The Custodian
shall delete the Purchased Eligible Assets from the applicable List of
Contracts and send the amended List of Contracts to the Registered
Holder.)
42
<PAGE>
2. Delivery of Substituted Eligible Assets. (The Custodian is hereby
- --- authorized to delete the Purchased Eligible Assets from the applicable
List of Contracts attached hereto and send the amended List of Contracts
to the Registered Holder.)
3. Purchased Eligible Assets Liquidated By _____________. (The Custodian is
- --- hereby authorized to delete Purchased Eligible Assets from the applicable
List of Contracts attached hereto and send the amended List of Contracts
to the Registered Holder.)
4. Mortgage Loan in Foreclosure
- ---
5. Other (explain) _____________________________________
- ---
If box 1, 2 or 3 above is checked, and if all or part of the Home Equity
Loan Files/Home Improvement Loan Files were previously released to us, please
release to us our previous request and receipt on file with you, as well as any
additional documents in your possession relating to the specified Purchased
Eligible Asset.
If box 4 or 5 above is checked, upon our return of all of the above
documents to you as the Custodian, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
The Seller understands and agrees that all documents delivered to Seller
or Seller's subservicer pursuant to this Request for Release shall be returned
to the Custodian no later than thirty (30) days from the date hereof.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Custodial Agreement.
Custodian may terminate its obligations hereunder upon 30 days' prior
written notice to Buyer, the Registered Holder and Seller. Such resignation
shall take effect upon (i) the appointment of a successor Custodian acceptable
to Buyer within such 30 days; and (ii) delivery of all Home Equity Loan Files
and Home Improvement Loan Files to the successor Custodian.
[Green Tree Finance Corp. -- Three]
Seller
By:
Name:
Title:
43
<PAGE>
Acknowledged and Agreed:
[Registered Holder]
(Required if documentation relating to more than five (5) Home Equity Loan Files
and Home Improvement Loan Files are outstanding or if Items 1, 3 or 5 is
--
checked.)
By:
Name:
Title:
44
<PAGE>
Acknowledgment of Documents returned to the Custodian, for the reasons listed in
Items 4 or 5, as applicable
,
Custodian
By:
Name:
Title:
Date:
45
<PAGE>
ANNEX I
SUPPLEMENTAL TERMS TO AMENDED AND
RESTATED MASTER REPURCHASE AGREEMENT,
DATED AS OF June 1, 1997, AMONG
MERRILL LYNCH MORTGAGE CAPITAL INC. AND
MERRILL LYNCH CREDIT CORPORATION AND
GREEN TREE FINANCE CORP.--THREE
1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to
-------------
Master Repurchase Agreement (the "Master Repurchase Agreement", and
collectively with these Supplemental Terms, the "Agreement") modify the
terms and conditions under which the parties hereto, from time to time,
enter into Transactions.
2. ADDITIONAL DEFINITIONS.
----------------------
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Master Repurchase Agreement.
(b) "Buyer" shall refer to Merrill Lynch Mortgage Capital Inc. or Merrill
Lynch Credit Corporation, as applicable.
(c) "Consumer Products" refers to consumer goods consisting of
motorcycles, marine products (including boats, boat trailers and
outboard motors), pianos and organs, horse trailers, sport vehicles
(including snowmobiles, personal watercraft and all-terrain vehicles),
trucks, personal aircraft, recreational vehicles, and any other asset
as shall be acceptable to Buyer in its sole discretion, financed by
Green Tree pursuant to a Contract.
(d) "Contract" refers to promissory notes financing home improvements
(which are not treated as Home Improvement Loans), certain closed-end
home equity loans (which are not treated as Home Equity Loans) and any
retail installment contract which finances a purchase of a Consumer
Product, all rights to receive payments which are due pursuant
thereto, and any "purchase money security interest" (as defined in the
Uniform Commercial Code) created in favor of Seller in the Consumer
Product, financed thereunder, the ownership of which is evidenced by a
Trust Receipt issued pursuant to the Custodial Agreement. This
definition of "Contract"
1
<PAGE>
shall include home improvement loans and home equity loans that
Seller believes may not respectively satisfy the representations set
forth in Exhibit B and Exhibit C and are thus not included in the
definition of "Home Improvement Loan" and "Home Equity Loan."
(e) "Custodial Agreement" shall refer to an amended and restated custodial
agreement, among the parties having ownership interests in the related
Securities and the party named as custodian therein, providing for the
maintenance of ownership records relating to the Securities.
(f) "Custodian" refers to the party named as custodian in the Custodial
Agreement, or any permitted successor thereto.
(g) "Electronic Ledger" refers to the electronic master record of
installment sale contracts of the Seller.
(h) "FHA" shall refer to the Federal Housing Administration of HUD.
(i) "FHA/VA MH Contracts" shall refer to MH Contracts that are insured by
the FHA or guaranteed by the Department of Veterans Affairs.
(j) "Home Equity Loans" shall refer to the home equity loans other than
such home equity loans included in the definition of "Contract"
secured by first, second or third liens on single family residential
real property (including, without limitation, condominiums and planned
unit developments) certain documents relating to which have been
delivered to the Custodian pursuant to the Custodial Agreement and the
ownership of which is evidenced by a Trust Receipt issued pursuant to
the Custodial Agreement.
(k) "Home Improvement Loans" refers to home improvement installment loan
contracts and promissory notes other than such home improvement loans
included in the definition of "Contract", the ownership of which is
evidenced by a Trust Receipt issued pursuant to the Custodial
Agreement.
(l) "HUD" shall refer to the Department of Housing and Urban Development.
(m) "Land-and-Home Contract" refers to a MH Contract that is secured by a
mortgage or deed of trust on real estate on
2
<PAGE>
which the related manufactured home is situated, and which
manufactured home is considered or classified as part of the real
estate under the laws of the jurisdiction in which it is located.
(n) "Market Value" shall, in addition to the definition set forth in the
Master Repurchase Agreement, provide that:
(i) the Market Value of any Security shall be determined solely by
Buyer;
(ii) the Market Value of a Security shall be determined by valuing
such Security net of any applicable servicing fee;
(iii) a value of zero shall be assigned to any Security which has been
delinquent for thirty (30) days or more; and
(iv) in no event shall the Market Value of a Security exceed the
outstanding principal amount thereof.
(o) "MH Contract" refers to a manufactured housing conditional sales
contract, including any Land-and-Home Contract, the ownership of which
is evidenced by a Trust Receipt issued pursuant to the Custodial
Agreement.
(p) "Owner" shall have the meaning set forth in the Custodial Agreement.
(q) "Secured Home Improvement Loans" refers to Home Improvement Loans
which are secured by first, second or third mortgages on property,
whether conventional or insured by the FHA.
(r) "Securities" shall refer to MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts; provided, however, that such MH
-------- -------
Contracts, Home Improvement Loans, Home Equity Loans and Contracts
shall not be deemed to be securities for any federal securities law or
state blue sky law purposes; provided, further, that in the extent
-------- -------
Merrill Lynch Capital Markets is not selected to be, or has resigned
as, the lead manager or a co-manager for the securitization of any of
the MH Contracts, Home Improvement Loans, Home Equity Loans or
Contracts, such MH Contracts, Home Improvement Loans, Home Equity
Loans or Contracts shall, at the election of Buyer in its discretion,
be deemed not to be "Securities" hereunder.
3
<PAGE>
(s) "Seller" shall refer to Green Tree Finance Corp.--Three.
(t) "Step-Up Rate Contract" shall refer to any Contract bearing interest
during an initial period at a fixed rate that is lower than the fixed
rate borne thereafter.
(u) "Title I Loan" shall refer to a Home Improvement Loan insured under
the FHA's Title I Program.
(v) "Transaction" shall, in addition to the definition set forth in the
Master Repurchase Agreement, refer to deliveries of Securities or cash
pursuant to Paragraph 4(a) of the Master Repurchase Agreement and
substitutions pursuant to Paragraph 9 of the Master Repurchase
Agreement.
(w) "UCC" refers to the Uniform Commercial Code as in effect in the
applicable jurisdiction.
(x) "Unsecured Home Improvement Loans" refers to Home Improvement Loans
which are not secured by mortgaged property.
3. CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto
-------------
unless written notice of objection is given by the objecting party to the
other party within two (2) business days after the objecting party's
receipt of such Confirmation. In the case of Transactions involving MH
Contracts, Home Improvement Loans, Home Equity Loans or Contracts, the
Purchased Securities shall be identified on a detailed listing to be
provided by Seller to Buyer (a "List of MH Contracts" for MH Contracts, a
"List of Home Improvement Loans" for Home Improvement Loans, a "List of
Home Equity Loans" for Home Equity Loans and a "List of Contracts" for
Contracts) and may be identified in the related Confirmation by reference
to such lists.
4. INCOME PAYMENTS. So long as no Event of Default shall have occurred and be
---------------
continuing, Seller shall be entitled to all payments of principal and
interest and principal prepayments payable to the holder of the Purchased
Securities.
5. SECURITY INTEREST.
-----------------
(a) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the parties
intend that Buyer shall have a
4
<PAGE>
perfected first priority security interest in all of the Purchased
Securities.
(b) Seller shall pay all fees and expenses associated with perfecting such
security interest including, without limitation, the cost of filing
financing statements under the Uniform Commercial Code.
(c) In the event that Buyer elects to engage in repurchase transactions
with the Purchased Securities or otherwise elects to pledge or
hypothecate the Purchased Securities, Seller shall, at the request of
Buyer and at the expense of Seller, provide Buyer's counterparty in
such repurchase transaction with an opinion of counsel to the effect
that such counterparty has either an ownership interest or a perfected
first priority security interest in such Purchased Securities.
6. REPRESENTATIONS.
---------------
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the execution, delivery and performance of the Agreement and the
performance of each Transaction do not and will not result in or
require the creation of any lien, security interest or other
charge or encumbrance (other than pursuant hereto) upon or with
respect to any of its properties; and
(ii) the Agreement is, and each Transaction when entered into under
the Agreement will be, a legal, valid and binding obligation of
it enforceable against it in accordance with the terms of the
Agreement.
(b) Seller represents and warrants to Buyer, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the documents disclosed by Seller to Buyer pursuant to these
Supplemental Terms are either original documents or genuine and
true copies thereof;
(ii) Seller is a separate and independent corporate entity from the
custodian named in the Custodial Agreement, Seller does not own
a controlling interest in such custodian either directly or
5
<PAGE>
through affiliates and no director or officer of Seller is
also a director or officer of such custodian;
(iii) Seller shall be at the time it delivers any Purchased Securities
for any Transaction, and shall continue to be, through the
Purchase Date relating to each such Transaction, the legal and
beneficial owner of such Purchased Securities free and clear
of any lien, security interest, option or encumbrance except
for the security interest created by the Agreement;
(iv) each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract was originated by Green Tree directly or through its
correspondent network in its ordinary course of business and
has not been purchased in any bulk transaction, unless
otherwise expressly approved by Buyer in writing;
(v) each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract was underwritten in accordance with the written
underwriting standards of Green Tree furnished by Seller to
Buyer, and no material change to such underwriting standards
has occurred since the date of the last written revision to
such standards was furnished to Buyer by Seller;
(vi) since the date of the most recent financial statement of Seller,
delivered by it pursuant to Paragraph 9 hereof, there has been
no material adverse change in the financial condition or
results or operations of Seller;
(vii) Seller has capital in an amount at least equal to $1,000,000 in
the form of cash or U.S. Treasury bills; and
(viii) Seller is in possession of a note of Green Tree Financial
Corporation ("Green Tree"), made payable to Seller in the
amount of at least $1,000,000, which note is subordinated to
all outstanding debt of Green Tree.
(c) Seller makes the representations and warranties to Buyer concerning
the MH Contracts, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties,
as are set forth at Exhibit A-1 hereto, with respect to those MH
Contracts relating to manufactured housing that is not considered to
be real property under applicable state law, and Exhibit A-2 hereto,
with respect to those MH Contracts
6
<PAGE>
relating to manufactured housing that is considered to be real
property under applicable state law. Seller further represents and
warrants to Buyer that the Exhibit A-1 and A-2 representations and
warranties, as applicable, shall continue to be true for all MH
Contracts through the Repurchase Date of the related Transaction.
The representations and warranties set forth at Exhibits A-1 and A-2
hereto are incorporated herein in their entirety.
(d) Seller makes the representations and warranties to Buyer concerning
the Home Equity Loans, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties,
as are set forth at Exhibit B hereto. Seller further represents and
warrants to Buyer that the Exhibit B representations and warranties
shall continue to be true for all Home Equity Loans through the
Repurchase Date of the related Transactions. The representations and
warranties set forth at Exhibit B hereto are incorporated herein in
their entirety.
(e) Seller makes the representations and warranties to Buyer concerning
the Contracts, and shall as of the Purchase Date of any Transaction
be deemed to make such representations and warranties, as are set
forth at Exhibit C hereto. Seller further represents and warrants to
Buyer that the Exhibit C representations and warranties shall
continue to be true for all Contracts through the Repurchase Date of
the related Transactions. The representations and warranties set
forth at Exhibit C hereto are incorporated herein in their entirety.
(f) Seller makes the representations and warranties to Buyer concerning
the Home Improvement Loans, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties,
as are set forth at Exhibit D hereto. Seller further represents and
warrants to Buyer that the Exhibit D representations and warranties
shall continue to be true for all Home Improvement Loans through the
Repurchase Date of the related Transactions. The representations and
warranties set forth at Exhibit D hereto are incorporated herein in
their entirety.
7
<PAGE>
7. EVENTS OF DEFAULT.
-----------------
(a) The term "Event of Default" shall, in addition to the definition set
forth in the Master Repurchase Agreement, include the following
events:
(i) any governmental or self-regulatory authority shall take
possession of Buyer or Seller or its property or appoint any
receiver, conservator or other official, or such party shall
take any action to authorize any of the actions set forth in
this clause (i);
(ii) Buyer shall have reasonably determined that Seller is or will be
unable to meet its commitments under the Agreement, shall have
notified Seller of such determination and Seller shall not
have responded with appropriate information to the contrary to
the satisfaction of Buyer within twenty-four (24) hours;
(iii) the Agreement shall for any reason cease to create either an
ownership interest (which ownership interest shall be
confirmed upon request of Buyer in an opinion of counsel
provided by Seller) or a valid, first priority security
interest in any of the Purchased Securities purported to be
covered thereby;
(iv) a final judgment by any competent court in the United States of
America for the payment of money in an amount of at least
$100,000 is rendered against the defaulting party, and the
same remains undischarged for a period of 60 days during which
execution of such judgment is not effectively stayed;
(v) any representation or warranty made by Seller in the Agreement
or the Custodial Agreement shall have been incorrect or untrue
when made or repeated or when deemed to have been made or
repeated or, in the case of continuing representations, shall
be untrue in any material respect during the term of any
Transaction under the Agreement;
(vi) HUD or the Federal Housing Administration shall have withdrawn
or adversely modified its approval of Green Tree to act as an
FHA-approved mortgagee and
8
<PAGE>
servicer (including an FHA-approved mortgagee and servicer
under Title I); and
(vii) The capitalization of Seller shall at any time fail to comply
with the structure set forth in Paragraphs 6(b)(vii) and
(viii).
(b) Upon the occurrence and during the continuance of an Event of Default
by Seller:
(i) all rights of Seller to receive payments which it would
otherwise be authorized to receive pursuant to Paragraph 4 of
these Supplemental Terms shall cease, and all such rights
shall thereupon become vested in Buyer, which shall thereupon
have the sole right to receive such payments and apply them to
the aggregate unpaid Repurchase Prices owed by Seller; and
(ii) all payments which are received by Seller contrary to the
provisions of the preceding clause (i) shall be received in
trust for the benefit of Buyer and shall be segregated from
other funds of Seller.
(c) Any sale of Purchased Securities under Section 11 of the Master
Repurchase Agreement shall be conducted in a commercially reasonable
manner.
8. ADDITIONAL EVENTS OF TERMINATION.
--------------------------------
(a) At the option of Buyer, exercised by written notice to Seller and
Green Tree, the Repurchase Date for each Transaction under the
Agreement shall be deemed to immediately occur in the event that:
(i) in the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Green Tree or Seller;
(ii) Buyer shall request written assurances as to the financial well-
being of Green Tree or Seller and such assurances shall not
have been provided within twenty-four (24) hours of such
request;
(iii) Green Tree or Seller shall be in default with respect to any
normal and customary covenants under any contract or agreement
to which it is a party (which
9
<PAGE>
covenants include, but are not limited to, an Act of
Insolvency of Green Tree or Seller or the failure of Green
Tree or Seller to make required payments of at least $100,000
and remains unpaid under such contract or agreement as they
become due); or
(iv) The senior debt obligations or short-term debt obligations of
Merrill Lynch & Co., Inc. shall be rated below the four
highest grades by any nationally recognized statistical rating
organization.
(b) The events specified in Paragraph 8(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for each Transaction shall be in addition to any
other rights of Buyer to cause such an acceleration under the
Agreement.
9. FINANCIAL STATEMENTS. As of the date hereof, the parties hereto shall each
--------------------
provide the other with its audited year-end financial statements and its
most recent publicly available interim financial statement. The parties
hereto shall from time to time each provide the other with audited year-
end financial statements and additional publicly available interim
financial statements upon the other's reasonable request. The financial
statements of Seller required pursuant to this Section 9 may be
consolidated with those of Green Tree. Each delivery of Purchased
Securities by Seller to Buyer hereunder will constitute a representation
by Seller that there has been no material adverse change in Seller's
financial condition not disclosed to Buyer since the date of Seller's
most recent financial statement delivered to Buyer. Seller shall provide
Buyer, from time to time at Seller's expense, with such information of a
financial or operational nature as Buyer may reasonably request promptly
upon receipt of such request.
10. USE OF PROCEEDS. Seller represents, warrants and covenants that none of
---------------
the Purchase Price for any Purchased Securities will be used either
directly or indirectly to acquire any security, as that term is defined
in Regulation G or Regulation T of the Board of Governors of the Federal
Reserve System, and that Seller has not taken any action that might
cause any Transaction to violate any regulation of the Federal Reserve
Board.
10
<PAGE>
11. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. The parties hereto agree
-----------------------------------------------
and acknowledge that Transactions hereunder will be entered into by Buyer
in its sole discretion and that Buyer is under no obligation to enter into
any Transaction with Seller. With respect to any Transaction and without
limiting the discretion of Buyer referred to in the foregoing sentence and
in Paragraph 16 of these Supplemental Terms:
(a) the minimum amount of any Transaction under this Agreement shall have
a Purchase Price of $5,000,000;
(b) the aggregate outstanding Purchase Price for all Purchased Securities
shall not exceed $1,000,000,000 at any one time;
(c) the aggregate outstanding Purchase Price for Purchased Securities
other than MH Contracts shall not exceed $750,000,000 at any one time;
and
(d) the percentage used to determine Buyer's Margin Amount shall be as
mutually agreed upon by Buyer and Seller but in no event less than
110%.
12. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date
------------------------------------
shall include that portion of the Price Differential that has accrued but
has not been paid. The Price Differential shall accrue and be calculated
on a daily basis for each MH Contract, Home Improvement Loan, Home Equity
Loan and Contract (such calculation to be made on the basis of a 360-day
year and the actual number of days elapsed). The Price Differential shall
be payable weekly in arrears to Buyer with respect to each MH Contract,
Home Improvement Loan, Home Equity Loan and Contract on the earlier of
Friday of each week or the termination date for the related Transaction.
The Price Differential for any MH Contract, Home Improvement Loan, Home
Equity Loan and Contract shall be equal to the product of (i) the Purchase
Price and (ii) a per annum percentage 50 basis points (or such other number
of basis points as Buyer and Seller may mutually agree) in excess of the
prevailing overnight rate on Federal funds (as reported on Page 5 of
Telerate) existing at the opening of business on the date of calculation.
Payment of the Price Differential to Buyer shall be made by wire transfer
in immediately available funds.
13. ADDITIONAL INFORMATION.
----------------------
11
<PAGE>
(a) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in
their possession pertaining to each Purchased Security that is the
subject of such Transaction. Such inspection shall occur upon the
request of Buyer at a mutually agreeable location during regular
business hours and on a date not more than two (2) business days
after the date of such request.
(b) Seller agrees to provide Buyer from time to time with such information
concerning Seller of a financial or operational nature as Buyer may
request.
(c) Seller shall provide Buyer with copies of all filings made by or on
behalf of Seller or its parent with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as
amended, promptly upon making such filings.
14. TERMINATION Notwithstanding Paragraph 15 of the Master Repurchase
-----------
Agreement, this Agreement and all Transactions outstanding hereunder shall
terminate automatically without any requirement for notice on the date
occurring six calendar months after the date as of which this Agreement is
entered into; provided, however, that this Agreement and any Transaction
outstanding hereunder may be extended by mutual agreement of Buyer, Seller
and Green Tree; and provided further, however, that no such party shall be
obligated to agree to such an extension.
15. MARGIN MAINTENANCE.
------------------
(a) Paragraph 4(a) of the Master Repurchase Agreement is hereby modified
to provide that if the notice to be given by Buyer to Seller under
such paragraph is given at or prior to 10:00 a.m. New York City time,
Seller shall transfer the Additional Purchased Securities or cash to
Buyer prior to the close of business in New York City on the date of
such notice, and if such notice is given after 10:00 a.m. New York
City time, Seller shall transfer the Additional Purchased Securities
or cash prior to the close of business in New York City on the
business day following the date of such notice.
(b) Additional Purchased Securities that are MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts that are
transferred by Seller to Buyer pursuant to Paragraph 4(a) of the
Master Repurchase Agreement shall
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<PAGE>
be transferred to the Custodian for the benefit of Buyer pursuant to
the provisions of the Custodial Agreement. Any cash transferred by
Seller to Buyer shall be sent via wire transfer in immediately
available funds to the account designated by Buyer.
16. TRANSACTIONS OPTIONAL; NO COMMITMENT. Notwithstanding any other provision
------------------------------------
of the Agreement or the Custodial Agreement to the contrary, Buyer shall be
under no obligation to enter into Transactions with Seller and the
initiation of each Transaction is subject to the approval of Buyer in its
sole discretion.
17. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction
---------------------
under this Agreement, Seller shall cause each of the following conditions
to occur:
(a) A Custodial Agreement relating to the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts, in form and substance
satisfactory to Buyer, shall have been executed and delivered by the
parties thereto;
(b) Seller shall have disclosed information satisfactory to Buyer with
respect to the scheduled maturities and termination provisions of all
outstanding credit facilities and debt of Seller; and
(c) Seller shall, on the Purchase Date of the first Transaction hereunder
and, upon the request of Buyer, on the Purchase Date of any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon
permitted as to any person or entity that purchases the Securities
from Buyer in a repurchase transaction, an opinion of counsel, in form
and substance satisfactory to Buyer and its counsel, concerning (i)
the authorization and authority of Seller to enter into the Agreement
and the Custodial Agreement and Transactions thereunder, (ii) the
ownership interest or perfected security interest of Buyer or its
agent in the Purchased Securities and (iii) such other matters as
Buyer may reasonably require.
18. SERVICING ARRANGEMENTS.
----------------------
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts contemplated hereby, Seller shall cause
Green
13
<PAGE>
Tree to continue to service the MH Contracts, Home Improvement Loans,
Home Equity Loans and Contracts for the benefit of Buyer and, if Buyer
shall exercise its rights to sell the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts pursuant to this Agreement
prior to the related Repurchase Date, Buyer's assigns; provided,
--------
however, that the obligation of Green Tree to service the MH
-------
Contracts, Home Improvement Loans, Home Equity Loans and Contracts for
the benefit of Buyer as aforesaid shall cease upon the payment to
Buyer of the Repurchase Price therefor.
(b) Green Tree shall service the MH Contracts, Home Improvement Loans,
Home Equity Loans and Contracts and shall enforce its rights and the
rights of the beneficial owner thereunder in accordance with the
standards of a prudent lender in the manufactured housing industry,
the home equity loan industry and the consumer finance industry, as
applicable.
(c) Green Tree shall service all FHA/VA MH Contracts and all FHA/VA Home
Equity and Home Improvement Loans in a manner such that such insurance
or guarantee will not be impaired and will remain in full force and
effect.
(d) Buyer may, in its sole discretion if an Event of Default shall have
occurred and be continuing, without payment of any termination fee or
any other amount to Seller, (i) sell its right to the MH Contracts,
Home Improvement Loans, Home Equity Loans and Contracts on a servicing
released basis or (ii) terminate Green Tree as servicer of the MH
Contracts, Home Improvement Loans, Home Equity Loans and Contracts
with or without cause.
19. TRANSFERS TO THIRD PARTIES. Buyer and Seller agree that, notwithstanding
--------------------------
any provision of the Agreement or the Custodial Agreement to the contrary,
Buyer may engage in repurchase transactions with the Purchased Securities
and may otherwise pledge or hypothecate the Purchased Securities, provided
that no such transaction shall relieve Buyer of its obligations under the
Agreement.
20. SINGLE AGREEMENT. Paragraph 12 of the Master Repurchase Agreement is
----------------
amended by adding at the end thereof the following:
"Buyer and Seller agree that, upon an Act of Insolvency by Buyer, on
the one hand, or Seller or any of its affiliates, on the other hand,
or the default by Buyer,
14
<PAGE>
on the one hand, or Seller or any of its affiliates, on the other
hand, under any transaction with the other party hereto (the party to
which such Act of Insolvency or default relates being herein referred
to as "Party A" and the other party being referred to herein as "Party
B"), Party B may: (a) liquidate any transaction between Party A and
Party B, (b) reduce any amounts due and owing to Party A under this or
any other transactions between Party A and Party B by setting off
against such amounts any amounts due and owing to Party B by Party A,
and (c) treat all security for any transactions between Party A and
Party B as security for all transactions between Party A and Party B.
21. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Buyer and Seller hereby agree
-------------------------------------------
to submit to the courts of the State of New York in any action or
proceeding arising out of this Agreement. Buyer and Seller each hereby
waives the right of trial by jury in any litigation arising hereunder.
22. BINDING TERMS. All of the covenants, stipulations, promises and agreements
-------------
in the Agreement shall bind the successors and assigns of the parties
hereto, whether expressed or not.
23. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which counterparts shall be deemed to be an original,
and such counterparts shall constitute but one and the same instrument.
24. INCORPORATION OF TERMS. The Master Repurchase Agreement as supplemented by
----------------------
this Annex I and by Exhibits A-1, A-2, B, C and D shall be read, taken and
construed as one and the same instrument.
25. OPINIONS OF COUNSEL. Seller shall, on the date of the first Transaction
-------------------
hereunder and, upon the request of Buyer, on the date on any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon
permitted as to any person or entity that purchases the Contracts from
Buyer in a repurchase transaction, opinions of counsel reasonably
satisfactory to Buyer.
26. APPOINTMENT OF AGENT. Merrill Lynch Credit Corporation ("MLCC") hereby
--------------------
appoints Merrill Lynch Mortgage Capital Inc. ("MLMCI") as its agent for
purposes of reviewing and executing Confirmations, determining Market
Value, exercising any termination option provided for in Paragraph 14
hereof, exercising MLCC's rights under any margin maintenance
15
<PAGE>
provision of the Agreement, exercising MLCC's rights under the default
provisions of the Agreement and such other purposes as MLCC may direct. The
appointment of such agent shall not relieve MLCC of its obligations as
Buyer hereunder.
16
<PAGE>
EXHIBIT A-1
-----------
Representations with respect to MH Contracts
(not relating to real property)
--------------------------------------------
A. Payments. The scheduled payment of principal and interest for the
--------
most recent Due Date was made by or on behalf of the obligor (without any
advance from Green Tree or any Person acting at the request of Green Tree) or
was not delinquent for more than 30 days.
B. No Waivers. The terms of the MH Contract have not been waived,
----------
altered or modified in any respect, except by instruments or documents
identified in the MH Contract file.
C. Binding Obligation. The MH Contract is the legal, valid and binding
------------------
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. No Defenses. The MH Contract is not subject to any right of
-----------
rescission, setoff, counterclaim or defense, including the defense of usury, and
the operation of any of the terms of the MH Contract or the exercise of any
right thereunder will not render the MH Contract unenforceable in whole or in
part or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto.
E. Insurance. Green Tree or its agent has monitored the existence of a
---------
hazard insurance policy with respect to the manufactured home securing a MH
Contract and if the Green Tree has determined that no such policy exists, Green
Tree has arranged for such insurance and has billed the related obligor through
its loan account.
F. Origination. The MH Contract was originated by a manufactured housing
-----------
dealer or Green Tree in the regular course of its business and, if originated by
a manufactured housing dealer, was purchased by Green Tree in the regular course
of its business.
G. Lawful Assignment. The MH Contract was not originated in and is not
-----------------
subject to the laws of any jurisdiction whose laws
1
<PAGE>
would make the transfer of the MH Contract to the Custodian or the ownership of
the MH Contracts by the Owner unlawful.
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by the Custodian
or the Owner's ownership of the MH Contracts, and Green Tree shall maintain in
its possession, available for the Buyer's inspection, and shall deliver to the
Buyer upon demand, evidence of compliance with all such requirements.
I. MH Contract in Force. The MH Contract has not been satisfied or
--------------------
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. Valid Security Interest. The MH Contract creates a valid and
-----------------------
enforceable perfected first priority security interest in favor of Green Tree in
the manufactured home covered thereby as security for payment of the outstanding
principal balance of such MH Contract and all other obligations of the obligor
under such MH Contract; such security interest has been assigned by Green Tree
to the Custodian, and the Custodian has and will, on behalf of the Owners of the
MH Contracts, have a valid and perfected and enforceable first priority security
interest in such manufactured home.
K. Capacity of Parties. All parties to the MH Contract had capacity to
-------------------
execute the MH Contract.
L. Good Title. In the case of a MH Contract purchased from a
----------
manufactured housing dealer, Green Tree purchased the MH Contract for fair value
and took possession thereof in the ordinary course of its business, without
knowledge that the MH Contract was subject to a security interest. Green Tree
has not sold, assigned or pledged the MH Contract to any Person other than the
Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Green Tree has not waived any such default, breach, violation or
event permitting acceleration.
2
<PAGE>
N. No Liens. There are, to the best of Green Tree's knowledge, no liens
--------
or claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
O. Equal Installments. The MH Contract either has a fixed rate or is a
------------------
Step-Up Rate Contract and provides for level monthly payments which fully
amortize the loan over its term.
P. Enforceability. The MH Contract contains customary and enforceable
--------------
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed MH Contract, which
------------
is held by Green Tree.
R. Loan-to-Value Ratio. At the time of its origination each MH Contract
-------------------
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Green Tree's
underwriting guidelines in effect at the time the MH Contract was originated.
S. Primary Resident. At the time of origination of the MH Contract the
----------------
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
T. Not Real Estate. The related manufactured home is not considered or
---------------
classified as part of the real estate on which it is located under the laws of
the jurisdiction in which it is located and such manufactured home is, to the
best of Green Tree's knowledge, free of damage and in good repair.
U. Notation of Security Interest. If the related manufactured home is
-----------------------------
located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the title
document shows, or if a new or replacement title document with respect to such
manufactured home is being applied for such title document will be issued within
180 days and will show, Green Tree as the holder of a first priority security
interest in such manufactured home. If the related manufactured home is located
in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in manufactured housing, such filings or
recordings have been duly made and show Green Tree as secured
3
<PAGE>
party. In either case, the Custodian has the same rights as the secured party of
record would have (if such secured party were still the owner of the MH
Contract) against all Persons claiming an interest in such manufactured home.
V. Qualified Mortgage for REMIC. Each MH Contract is a "qualified
----------------------------
mortgage" under Section 860G(a)(3) of the Code, and the related manufactured
home is "manufactured housing" within the meaning of Section 25(e)(10) of the
Code.
W. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the
-------------------
MH Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
X. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the MH Contracts.
4
<PAGE>
EXHIBIT A-2
-----------
Representations with respect to MH Contracts
(relating to real property)
--------------------------------------------
A. Payments. The scheduled payment of principal and interest for the
--------
most recent Due Date was made by or on behalf of the obligor (without any
advance from Green Tree or any Person acting at the request of Green Tree) or
was not delinquent for more than 30 days.
B. No Waivers. The terms of the MH Contract have not been waived,
----------
altered or modified in any respect, except by instruments or documents
identified in the MH Contract file.
C. Binding Obligation. The MH Contract is the legal, valid and binding
------------------
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. No Defenses. The MH Contract is not subject to any right of
-----------
rescission, setoff, counterclaim or defense, including the defense of usury, and
the operation of any of the terms of the MH Contract or the exercise of any
right thereunder will not render the MH Contract unenforceable in whole or in
part or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto.
E. Insurance. Green Tree or its agent has monitored the existence of a
---------
hazard insurance policy with respect to the manufactured home securing a MH
Contract and if the Green Tree has determined that no such policy exists, Green
Tree has arranged for such insurance and has billed the related obligor through
its loan account
F. Origination. The MH Contract was originated by a manufactured housing
-----------
dealer or Green Tree in the regular course of its business and, if originated by
a manufactured housing dealer, was purchased by Green Tree in the regular course
of its business.
G. Lawful Assignment. The MH Contract was not originated in and is not
-----------------
subject to the laws of any jurisdiction whose laws
1
<PAGE>
would make the transfer of the MH Contract to the Custodian or the ownership of
the MH Contracts by the Owner unlawful.
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by the Custodian
or the Owner's ownership of the MH Contracts, and Green Tree shall maintain in
its possession, available for the Buyer's inspection, and shall deliver to the
Buyer upon demand, evidence of compliance with all such requirements.
I. MH Contract in Force. The MH Contract has not been satisfied or
--------------------
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. Interest in Real Property. Each mortgage is a valid first lien in
-------------------------
favor of Green Tree on real property securing the amount owed by the obligor
under the related MH Contract subject only to (a) the lien of current real
property taxes and assessments, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of public record as of the date of
recording of such mortgage, such exceptions appearing of record being acceptable
to mortgage lending institutions generally in the area wherein the property
subject to the mortgage is located or specifically reflected in the appraisal
obtained in connection with the origination of the related MH Contract obtained
by Green Tree and (c) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by such Mortgage. Green Tree has assigned all of its
right, title and interest in such MH Contract and related mortgage, including
the security interest in the manufactured home covered thereby, to the
Custodian. The Custodian has and will have a valid and perfected and
enforceable first priority security interest in such MH Contract. The MH
Contract creates a valid and enforceable perfected first priority security
interest in favor of Green Tree in the manufactured home covered thereby (to the
extent such manufactured home is not considered real property) as security for
payment of the outstanding principal balance of such MH Contract and all other
obligations of the obligor under such MH Contract; such security interest has
been assigned by Green Tree to the Custodian, and the Custodian has and will, on
behalf of the Owners of the MH Contracts, have a valid and perfected and
enforceable first priority security interest in such manufactured home.
2
<PAGE>
K. Capacity of Parties. All parties to the MH Contract had capacity to
-------------------
execute the MH Contract.
L. Good Title. In the case of a MH Contract purchased from a
----------
manufactured housing dealer, Green Tree purchased the MH Contract for fair value
and took possession thereof in the ordinary course of its business, without
knowledge that the MH Contract was subject to a security interest. Green Tree
has not sold, assigned or pledged the MH Contract to any Person other than the
Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Green Tree has not waived any such default, breach, violation or
event permitting acceleration.
N. No Liens. There are, to the best of Green Tree's knowledge, no liens
--------
or claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
O. Equal Installments. The MH Contract either has a fixed rate or is a
------------------
Step-Up Rate Contract and provides for level monthly payments which fully
amortize the loan over its term.
P. Enforceability. The MH Contract contains customary and enforceable
--------------
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed MH Contract, which
------------
is held by Green Tree.
R. Loan-to-Value Ratio. At the time of its origination each MH Contract
-------------------
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Green Tree's
underwriting guidelines in effect at the time the MH Contract was originated.
S. Primary Resident. At the time of origination of the MH Contract the
----------------
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
3
<PAGE>
T. Good Repair. The related manufactured home is, to the best of Green
-----------
Tree's knowledge, free of damage and in good repair.
U. Qualified Mortgage for REMIC. Each MH Contract is a "qualified
----------------------------
mortgage" under Section 860G(a)(3) of the Code, and the related manufactured
home is "manufactured housing" within the meaning of Section 25(e)(10) of the
Code.
V. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the
-------------------
MH Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
W. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the MH Contracts.
4
<PAGE>
EXHIBIT B
---------
Representations with respect
to Home Equity Loans
------------------------
A. Payments. The scheduled payment of principal and interest due under
--------
the Home Equity Loan with respect to the prior Due Date was made on or before
such Due Date by or on behalf of the obligor (without any advance from Green
Tree or any Person acting at the request of Green Tree) or was not delinquent
for more than 30 days after such Due Date.
B. No Waivers. The terms of the Home Equity Loan have not been waived,
----------
altered or modified in any respect, except by instruments or documents
identified in the Home Equity Loan File. All costs, fees and expenses incurred
in making, closing and perfecting the lien and/or security interest, as
applicable, of the Home Equity Loan have been paid.
C. Binding Obligation. The Home Equity Loan is the legal, valid and
------------------
binding obligation of the obligor thereunder and is enforceable in accordance
with its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally. Green Tree has delivered, or
caused to be delivered, to the Custodian the original Mortgage, with evidence of
recording thereon, or if the original Mortgage has not yet been returned from
the recording office, a true copy of the Mortgage which has been delivered for
recording in the appropriate recording office of the jurisdiction in which the
Real Property is located.
D. No Defenses. The Home Equity Loan is not subject to any right of
-----------
rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Equity Loan or the exercise of
any right thereunder will not render the Home Equity Loan unenforceable in whole
or in part or subject to any right of rescission, set off, counterclaim or
defense, including the defense of usury, and no such right of rescission, set
off, counterclaim or defense has been asserted with respect thereto.
E. Insurance. All improvements on the related real property are covered
---------
by a hazard insurance policy. All premiums due on such insurance have been paid
in full.
1
<PAGE>
F. Origination. The Home Equity Loan was originated by a home equity
-----------
lender or Green Tree in the regular course of its business and, if originated by
a home equity lender, was purchased by Green Tree in the regular course of its
business.
G. Lawful Assignment. The Home Equity Loan was not originated in and is
-----------------
not subject to the laws of any jurisdiction whose laws would make the transfer
of the Home Equity Loan to Custodian or the ownership of the Home Equity Loans
by the Owner thereof unlawful or make the Home Equity Loan unenforceable.
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the Home Equity Loan have been complied with and
such compliance is not affected by the holding of the Home Equity Loans by
Custodian or the Owners' ownership of the Home Equity Loans, and Green Tree
shall for at least the period of this Agreement, maintain in its possession,
available for Custodian's inspection, and shall deliver to Custodian upon
demand, evidence of compliance with all such requirements.
I. Home Equity Loan in Force. The Home Equity Loan has not been
-------------------------
satisfied or subordinated in whole or in part or rescinded, and the real
property securing the Home Equity Loan has not been released from the lien of
the Home Equity Loan in whole or in part.
J. Valid Lien. The Home Equity Loan has been duly executed and delivered
----------
by the obligor and the related Mortgage is a valid and subsisting first, second
or third lien on the property therein described; any related Mortgage has been
assigned by Green Tree to Custodian, and Custodian has and will have, on behalf
of the Owners of the Home Equity Loans, a valid and subsisting lien on the
property therein described. Green Tree has full right to sell and assign the
Home Equity Loans to Custodian.
K. Capacity of Parties. All parties to the Home Equity Loan had capacity
-------------------
to execute the Home Equity Loan.
L. Good Title. Prior to transfer to Custodian, Green Tree is the sole
----------
owner of the Home Equity Loan and has the authority to sell, transfer and assign
the Home Equity Loan. Green Tree has not sold, assigned or pledged the Home
Equity Loan to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the Home Equity Loan
2
<PAGE>
and no event which, with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event permitting
acceleration under such Home Equity Loan. Green Tree has not waived any such
default, breach, violation or event permitting acceleration.
N. No Liens. There are, to the best of Green Tree's knowledge, no liens
--------
or claims which have been filed for work, labor or materials affecting the real
property securing the Home Equity Loan which are or may be liens prior to, or
equal or coordinate with, the lien of the Home Equity Loan.
O. Equal Installments. The Home Equity Loan has a fixed rate and
------------------
provides for level monthly payments which fully amortize the loan over its term.
P. Enforceability. The Home Equity Loan contains customary and
--------------
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security provided thereby.
Q. One Original. There is only one original executed Home Equity Loan
------------
note, and it has been delivered to the Custodian.
R. Primary Resident. At the time of origination of the Home Equity Loan,
----------------
the obligor was the primary resident of the related real property.
S. Qualified Mortgage for REMIC. Each Home Equity Loan that is secured
----------------------------
by a Mortgage on the property described therein is a "qualified mortgage" under
Section 860G(a)(3) of the Code.
T. Proceedings. There is no proceeding pending or, to Green Tree's
-----------
knowledge, threatened for the total or partial condemnation of collateral
securing a Home Equity Loan.
U. Marking Records. Green Tree has caused the portions of the Electronic
---------------
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Equity Loans are owned by Custodian in accordance with
the terms of the related Custodial Agreement.
V. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the Home Equity Loans.
3
<PAGE>
W. Real Property. Each mortgaged property is improved by a single family
-------------
dwelling which constitutes real property under state law and is the principal
residence of the obligor.
4
<PAGE>
EXHIBIT C
---------
Representations with respect to Contracts
-----------------------------------------
A. List of Contracts. The information set forth in the List of Contracts
-----------------
is true and correct as of its date.
B. Payments. The most recent scheduled payment was made by or on behalf
--------
of the obligor (without any advance from Green Tree or any Person acting at the
request of Green Tree) or was not delinquent for more than 59 days.
C. No Waivers. The terms of the Contract have not been waived, altered
----------
or modified in any respect, except by instruments or documents identified in the
Contract File.
D. Binding Obligation. The Contract is the legal, valid and binding
------------------
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally.
E. No Defenses. The Contract is not subject to any right of rescission,
-----------
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Contract or the exercise of any right
thereunder will not render the Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
F. Origination. Each Contract other than a Home Improvement Contract or
-----------
a Home Equity Contract was originated by a dealer of goods of a class including
the Consumer Product subject to the Contract, or by Green Tree, in the regular
course of its business and, if originated by a dealer, was purchased by Green
Tree in the regular course of its business. Each Home Improvement Contract was
originated by a home improvement contractor, or by Green Tree, in the ordinary
course of its business and, if originated by a contractor, was purchased by
Green Tree, in the ordinary course of its business. Each Home Equity Contract
was originated by a home equity lender, or by Green Tree, in the ordinary course
of its business and, if originated by a lender, was purchased by Green Tree in
the ordinary course of its business.
1
<PAGE>
G. Lawful Assignment. The Contract was not originated in and is not
-----------------
subject to the laws of any jurisdiction whose laws would make the transfer of
the Contract to the Custodian unlawful or render the Contract unenforceable.
H. Compliance with Law. At the date of origination of the Contract, all
-------------------
requirements of any federal and state laws, rules and regulations applicable to
the Contract, including, without limitation, usury, truth in lending and equal
credit opportunity laws, have been complied with, and (if such Contract is an
FHA-Insured Contract) the FHA Regulations have been complied with, and Green
Tree shall for at least the period of this Agreement, maintain its possession,
available for the Custodian's inspection, and shall deliver to the Custodian
upon demand, evidence of compliance with all such requirements. Such compliance
is not affected by the Custodian's ownership of the Contract.
I. Contract in Force. The Contract has not been satisfied or
-----------------
subordinated in whole or in part or rescinded, and the Consumer Product or real
property, if any, securing the Contract has not been released in whole or in
part.
J. Valid Security Interest or Lien. As to each Contract other than a
-------------------------------
Home Improvement Contract or a Home Equity Contract: (a) the Contract creates a
valid and enforceable perfected first priority security interest in favor of
Green Tree in the Consumer Product covered thereby as security for payment of
the outstanding principal balance of such Contract; (b) the Company has assigned
all of its right, title and interest in such Contract, including the security
interest in the Consumer Product covered thereby to the Custodian; and (c) the
Custodian has and will have a valid and perfected and enforceable first priority
security interest in such Consumer Product. As to each Home Equity Contract,
the Contract has been duly executed and delivered by the obligor, and the lien
created thereby has been duly recorded, or has been delivered to the appropriate
governmental authority for recording and will be duly recorded within 30 days
and constitutes a valid and perfected first, second or third priority lien on
the real estate described in such Contract.
K. Capacity of Parties. The signature(s) of the obligor(s) on the
-------------------
Contract are genuine and all parties to the Contract had full legal capacity to
execute the Contract.
L. Good Title. In the case of a Contract purchased from a dealer, home
----------
improvement contractor or home equity lender, Green Tree purchased the Contract
for fair value and took possession thereof in the ordinary course of its
business, without knowledge
2
<PAGE>
that the Contract was subject to a security interest. Green Tree has not sold,
assigned or pledged the Contract to any Person and prior to the transfer of the
Contract by Green Tree to the Custodian, Green Tree had good and marketable
title thereto free and clear of any encumbrance, equity, loan, pledge, charge,
claim or security interest and was the sole owner thereof with full right to
transfer the Contract to the Custodian. If such Contract is an FHA-Insured
Contract, because the Custodian is a lender approved by HUD to originate and
purchase Title I loans under a valid Title I contract of insurance, Green Tree
has the authority to sell, transfer and assign such Contract to the Custodian.
No financing statement describing or referring to any Contract (other than any
financing statement naming the Custodian as secured party, or filed by Green
Tree as secured party to perfect its interest in a Contract purchased from a
dealer) is on file in any public office.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such Contract
(except payment delinquencies permitted by clause (b) above). Green Tree has
not waived any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (b) above. The related
Consumer Product is, to the best of Green Tree's knowledge, free of damage and
in good repair.
N. No Liens. As to each Contract other than a Home Improvement Contract
--------
or a Home Equity Contract, there are, to the best of Green Tree's knowledge, no
liens or claims which have been filed for work, labor or materials affecting the
Consumer Product securing the Contract which are or may be liens prior to, or
equal or coordinate with, the lien of the Contract.
O. Equal Installments. Each Contract has a fixed Contract Rate and
------------------
provides for level monthly payments (except, in the case of a Balloon Loan, for
the final monthly payment of such loan) which fully amortize the loan over its
term.
P. Enforceability. The Contract contains customary and enforceable
--------------
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed Contract (other
------------
than an original in the possession of the relevant obligor), which Contract has
been delivered to the Custodian on or
3
<PAGE>
before the date hereof. Each Contract other than a Home Improvement Contract or
a Home Equity Contract has been stamped to reflect the assignment of such
Contract to the Custodian. Each Home Equity Contract and Home Improvement
Contract has been delivered to the Custodian on or before the date hereof.
R. Notation of Security Interest. With respect to each Contract other
-----------------------------
than a Home Improvement Contract or a Home Equity Contract, if the related
Consumer Product is located in a state in which notation of a security interest
on the title document is required or permitted to perfect such security
interest, the title document shows, or if a new or replacement title document
with respect to such Consumer Product is being applied for such title document
will be issued within 180 days and will show, Green Tree as the holder of a
first priority security interest in such Consumer Product; if the related
Consumer Product is located in a state in which the filing of a financing
statement under the UCC is required to perfect a security interest in goods of
the type including the Consumer Product, such filings or recordings have been
duly made and show Green Tree as secured party; and if the related Consumer
Product is an aircraft subject to registration with the Federal Aviation
Administration's Aircraft Registry, and the recordation of a mortgage, security
agreement or similar conveyance with such Registry is required to perfect the
lien created thereby, such recordation has been duly made and shows Green Tree
as secured party or mortgagee. In any case, the Custodian has the same rights
as the secured party of record would have (if such secured party were still the
owner of the Contract) against all Persons (including Green Tree and any trustee
in bankruptcy of Green Tree) claiming an interest in such Consumer Product.
S. No Government Contracts. No obligor is the United States government
-----------------------
or an agency, authority, instrumentality or other political subdivision of the
United States government.
4
<PAGE>
EXHIBIT D
---------
Representations with respect
to Home Improvement Loans
----------------------------
A. Payments. The scheduled payment of principal and interest due under
--------
the Home Improvement Loan with respect to the prior Due Date was made on or
before such Due Date by or on behalf of the obligor (without any advance from
Seller or any Person acting at the request of Seller) or was not delinquent for
more than 30 days after such Due Date.
B. No Waivers. The terms of the Home Improvement Loan have not been
----------
waived, altered or modified in any respect, except by instruments or documents
identified in the Home Improvement Loan File (as defined in the Custodial
Agreement). All costs, fees and expenses incurred in making, closing and
perfecting the lien and/or security interest, as applicable, of the Home
Improvement Loan have been paid.
C. Binding Obligation. The Home Improvement Loan is the legal, valid and
------------------
binding obligation of the obligor thereunder and is enforceable in accordance
with its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally. In the case of Home Improvement
Loans other than Unsecured Home Improvement Loans, Seller has delivered, or
caused to be delivered, to the Custodian the original Mortgage, with evidence of
recording thereon, or if the original Mortgage has not yet been returned from
the recording office, a true copy of the Mortgage which has been delivered for
recording in the appropriate recording office of the jurisdiction in which the
Real Property is located.
D. No Defenses. The Home Improvement Loan is not subject to any right of
-----------
rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Improvement Loan or the
exercise of any right thereunder will not render the Home Improvement Loan
unenforceable in whole or in part or subject to any right of rescission, set
off, counterclaim or defense, including the defense of usury, and no such right
of rescission, set off, counterclaim or defense has been asserted with respect
thereto.
E. Insurance. In the case of Home Improvement Loans other than Unsecured
---------
Home Improvement Loans, all improvements on the
1
<PAGE>
related real property are covered by a hazard insurance policy. All premiums
due on such insurance have been paid in full.
Each Title I Loan was originated in compliance with FHA regulations and is
insured, without set-off, surcharge or defense, by FHA insurance. Seller has,
in conformity with FHA regulations, filed all reports necessary for the Title I
Loan to be registered for FHA insurance. Following assignment of the Title I
Loan to Custodian, on behalf of the Owners, Custodian will be entitled to the
full benefits of the FHA insurance.
F. Origination. The Home Improvement Loan was originated by a home
-----------
improvement contractor or Seller in the regular course of its business and, if
originated by a home improvement contractor, was purchased by Seller in the
regular course of its business.
G. Lawful Assignment. The Home Improvement Loan was not originated in
-----------------
and is not subject to the laws of any jurisdiction whose laws would make the
transfer of the Home Improvement Loan to Custodian or the ownership of the Home
Improvement Loans by the Owner thereof unlawful or make the Home Improvement
Loan unenforceable.
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws and the FHA regulations, applicable to the Home Improvement
Loan have been complied with and such compliance is not affected by the holding
of the Home Improvement Loans by Custodian or the Owner's ownership of the Home
Improvement Loans, and Seller shall for at least the period of this Agreement,
maintain in its possession, available for Custodian's inspection, and shall
deliver to Custodian upon demand, evidence of compliance with all such
requirements.
I. Home Improvement Loan in Force. The Home Improvement Loan has not
------------------------------
been satisfied or subordinated (except for such subordination as may be allowed
under FHA regulations) in whole or in part or rescinded, and, in the case of
Home Improvement Loans other than Unsecured Home Improvement Loans, the real
property securing the Home Improvement Loan, as applicable, has not been
released from the lien of the Home Improvement Loan in whole or in part.
J. Valid Lien. The Home Improvement Loan has been duly executed and
----------
delivered by the obligor and either the related Mortgage is a valid and
subsisting first, second or third lien on the property therein described or the
Home Improvement Loan is an unsecured borrowing of the obligor; any related
Mortgage has been
2
<PAGE>
assigned by Seller to Custodian, and Custodian has and will have, on behalf of
the Owners of the Home Improvement Loans, a valid and subsisting lien on the
property therein described. Seller has full right to sell and assign the Home
Improvement Loans to Custodian.
K. Capacity of Parties. All parties to the Home Improvement Loan had
-------------------
capacity to execute the Home Improvement Loan.
L. Good Title. Prior to transfer to Custodian, Seller is the sole owner of
----------
the Home Improvement Loan and has the authority to sell, transfer and assign the
Home Improvement Loan. Seller has not sold, assigned or pledged the Home
Improvement Loan to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the Home Improvement Loan and no event
which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Home Improvement Loan. Seller has not waived any such default,
breach, violation or event permitting acceleration.
N. No Liens. In the case of Home Improvement Loans other than Unsecured
--------
Home Improvement Loans, there are, to the best of Seller's knowledge, no liens
or claims which have been filed for work, labor or materials affecting the real
property securing the Home Improvement Loan which are or may be liens prior to,
or equal or coordinate with, the lien of the Home Improvement Loan.
O. Equal Installments. The Home Improvement Loan has a fixed rate and
------------------
provides for level monthly payments which fully amortize the loan over its term.
P. Enforceability. The Home Improvement Loan contains customary and
--------------
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security provided thereby.
Q. One Original. There is only one original executed Home Improvement Loan
------------
contract and note, each of which has been delivered to the Custodian.
R. Primary Resident. At the time of origination of the Home Improvement
----------------
Loan, the obligor was the primary resident of the related real property.
3
<PAGE>
S. Qualified Mortgage for REMIC. Each Home Improvement Loan that is secured
----------------------------
by a Mortgage on the property described therein is a "qualified mortgage" under
Section 860G(a)(3) of the Code.
T. Proceedings. There is no proceeding pending or, to Seller's knowledge,
-----------
threatened for the total or partial condemnation of collateral securing a Home
Improvement Loan.
U. Marking Records. Seller has caused the portions of the Electronic Ledger
---------------
relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Improvement Loans are owned by Custodian in accordance
with the terms of the related Custodial Agreement.
V. No Adverse Selection. Except for the effect of the representations and
--------------------
warranties made hereunder, no adverse selection procedures have been employed
in selecting the Home Improvement Loans.
4
<PAGE>
Exhibit 10(q)
REVERSE REPURCHASE
TRI-PARTY CUSTODIAL AGREEMENT
by and among
----------------------------
SMITH BARNEY MORTGAGE CAPITAL GROUP, INC.,
Buyer
GREEN TREE FINANCIAL CORPORATION
Seller
FIRST BANK NATIONAL ASSOCIATION,
Custodian
----------------------------
Dated as of June 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
Section 1.01. Certain Defined Terms................................... 2
Section 1.02. Reference to Time....................................... 7
ARTICLE II
SERVICING ARRANGEMENT
Section 2.01. Documents Maintained by the Seller...................... 7
Section 2.02. List of MH Contracts, List of Home Improvement Loans,
List of Home Equity Loans and List of Contracts......... 7
Section 2.03. Release of Loan Files for Servicing..................... 8
ARTICLE III
CUSTODIAL ARRANGEMENT
Section 3.01. General Provisions...................................... 8
Section 3.02. Custodial Accounts...................................... 9
Section 3.03. Assignment of MH Contracts to the Custodian;
UCC Filings............................................. 9
Section 3.04. Assignment of Contracts to the Custodian; UCC
Filings................................................. 10
Section 3.05. Transfer of Home Improvement Loans; Delivery of
Documents............................................... 10
Section 3.06. Transfer of Home Equity Loans; Delivery of Documents.... 11
Section 3.07. Issuance and Transfer of Trust Receipts................. 12
Section 3.08. Trust Receipt Register.................................. 12
ARTICLE IV
OWNERSHIP AND TRANSFER OF ASSETS
Section 4.01. The Trust Receipts...................................... 13
Section 4.02. Repurchase Date......................................... 14
Section 4.03. Voluntary Transfer of Assets............................ 14
Section 4.04. Voluntary Repurchase of Assets.......................... 15
Section 4.05. Payment of Price Differential........................... 16
Section 4.06. Objections of Buyer or Seller........................... 16
Section 4.07. No Service Charge for Sale or Transfer of Assets........ 16
Section 4.08. Simultaneous Transfers.................................. 16
Section 4.09. Buyer May Reject Assets................................. 17
Section 4.10. Persons Deemed Owners................................... 17
</TABLE>
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<TABLE>
<S> <C> <C>
Section 4.11. Unilateral Transfer of Assets Owned by Seller........... 17
Section 4.12. Unilateral Transfer of Assets Owned by a Person Other
Than Seller............................................. 17
Section 4.13. Modification of the Repurchase Date..................... 18
Section 4.14. Transfers to Third Parties.............................. 18
ARTICLE V
THE CUSTODIAN
Section 5.01. Representations and Warranties of the Custodian......... 18
Section 5.02. Custodian of Documents.................................. 20
Section 5.03. Charges and Expenses.................................... 20
Section 5.04. No Adverse Interests.................................... 20
Section 5.05. Inspections............................................. 20
Section 5.06. Insurance............................................... 20
Section 5.07. Limitation of Liability................................. 21
Section 5.08. Indemnification......................................... 21
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Amendment............................................... 21
Section 6.02. Governing Law........................................... 21
Section 6.03. New York Jurisdiction; Waiver of Jury Trial............. 21
Section 6.04. Notices................................................. 21
Section 6.05. Severability of Provisions.............................. 22
Section 6.06. No Partnership.......................................... 23
Section 6.07. Counterparts............................................ 23
Section 6.08. Assignment.............................................. 23
Section 6.09. Headings................................................ 23
</TABLE>
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THIS AGREEMENT, made as of the date appearing on the cover page hereof by and
among Smith Barney Mortgage Capital Group, Inc., a Delaware corporation, as
Buyer, Green Tree Financial Corporation, a Delaware corporation, as Seller, and
First Bank National Association, a national banking association, as Custodian:
WITNESSETH:
Seller in the ordinary course of its business originates or buys MH
Contracts, Home Improvement Loans, Home Equity Loans and Contracts, and sells MH
Contracts, Home Improvement Loans, Home Equity Loans and Contracts on the
secondary market;
Seller desires to obtain financing secured by an ownership interest in such
MH Contracts, Home Improvement Loans, Home Equity Loans and Contracts;
In order to facilitate such transactions, Seller and Buyer desire to engage
the Custodian to act as custodian of the MH Contracts, Home Improvement Loans,
Home Equity Loans and Contracts for the benefit of Buyer and Seller and their
permitted assigns as their interests may appear;
The ownership by any party of any MH Contract, Home Improvement Loan, Home
Equity Loan or Contract shall be confirmed by delivery to Buyer of a Trust
Receipt issued by the Custodian substantially in the form set forth at Exhibit A
hereto, with appropriate insertions, as provided therein;
Seller acts as servicer with respect to the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts; and
Seller intends to enter into Transactions from time to time with Buyer
pursuant to the Master Repurchase Agreement between Buyer and Seller, each such
Transaction providing for the sale and repurchase of certain MH Contracts, Home
Improvement Loans, Home Equity Loans or Contracts;
NOW, THEREFORE:
In consideration of the premises and the mutual agreements hereinafter set
forth, Buyer, Seller and the Custodian agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Whenever used in this Agreement,
unless the context otherwise requires, the following words shall have the
meanings set forth below:
"Agreement" shall mean this Reverse Repurchase Tri-Party Custodial
Agreement.
"Assets" means MH Contracts, Home Improvement Loans, Home Equity Loans and
Contracts, as applicable.
"Business Day" means any day other than (a) a Saturday or a Sunday or (b)
another day on which banking institutions in the States of Minnesota or New York
are authorized or obligated by law, executive order, or governmental decree to
be closed.
"Buyer" means Smith Barney Mortgage Capital Group, Inc., and any successor
thereto.
"Collateral Balance" means, as to any Transaction, the related aggregate
Outstanding Principal Amount of MH Contracts, Home Improvement Loans, Home
Equity Loans or Contracts, as the case may be, specified by Buyer in the
Transfer Instructions.
"Computer Tape" means a computer tape generated by Seller which provides
information relating to the MH Contracts, Home Improvement Loans, Home Equity
Loans and Contracts.
"Consumer Products" refers to consumer goods consisting of motorcycles,
marine products (including boats, boat trailers and outboard motors), pianos and
organs, horse trailers, sport vehicles (including snowmobiles, personal
watercraft and all-terrain vehicles), trucks, personal aircraft, recreational
vehicles and any other asset as shall be acceptable to Buyer in its sole
discretion, financed by Seller pursuant to a Contract.
"Contract" refers to promissory notes financing home improvements, certain
closed-end home equity loans and any retail installment contract between Seller
and a third party obligor pursuant to which Seller finances a Consumer Product,
all rights to receive payments which are due pursuant thereto, and any "purchase
money security interest" (as defined in the Uniform Commercial Code) created in
favor of Seller in the Consumer Product financed thereunder, the ownership of
which is evidenced by a Trust Receipt issued pursuant to this Agreement.
"Contract File" means, as to each Contract, (a) the original copy of the
Contract, including the executed evidence of the
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obligation of the obligor; (b) either (i) the original title document for the
related Consumer Product or a duplicate certified by the appropriate
governmental authority which issued the original thereof or the application for
such title document or (ii) if the laws of the jurisdiction in which the related
Consumer Product is located do not provide for the issuance of title documents
for goods of the type including the Consumer Product, other evidence of
ownership of the related Consumer Product which is customarily relied upon in
such jurisdiction as evidence of title to such goods; (c) evidence of one or
more of the following types of perfection of the security interest in the
related Consumer Product granted by such Contract, as appropriate: (i) notation
of such security interest on the title document, (ii) a financing statement
meeting the requirements of the UCC, with evidence of recording indicated
thereon (if required to perfect a security interest in the related Consumer
Product under the UCC as in force in the relevant state), (iii) in the case of a
Contract secured by a security interest in an aircraft, evidence of filing with
the Federal Aviation Administration Aircraft Registry or (iv) such other
evidence of perfection of a security interest in goods of the type including the
Consumer Product as is customarily relied upon in the jurisdiction in which the
related Consumer Product is located; (d) the assignment of the Contract from the
originator (if other than the Seller or a wholly-owned subsidiary of the Seller)
to the Seller or a wholly-owned subsidiary of the Seller; (e) any extension,
modification or waiver agreement(s); (f) a credit application signed by the
obligor, or a copy thereof; and (g) if required by Buyer in its sole discretion
with respect to such Contract, a certificate of insurance or application form
for insurance signed by the obligor, or copies thereof.
"Custodial Account" means an account as defined in and established pursuant
to Section 3.02.
"Custodian" means First Bank National Association, acting in its custodial
capacity, and any successor thereto.
"Defaulted Asset" means, with respect to any monthly payment period, an MH
Contract, Home Improvement Loan, Home Equity Loan or Contract in respect of
which payments exceeding $25 in the aggregate were delinquent 120 days or more
as of the last day of such monthly payment period.
"Home Equity Loans" shall refer to the home equity loans secured by first,
second or third liens on single family residential real property (including,
without limitation, condominiums and planned unit developments) certain
documents relating to which have been delivered to the Custodian pursuant to
this Agreement and the ownership of which is evidenced by a Trust Receipt issued
pursuant to this Agreement.
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"Home Equity Loan File" refers to the Loan File described in Section 3.06
hereof.
"Home Improvement Loans" refers to home improvement installment loan
contracts and promissory notes, the ownership of which is evidenced by a Trust
Receipt issued pursuant to this Agreement.
"Home Improvement Loan File" refers to the Loan File described in Section
3.05 hereof.
"Land-and-Home Contract" means a MH Contract that is secured by a mortgage
or deed of trust on real estate on which the related manufactured home is
situated, and which manufactured home is considered or classified as part of the
real estate under the laws of the jurisdiction in which it is located.
"Land-and-Home Contract File" means, as to each Land-and-Home Contract, (a)
the original copy of the Land-and-Home Contract; (b) the original related
mortgage with evidence of recording thereon (or, if the original mortgage has
not yet been returned by the applicable recording office, a copy thereof,
certified by such recording office, which will be replaced by the original
mortgage when it is so returned) and any title document for the related
manufactured home; (c) the assignment of the Land-and-Home Contract from the
originator (if other than the Seller) to the Seller; (d) if such Land-and-Home
Contract was originated by the Seller, an endorsement of such Land-and-Home
Contract by the Seller; and (e) any extension, modification or waiver
agreements(s).
"List of Contracts" means the list, as amended from time to time,
identifying each Contract deposited hereunder, which list (a) identifies each
Contract and (b) sets forth as to each Contract (i) the outstanding principal
balance, (ii) the amount of monthly payment due from the obligor, (iii) the rate
and (iv) the maturity date.
"List of Home Equity Loans" means the list, as amended from time to time,
identifying each Home Equity Loan deposited hereunder, which list (a) identifies
each Home Equity Loan and (b) sets forth as to each Home Equity Loan (i) the
outstanding principal balance, (ii) the amount of monthly payment due from the
obligor, (iii) the rate and (iv) the maturity date.
"List of Home Improvement Loans" means the list, as amended from time to
time, identifying each Home Improvement Loan deposited hereunder, which list (a)
identifies each Home Improvement Loan and (b) sets forth as to each Home
Improvement Loan (i) the outstanding principal balance, (ii) the amount of
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monthly payment due from the obligor, (iii) the rate and (iv) the maturity date.
"List of MH Contracts" means the list, as amended from time to time,
identifying each MH Contract deposited hereunder, which list (a) identifies each
MH Contract and (b) sets forth as to each MH Contract (i) the outstanding
principal balance, (ii) the amount of monthly payment due from the obligor,
(iii) the rate and (iv) the maturity date.
"Loan Files" means the MH Contract File, the Land-and-Home Contract File,
the Home Equity Loan File, the Home Improvement Loan File and the Retail
Installment Loan File.
"MH Contract File" means, as to each MH Contract, other than a Land-and-
Home Contract, (a) the original copy of the MH Contract, (b) either (i) the
original title document for the related manufactured home or a duplicate
certified by the appropriate governmental authority which issued the original
thereof or the application for such title document or (ii) if the laws of the
jurisdiction in which the related manufactured home is located do not provide
for the issuance of title documents for manufactured housing, other evidence of
ownership of the related manufactured home which is customarily relied upon in
such jurisdiction as evidence of title to a manufactured housing unit, (c)
evidence of one or more of the following types of perfection of the security
interest in the related manufactured home granted by such MH Contract, as
appropriate: (i) notation of such security interest on the title document, (ii)
a financing statement meeting the requirements of the UCC, with evidence of
recording indicated thereon, or (iii) such other evidence of perfection of a
security interest in a manufactured housing unit as is customarily relied upon
in the jurisdiction in which the related manufactured home is located, (d) the
assignment of the MH Contract from the originator (if other than the Seller) to
the Seller and (e) any extension, modification or waiver agreement(s).
"MH Contracts" means the manufactured housing installment sales contracts
and installment loan agreements subject to this Agreement, including any Land-
and-Home Contracts, the ownership of which is evidenced by a Trust Receipt
issued pursuant to this Agreement.
"Master Repurchase Agreement" means the master repurchase agreement between
Buyer and Seller relating to the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts.
"Outstanding Principal Amount" means, as to any MH Contract, Home
Improvement Loan, Home Equity Loan and Contract, the outstanding principal
amount thereof as reflected on the most recent Computer Tape received by the
Custodian; provided, however,
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that any Defaulted Asset and any Rejected Asset shall be assigned an Outstanding
Principal Amount of zero.
"Owner" means, with respect to any Asset, the Person reflected in the Trust
Receipt Register as being the owner thereof and the holder of the related Trust
Receipt.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Price Differential" means, with respect to any Transaction, the aggregate
amount obtained by daily application of the Pricing Rate for such Transaction to
the Purchase Price for such Transaction on a 360 day per year basis for the
actual number of days during the period commencing on (and including) the date
such Transaction is entered into and ending on (but excluding) the date of
determination (reduced by any amount of such Price Differential previously paid
by Seller to Buyer with respect to such Transaction).
"Price Differential Payment Date" means the Business Day of each week on
which the aggregate amount of the accrued and unpaid Price Differential is to be
transferred to Buyer's Custodial Account pursuant to Section 4.05, which, unless
Buyer and Seller otherwise notify the Custodian in writing, shall be the last
Business Day of each week.
"Pricing Rate" means, with respect to any Transaction, the rate provided to
the Custodian and Seller by Buyer in the Transfer Instructions.
"Purchase Price" means, with respect to any Transaction, the price to be
paid by Buyer for the MH Contracts, Home Improvement Loans, Home Equity Loans or
Contracts.
"Rejected Asset" means any MH Contract, Home Improvement Loan, Home Equity
Loan or Contract that Buyer has rejected pursuant to Section 4.09.
"Repurchase Date" means, for any Transaction, the date on which the related
Assets are to be repurchased pursuant to the Master Repurchase Agreement.
"Repurchase Price" means, with respect to any Transaction on any date, the
price to be paid by Seller to repurchase the related Assets as if such date were
the Repurchase Date for such Transaction, which Repurchase Price shall be
provided to the Custodian by Buyer and Seller.
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"Secured Home Improvement Loans" refers to Home Improvement Loans which are
secured by first, second or third mortgages on property, whether conventional or
insured by the Federal Housing Administration.
"Seller" means Green Tree Financial Corporation, and any successor thereto.
"Transaction" means a reverse repurchase arrangement under the Master
Repurchase Agreement.
"Transfer Instructions" means, with respect to a Transaction pursuant to
Section 4.03, the Collateral Balance, the Purchase Price and the Pricing Rate as
provided to the Custodian and Seller by Buyer.
"Trust Receipt" means a receipt issued by the Custodian substantially in
the form attached hereto as Exhibit A.
"Trust Receipt Register" means the register maintained by the Custodian
reflecting as to each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract the Owner thereof.
"Unsecured Home Improvement Loans" refers to Home Improvement Loans which
are not secured by mortgaged property.
Section 1.02. Reference to Time. All references to time herein shall be
deemed to refer to New York City time unless otherwise provided.
ARTICLE II
SERVICING ARRANGEMENT
Section 2.01. Documents Maintained by the Seller. The Seller shall retain
possession of all documents and files relating to the MH Contracts, the Home
Improvement Loans, Home Equity Loans and Contracts, (other than as set forth in
Section 3.05 hereof). All documents so held by Seller shall be held by it as
agent of the Custodian for the benefit of the Owner of the related Contracts as
indicated on the Trust Receipt Register maintained by the Custodian pursuant to
Section 3.07.
Section 2.02. List of MH Contracts, List of Home Improvement Loans, List
of Home Equity Loans and List of Contracts. The Custodian shall maintain the
most recent version of the List of MH Contracts, the List of Home Improvement
Loans, the List of Home Equity Loans and the List of Contracts as such list may
be amended from time to time. The Custodian shall receive a printed copy of the
amended List of MH Contracts, amended List of Home Improvement Loans, amended
List of Home
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Equity Loans and amended List of Contracts with each revised copy of the
applicable Computer Tape. If a Computer Tape received by the Custodian is not
accompanied by such amended lists, the Custodian shall immediately produce such
printed lists from the related Computer Tape. The most recently amended List of
MH Contracts, amended List of Home Improvement Loans, amended List Home Equity
Loans and amended List of Contracts received by the Custodian shall be the
definitive List of MH Contracts, List of Home Improvement Loans, List of Home
Equity Loans and List of Contracts for all purposes under this Agreement.
Section 2.03. Release of Loan Files for Servicing. From time to time,
after delivery of any portion of the Loan Files to Custodian, as appropriate for
servicing and repossession in connection with any related Asset, Custodian
shall, upon written request of a servicing officer of Seller and delivery to
Custodian of a receipt signed by such servicing officer, cause the Loan File to
be released to Seller and shall execute such documents as Seller shall deem
necessary to the prosecution of any such proceedings. Custodian shall stamp the
face of any such Assets to be released to Seller with a notation that the Asset
has been assigned to Custodian. Such receipt shall obligate Seller to return
the original Asset and the related Loan File to Custodian when its need by
Seller has ceased unless the Asset shall be liquidated or repurchased by Seller
pursuant to the Master Repurchase Agreement. Upon request of a servicing
officer, Custodian shall perform such other acts as reasonably requested by
Seller and otherwise cooperate with Seller in the enforcement of the Owners'
rights and remedies with respect to the Assets. Notwithstanding the foregoing,
the Custodian shall not release any portion of a Loan File to Seller if such
release would result in Seller having in its custody documents relating to more
than 1% of the aggregate number of Loan Files held by the Custodian hereunder.
ARTICLE III
CUSTODIAL ARRANGEMENT
Section 3.01. General Provisions. In accordance with the provisions of
this Agreement, the Custodian shall issue Trust Receipts with respect to Assets
held by it hereunder indicating that the Custodian holds such Assets as
custodian and bailee for the Owner named in such Trust Receipt. The ownership
of Assets may be transferred from time to time in the manner provided herein.
Each Trust Receipt shall serve as confirmation of the ownership (subject to the
Seller's right to service the Assets) of the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts, as applicable, assigned to the Custodian
listed on the schedule attached to such Trust Receipt. Each particular
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Transaction shall relate exclusively to either MH Contracts, Home Improvement
Loans, Home Equity Loans or Contracts. No Person shall own a fractional
ownership interest in any MH Contract, Home Improvement Loan, Home Equity Loan
or Contract. No Transaction shall be entered into with respect to a group of MH
Contracts, a group of Home Improvement Loans, a group of Home Equity Loans or a
group of Contracts having an aggregate Outstanding Principal Balance on the date
of commencement of such Transaction of less than $5,000,000.
Section 3.02. Custodial Accounts. The Custodian shall establish separate
custody accounts for Buyer and Seller (in each case, a "Custodial Account") for
purposes of holding cash and Assets owned by the related party. Buyer and
Seller may direct the Custodian in writing respecting the transfer, disbursement
and/or reinvestment of any cash on deposit in such Party's Custodial Account.
Section 3.03. Assignment of MH Contracts to the Custodian; UCC Filings.
(a) Seller may, from time to time, assign MH Contracts to the Custodian for
credit to Seller's Custodial Account by executing and delivering an assignment
in the form attached hereto as Exhibit B. Such MH Contracts shall, upon
assignment, be subject to this Agreement. On the Business Day prior to the date
of each such assignment Seller shall provide to the Custodian a schedule of the
related MH Contracts with information indicated thereon corresponding to the
information set forth in the List of MH Contracts. On or before the Business
Day preceding the initial assignment of MH Contracts by Seller to Buyer
hereunder, Seller shall provide to the Custodian evidence of the filing of a
financing statement under the Uniform Commercial Code with the Secretary of
State of the State of Minnesota reflecting the Custodian as the secured party
with respect to all MH Contracts that are or may become subject to this
Agreement. The Custodian shall, upon request of Buyer, provide to Buyer the
schedule and the evidence referred to in both of the preceding sentences.
(b) Seller shall file or cause to be filed all amendments to such financing
statement and all continuation statements as may be necessary to perfect the
interest of the Custodian in the MH Contracts; provided, however, that if Seller
-------- -------
shall fail to file or cause to be filed such amendments and continuation
statements, the Custodian shall make such filings. All financing statements,
amendments thereto and continuation statements shall be filed at the expense of
Seller.
(c) Prior to a Land-and-Home Contract becoming subject to this Agreement,
and thereby becoming eligible for inclusion in a
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Transaction, Seller shall deliver, or cause to be delivered, to Custodian the
Land-and-Home Contract File.
Section 3.04. Assignment of Contracts to the Custodian; UCC Filings.
(a) Seller may, from time to time, assign Contracts to the Custodian for
credit to Seller's Custodial Account by executing and delivering an assignment
in the form attached hereto as Exhibit E. Such Contracts shall, upon
assignment, be subject to this Agreement. On the Business Day prior to the date
of each such assignment Seller shall provide to the Custodian a schedule of the
related Contracts with information indicated thereto corresponding to the
information set forth in the List of Contracts. On or before the Business Day
preceding the initial assignment of Contracts by Seller to Buyer hereunder,
Seller shall provide to the Custodian evidence of the filing of a financing
statement under the Uniform Commercial Code with the Secretary of State of the
State of Minnesota reflecting the Custodian as the secured party with respect to
all Contracts that are or may become subject to this Agreement. The Custodian
shall, upon request of Buyer, provide to Buyer the schedule and the evidence
referred to in both of the preceding sentences.
(b) Seller shall file or cause to be filed all amendments to such financing
statement and all continuation statements as may be necessary to perfect the
interest of the Custodian in the Contracts; provided, however, that if Seller
-------- -------
shall fail to file or cause to be filed such amendments and continuation
statements, the Custodian shall make such filings. All financing statements,
amendments thereto and continuation statements shall be filed at the expense of
Seller.
(c) Prior to a home equity or home improvement loan included in the
definition of "Contract" becoming subject to this Agreement, and thereby
becoming eligible for inclusion in a Transaction, Seller shall deliver, or cause
to be delivered, to Custodian, the Home Equity Loan File or Home Improvement
Loan File, as the case may be.
Section 3.05. Tranfer of Home Improvement Loans; Delivery of Documents.
Prior to a Home Improvement Loan becoming subject to this Agreement, and thereby
becoming eligible for inclusion in a Transaction, Seller shall deliver, or cause
to be delivered, to Custodian the following documents:
(i) The List of Home Improvement Loans, as amended.
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(ii) An Assignment executed by Seller substantially in the form
of Exhibit C hereto.
(iii) The original contract and note relating to the Home
Improvement Loan.
(iv) The original Mortgage, in the case of Home Improvement
Loans other than Unsecured Home Improvement Loans, with evidence of recording
thereon, or, if the original Mortgage has not yet been returned from the
recording office, a copy of the original Mortgage, certified as true and
complete by such recording office, which copy shall be replaced by the original
Mortgage as soon as practicable after the original Mortgage is returned from the
recording office.
(v) The blanket assignment of Mortgage, in the case of Home
Improvement Loans other than Unsecured Home Improvement Loans, assigned in
blank, which assignment shall be in form and substance acceptable for recording.
In the event that the Home Improvement Loan was acquired by Seller in a merger,
the assignment must be by "[Seller], successor by merger to name of
predecessor"; and in the event that the Home Improvement Loan was acquired or
originated by Seller while doing business under another name, the assignment
must be by "[Seller], formerly known as [previous name]".
Seller shall file or cause to be filed all amendments to the financing
statement, all assignments of mortgage and all continuation statements as may be
necessary to perfect the interests of Custodian in the Home Improvement Loans
and the collateral related thereto; provided, however, that if Seller shall fail
-------- -------
to file or cause to be filed such amendments, assignments of mortgage and
continuation statements, Custodian shall make such filings. All financing
statements, assignments of mortgage, amendments and continuation statements
shall be filed at the expense of Seller.
All documents held by the Custodian with respect to a Home Improvement
Loan, including those delivered to the Custodian pursuant to Section 3.05, are
referred to herein as the "Custodian's Home Improvement Loan File".
Section 3.06. Transfer of Home Equity Loans; Delivery of Documents.
Prior to a Home Equity Loan becoming subject to this Agreement, and thereby
becoming eligible for inclusion in a Transaction, Seller shall deliver, or cause
to be delivered, to Custodian the following documents:
(1) The List of Home Equity Loans, as amended.
(2) An Assignment executed by Seller substantially in the form of
Exhibit D hereto.
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(3) The original contract and note relating to the Home Equity Loan.
(4) The original Mortgage with evidence of recording thereon, or, if
the original Mortgage has not yet been returned from the recording office,
a copy of the original Mortgage, certified as true and complete by such
recording office, which copy shall be replaced by the original Mortgage as
soon as practicable after the original Mortgage is returned from the
recording office.
(5) The blanket assignment of Mortgage, assigned in blank, which
assignment shall be in form and substance acceptable for recording. In the
event that the Home Equity Loan was acquired by Seller in a merger, the
assignment must be by "[Seller], successor by merger to name of
predecessor"; and in the event that the Home Equity Loan was acquired or
originated by Seller while doing business under another name, the
assignment must be by "[Seller], formerly known as [previous name]".
Seller shall file or cause to be filed all amendments to the financing
statement, all assignments of mortgage and all continuation statements as may be
necessary to perfect the interests of Custodian in the Home Equity Loans and the
collateral related thereto; provided, however, that if Seller shall fail to file
-------- -------
or cause to be filed such amendments, assignments of mortgage and continuation
statements, Custodian shall make such filings. All financing statements,
assignments of mortgage, amendments and continuation statements shall be filed
at the expense of Seller.
All documents held by the Custodian with respect to a Home Equity Loan,
including those delivered to the Custodian pursuant to Section 3.06, are
referred to herein as the "Custodian's Home Equity Loan File".
Section 3.07. Issuance and Transfer of Trust Receipts.
(a) Upon assignment of Assets to the Custodian as described in Sections
3.03, 3.04, 3.05 and 3.06 hereof and upon notice to the Custodian by Seller that
Seller has assigned a pool of Assets to Buyer in a Transaction under the Master
Repurchase Agreement, the Custodian shall issue a Trust Receipt relating to such
Transaction to Buyer with respect to such pool of Assets.
(b) Each Trust Receipt may be assigned by endorsement by the registered
holder thereof on the assignment form set forth thereon.
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(c) Upon presentation to the Custodian of a Trust Receipt endorsed as
aforesaid, the Custodian shall issue a new Trust Receipt with respect to the
Assets being assigned in the name of the assignee and a new Trust Receipt with
respect to the Assets being retained in the name of the assignor.
Section 3.08. Trust Receipt Register. The Custodian shall cause to be
kept at its Corporate Trust Office the Trust Receipt Register in which, subject
to such reasonable regulations as it may prescribe, the Custodian shall reflect
the ownership of Assets as confirmed by Trust Receipts as herein provided. The
Trust Receipt Register shall not contain any information concerning the amount
of cash on deposit in any Custodial Account. The Trust Receipt Register shall be
deemed to contain proprietary information and only the Custodian and Buyer shall
have access to such information.
ARTICLE IV
OWNERSHIP AND TRANSFER OF ASSETS
Section 4.01. The Trust Receipts.
(a) The Trust Receipts shall confirm an Owner's ownership interest in the
related Assets and shall be executed by manual signature on behalf of the
Custodian by an authorized officer of the Custodian.
(b) Each Trust Receipt shall be deemed to include the Custodian's
certification that the Custodian has reviewed the documents constituting the
related Custodian's Land-and-Home Contract Files, Custodian's Home Improvement
Loan Files or Custodian's Home Equity Loan Files, as applicable, and such
documents (i) appear regular on their face, (ii) are in the possession and
control of the Custodian and (iii) concern the related Land-and-Home Contracts,
Home Improvement Loans and Home Equity Loans described in such Land-and-Home
Contract Files, Home Improvement Loan Files and Home Equity Loan Files.
(c) All Trust Receipts shall be dated as of the date the related
Transaction is entered into.
(d) Each Trust Receipt shall have attached thereto a schedule listing all
MH Contracts, Home Improvement Loans, Home Equity Loans and Contracts, as
applicable, relating to such Trust Receipt.
(e) A separate Trust Receipt shall be issued for each Transaction and
each Trust Receipt shall relate to only one
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<PAGE>
variety of Assets (i.e., MH Contracts, Home Improvement Loans, Home Equity Loans
or Contracts).
(f) The schedule of related Assets attached to a Trust Receipt shall
contain so much of the List of MH Contracts, List of Home Improvement Loans,
List of Home Equity Loans or List of Contracts, as applicable, as pertains to
each Asset listed on such schedule.
(g) All Trust Receipts delivered by the Custodian hereunder shall be
executed originals with the schedule of Assets referred to therein attached
thereto.
Section 4.02. Repurchase Date. The Repurchase Date for each Transaction
shall, unless otherwise agreed to by Buyer and Seller as contemplated by Section
4.13, be the first Business Day following the date on which the Transaction is
entered into.
Section 4.03. Voluntary Transfer of Assets.
(a) On any Business Day that Buyer and Seller enter into a Transaction
under the Master Repurchase Agreement, Buyer shall telephonically advise the
Custodian of the Transfer Instructions. Transfer Instructions shall be
communicated to the Custodian prior to 10:00 a.m. on the date the Transaction is
entered into.
(b) In the case of any Transaction:
(i) The Custodian shall, immediately upon receiving such Transfer
Instructions:
(1) Determine whether related Assets having an aggregate
Outstanding Principal Amount at least equal to the
Collateral Balance are on deposit in Seller's Custodial
Account;
(2) Promptly advise Buyer and Seller by telephone or by
facsimile transmission if it determines that the Assets
referred to in (1) above are not so deposited and take no
further action under this Section 4.03 until it
determines that such Assets are so deposited;
(3) Upon determining that the Collateral Balance is on
deposit in Seller's Custodial Account, the Custodian
shall take the actions contemplated by clauses (ii)
through (iv) of this subsection (b);
(ii) The Custodian shall determine that Buyer has deposited in
immediately available funds into its Custodial Account, prior
to 5:00 p.m. Eastern Standard Time on the date the Transaction
is
14
<PAGE>
entered into, the Purchase Price for the related Assets;
(iii) The Custodian shall, by annotation of the Trust Receipt
Register and issuance of a Trust Receipt, transfer from the
Custodial Account of Seller to the Custodial Account of Buyer
the Assets subject to the Transaction; and
(iv) The Custodian shall, simultaneously with the transfer of Assets
described in (b)(iii) above, transfer from the Custodial
Account of Buyer to the Custodial Account of Seller cash in
immediately available funds in an amount equal to the Purchase
Price indicated on the Transfer Instructions.
(c) Any provision of this Agreement to the contrary notwithstanding, any
proposed Transaction between Buyer and Seller shall not be entered into and the
Custodian is not authorized to transfer any funds from Buyer's Custodial Account
as contemplated by Section 4.04(b)(iv), until Buyer has received at its offices
in New York, New York by facsimile transmission or otherwise no later than 2:00
p.m. Eastern Standard Time on the date the transaction is entered into, a Trust
Receipt bearing the original signature (or facsimile) of an authorized officer
of the Custodian with the schedule of Assets referred to therein attached
thereto.
Section 4.04. Voluntary Repurchase of Assets. The repurchase of Assets in
connection with any Transaction shall occur in the following manner:
(a) On the Repurchase Date Buyer shall telephonically advise the
Custodian of the Repurchase Price to be paid by Seller or the aggregate
Outstanding Principal Amount of MH Contracts, Home Improvement Loans, Home
Equity Loans or Contracts, as applicable, to be repurchased by Seller. Seller
shall, with the approval of Buyer communicated telephonically to the Custodian,
provide the Custodian with a list of the Assets to be repurchased. Such list
shall be delivered in writing to the Custodian and Buyer not later than 10:00
a.m. on the Repurchase Date, shall contain so much of the List of MH Contracts,
List of Home Improvement Loans, List of Home Equity Loans or List of Contracts,
as applicable, as pertains to each listed Asset and shall be accompanied by a
current Computer Tape.
(b) Upon being advised of the Repurchase Price pursuant to subsection
(a), the Custodian shall:
(i) Immediately telephonically relay such Repurchase Price to the
Seller;
15
<PAGE>
(ii) Determine whether such Repurchase Price is on deposit in
immediately available funds in Seller's Custodial Account; and
(iii) Determine whether the listed Assets are on deposit in Buyer's
Custodial Account.
(c) If the Custodian determines that funds in an amount equal to the
Repurchase Price are on deposit in Seller's Custodial Account and that the
Assets referred to above in clause (b)(iii) are credited to Buyer's Custodial
Account, it shall transfer an amount equal to such Repurchase Price to Buyer's
Custodial Account and shall credit to Seller's Custodial Account the Assets set
forth on the list provided to the Custodian pursuant to Section 4.04(a).
(d) If the Custodian determines that funds in an amount equal to such
Repurchase Price and/or the required Assets are not so deposited and credited,
it shall immediately notify Buyer and Seller of such circumstance by telephone
or facsimile transmission and the Custodian shall not be required to take the
actions described in clause (c) above until such time as it shall determine that
such funds and such Assets are so deposited and credited.
(e) Repurchase Instructions shall be communicated to the Custodian prior
to 10:00 a.m. on the Repurchase Date.
Section 4.05. Payment of Price Differential. On each Price Differential
Payment Date the Custodian shall telephonically contact Buyer to confirm the
aggregate amount of the unpaid Price Differential from all Transactions and
shall, on such date, transfer such amount from Seller's Custodial Account to
Buyer's Custodial Account. In the event that cash in such amount is not
available for transfer from Seller's Custodial Account the Custodian shall
immediately notify Buyer and Seller of such circumstance by telephone or
telecopy and shall effect such transfer when cash in such amount becomes so
available. The Custodian shall send written confirmation of such transfer to
Buyer and Seller on such date.
Section 4.06. Objections of Buyer or Seller. In the event that either
Buyer or Seller shall object to any of the information provided by any Person
with respect to a Transaction, the Custodian shall immediately notify the non-
objecting party. Buyer and Seller shall mutually instruct the Custodian as to
how such objection is to be resolved.
Section 4.07. No Service Charge for Sale or Transfer of Assets. No
service charge shall be made for any sale or transfer of Assets or the issuance
of Trust Receipts, but the
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<PAGE>
Custodian may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any sale or transfer
of Assets or the issuance of Trust Receipts.
Section 4.08. Simultaneous Transfers. The payment of cash for MH
Contracts, Home Improvement Loans, Home Equity Loans or Contracts and the
related transfer of Assets pursuant to any provision of this Agreement shall be
deemed to occur simultaneously.
Section 4.09. Buyer May Reject Assets. Buyer may, in its sole discretion,
refuse to purchase any Asset offered for sale by Seller under, or offered as
additional Assets pursuant to Paragraph 4(a) or for substitution pursuant to
Paragraph 9 of, the Master Repurchase Agreement or may, by notice to the
Custodian, require an immediate repurchase of any such Asset in the manner
provided by Section 4.04. Seller shall have no right to object to such
repurchase.
Section 4.10. Persons Deemed Owners. The Custodian shall treat as the
Owner of any Asset for all purposes whatsoever the person indicated as the Owner
thereof on the Trust Receipt Register, and the Custodian shall not be affected
by notice to the contrary.
Section 4.11. Unilateral Transfer of Assets Owned by Seller. The
Custodian shall, with respect to any Assets of which Seller is the Owner, follow
the instructions of Seller regarding the release and transfer of such Assets
from this Agreement and shall do such other acts and execute such other
documents as may be deemed reasonably necessary by Seller to effect such release
and transfer. Such release and transfer shall be effected by the Custodian
solely on the instructions of Seller and without any instructions or other
communication from any other party. All costs, fees and expenses relating to
such release and transfer shall be borne by Seller.
Section 4.12. Unilateral Transfer of Assets Owned by a Person Other Than
Seller. The Custodian shall, with respect to Assets of which the Owner is a
Person other than Seller:
(i) Upon the Custodian receiving written certification from Buyer
that an event of default under the Master Repurchase Agreement has occurred and
is continuing (a "Repurchase Agreement Default"), follow the instructions of the
non-defaulting party including instructions regarding the release of the related
Assets from this Agreement and the transfer of such Assets and shall do such
other acts and execute such other documents as may be deemed reasonably
necessary by such non-defaulting party to comply with such instructions.
17
<PAGE>
(ii) Upon receipt by the Custodian of a written certification of
Buyer of a breach of a representation or warranty by the Custodian under this
Agreement, follow the instructions of the Owner regarding the release from this
Agreement and the transfer of such Assets and shall do such other acts and
execute such other documents as may be deemed reasonably necessary to comply
with such instructions.
(iii) Upon the Custodian receiving written certification from the
registered holder of a Trust Receipt other than Buyer that an event of default
under a repurchase agreement between such Owner and Buyer has occurred and is
continuing, follow the instructions of the registered holder including
instructions regarding the release of the related Assets from this Agreement and
the transfer of such Assets and shall do such other acts and execute such other
documents as may be deemed reasonably necessary by such registered holder to
comply with such instructions.
Section 4.13. Modification of the Repurchase Date. The Repurchase Date in
any Transfer Instructions may be modified by telephonic notice of the new
Repurchase Date to the Custodian from Buyer and Seller. The Custodian shall send
written confirmation of such new Repurchase Date to Buyer and Seller by
facsimile transmission on the date of such notice.
Section 4.14. Transfers to Third Parties. Buyer and Seller agree and
advise the Custodian that, notwithstanding any provision of this Agreement to
the contrary, Buyer may engage in repurchase transactions with the Assets owned
by it and may otherwise pledge or hypothecate such Assets, provided that no such
transaction shall relieve Buyer of its obligations under this Agreement or the
Master Repurchase Agreement.
ARTICLE V
THE CUSTODIAN
Section 5.01. Representations and Warranties of the Custodian. With
respect to each Trust Receipt, the Custodian hereby represents and warrants to,
and covenants with the party indicated thereon as the Owner of the related
Assets, that as of the date such Trust Receipt is provided:
(a) The Custodian is duly organized, validly existing and in good
standing under the laws of the United States;
(b) The Custodian has the full power and authority to hold each Asset
(whether acting alone or through an agent) and to execute, deliver and perform,
and to enter into and consummate all transactions contemplated by this
Agreement, has duly authorized
18
<PAGE>
the execution, delivery and performance of this Agreement, has duly executed and
delivered this Agreement and this Agreement constitutes a legal, valid and
binding obligation of the Custodian, enforceable against it in accordance with
its terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(c) Neither the execution and delivery of this Agreement, the filing of a
financing statement indicating that the Custodian is the secured party with
respect to certain Assets, the issuance of the Trust Receipts, the consummation
of the transactions contemplated hereby or thereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement will conflict with or
result in a breach of any of the terms, conditions or provisions of the
Custodian's charter or by-laws or any legal restriction or any agreement or
instrument to which the Custodian is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation, order, judgment or decree
to which the Custodian or its property is subject;
(d) The Custodian does not believe, nor does it have any reason or cause
to believe, that it cannot perform each and every covenant contained in this
Agreement;
(e) To the Custodian's knowledge after due inquiry, there is no
litigation pending or threatened, which if determined adversely to the
Custodian, would adversely affect the execution, delivery or enforceability of
this Agreement, or any of the duties or obligations of the Custodian thereunder,
or which would have a material adverse effect on the financial condition of the
Custodian;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Custodian of or compliance by the Custodian with this
Agreement or the consummation of the transactions contemplated hereby;
(g) The Custodian is a separate and independent entity from Seller, the
Custodian does not own a controlling interest in Seller either directly or
through affiliates and no director or officer of the Custodian is also a
director or officer of Seller;
(h) The Custodian shall maintain Custodial Accounts for Buyer and Seller
as custody accounts for the purpose of holding funds on deposit therein and
reflecting Assets owned by the related party. The Custodian shall administer
such accounts in the same manner it administers similar accounts established for
the same purpose; and
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<PAGE>
(i) The Custodian shall monitor the financing statements filed with
respect to the Assets naming it as the secured party and shall cause Seller to
file or, if Seller shall fail to file in a timely manner, shall itself file such
amendments and continuation statements with respect thereto necessary in order
to maintain the perfected security interest of the Custodian in the Assets.
Section 5.02. Custodian of Documents. The Custodian, either directly or
by acting through an agent, shall hold all documents relating to any Asset that
comes into its possession for the exclusive use and benefit of the Owner of such
Asset and shall make disposition thereof only in accordance with the
instructions furnished by such Owner. The Custodian shall segregate and maintain
continuous custody of all such documents received by it in secure facilities in
accordance with customary standards for such custody and shall not release such
documents or transfer such documents to any other party, including any
subcustodian, without the express written consent of the related Owner.
Section 5.03. Charges and Expenses. Seller will pay all fees of the
Custodian in connection with the performance of its duties hereunder in
accordance with written agreements to be entered into from time to time between
the Custodian and Seller, including fees and expenses of counsel incurred by the
Custodian in the performance of its duties hereunder; provided, however, that
-------- -------
the Custodian shall in no event acquire any lien upon any Asset deposited under
this Agreement, or any claim against Buyer or any Owner, by reason of the
failure of Seller to pay any of such charges or expenses.
Section 5.04. No Adverse Interests. The Custodian covenants and warrants
to Buyer, Seller and each Owner, that: (i) as of the related date on which the
Custodian receives evidence of the perfection of its interest in the related
Assets, it holds no adverse interest, by way of security or otherwise, in any
Asset; and (ii) the execution of this Agreement and the creation of the
custodial relationship hereunder does not create any interest, by way of
security or otherwise of the Custodian in or to any Asset, other than the
Custodian's rights as custodian hereunder.
Section 5.05. Inspections. Upon reasonable prior written notice to the
Custodian, any Owner and such Owner's agents, accountants, attorneys and
auditors will be permitted during normal business hours to examine the
Custodian's documents, records and other papers in possession of or under the
control of the Custodian relating to the Assets owned by such Owner.
Section 5.06. Insurance. The Custodian shall, at its own expense,
maintain at all times during the existence of this
20
<PAGE>
Agreement and keep in full force and effect, (1) fidelity insurance, (2) theft
of documents insurance, (3) forgery insurance subject to deductibles, all as is
customary for amounts and with insurance companies reasonably acceptable to
Buyer and Seller. A certificate of the respective insurer as to each such policy
or a blanket policy for such coverage shall be furnished to any Owner, upon
request, containing the insurer's statement or endorsement that such insurance
shall not terminate prior to receipt by such party, by registered mail, of ten
(10) days' advance notice thereof.
Section 5.07. Limitation of Liability. The Custodian shall be subject to
no liability under this Agreement to Owners except for liabilities arising from
the Custodian's negligence or willful misconduct in connection with its
performance of such obligations and duties as are specifically set forth herein.
The Custodian shall not be liable for any action or non-action by it in reliance
on advice of counsel believed by it in good faith to be competent to give such
advice. The Custodian may rely and shall be protected in acting upon any written
notice, order, request, direction or other document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties.
Section 5.08. Indemnification. Seller agrees to indemnify the Custodian
against, and to hold it harmless from, any liabilities, and any related out-of-
pocket expenses, which it may incur in connection with this Agreement or the
Trust Receipts, other than any liabilities and expenses arising out of the
Custodian's negligence or bad faith. The Custodian agrees to indemnify Buyer,
Seller and any Owner against out-of-pocket expenses which it may incur in
connection with this Agreement and which is directly and proximately caused by
the Custodian's negligence or willful misconduct.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Amendment. This Agreement may be amended from time to time
by the Custodian, Buyer and Seller by written agreement signed by such Parties.
Section 6.02. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York governing agreements made and
to be performed therein, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
21
<PAGE>
Section 6.03. New York Jurisdiction; Waiver of Jury Trial. The Custodian,
Buyer and Seller hereby agree to submit to the courts of the State of New York
in any action or proceeding arising out of this Agreement. The Custodian, Buyer
and Seller each hereby waives the right of trial by jury in any litigation
arising hereunder.
Section 6.04. Notices. All demands, notices and communications hereunder,
except as otherwise provided herein, shall be in writing and shall be deemed to
have been duly given if personally delivered at or mailed by registered mail,
postage prepaid, or sent by facsimile transmission, to:
(a) in the case of the Custodian:
First Bank National Association
c/o First Trust National Association
180 East Fifth Street
2nd Floor
St. Paul, Minnesota 55101
Attention: Structured Finance
Telephone: (612) 244-0011
Telecopy: (612) 244-0089
with a copy to:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Specialized Finance Services
Telephone: (612) 244-1196
Telecopy: (612) 244-1537
(b) in the case of Buyer:
Smith Barney Mortgage Capital Group, Inc.
390 Greenwich Street
4th Floor
New York, New York 10013
Attention: ___________________
Telephone: (___) ___-____
(c) in the case of Seller:
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102
22
<PAGE>
Attention: Chief Financial Officer
Telephone: (612) 293-3420
Telecopy: (612) 293-5746
Section 6.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 6.06. No Partnership. Nothing herein contained shall be deemed or
construed to create a co-partnership or joint venture between the parties
hereto.
Section 6.07. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.
Section 6.08. Assignment. No party hereto shall sell, pledge, assign or
otherwise transfer this Agreement without the prior written consent of the other
parties hereto.
Section 6.09. Headings. Section headings are for reference purposes only
and shall not be construed as a part of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, Buyer, Seller and Custodian have caused their names to
be signed hereto by their respective officers thereunto duly authorized, all as
of the day and year first above written.
SMITH BARNEY MORTGAGE CAPITAL
GROUP, INC.
as Buyer
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
GREEN TREE FINANCIAL CORPORATION,
as Seller
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FIRST BANK NATIONAL ASSOCIATION,
as Custodian
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
Exhibit A
FORM OF TRUST RECEIPT
<PAGE>
THIS TRUST RECEIPT IS
NOT A NEGOTIABLE
INSTRUMENT.
TRUST RECEIPT/1/ [Date]
[ADDRESSEE]
Re: Ownership Interest in Manufactured
Housing Conditional Sales MH Contracts,
Home Improvement Loans, Home Equity Loans or
Contracts under the Master
Repurchase Agreement
---------------------------------------------
Gentlemen:
First Bank National Association, in its capacity as custodian (the
"Custodian") under a Tri-Party Custodial Agreement (the "Agreement"), by and
among Smith Barney Mortgage Capital Group, Inc. ("Buyer"), Green Tree Financial
Corporation and the Custodian, hereby confirms your ownership interest, under
the terms and conditions of the Agreement, of the manufactured housing
conditional sales contracts (the "MH Contracts"), home improvement loans (the
"Home Improvement Loans"), home equity loans (the "Home Equity Loans") or retail
installment contracts ("Contracts"), as applicable, listed on the schedule
attached hereto. Any exceptions or deficiencies in the Custodian's Home Equity
Loan File, Home Improvement File or Land-and-Home Contract File will be set
forth in an attached exception report. The Custodian shall act as custodian and
bailee exclusively for you and your assigns with respect to each such MH
Contract, Home Improvement Loan, Home Equity Loan or Contracts, as applicable
("Assets").
This Trust Receipt may be assigned, in whole only, by endorsement by the
registered holder on the assignment form set forth below. Upon presentation of
this Trust Receipt to the Custodian endorsed as aforesaid, the Custodian shall
issue a new Trust Receipt with respect to the Assets in the name of the
assignee.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned in the Agreement.
Upon the Custodian receiving written certification from the registered
holder of this Trust Receipt, if such holder is other than Buyer, that an event
of default under a repurchase agreement
- ---------------------------
/1/ A separate Trust Receipt shall be issued for each Transaction and each
Trust Receipt shall relate to only one variety of Assets.
1
<PAGE>
between the holder and Buyer has occurred and is continuing, the Custodian shall
follow the instructions of the registered holder including instructions
regarding the release of the related Assets from the Agreement and the transfer
of such Assets and shall do such other acts and execute such other documents as
may be deemed reasonably necessary by the registered holder to comply with such
instructions.
FIRST BANK NATIONAL ASSOCIATION,
as Custodian
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
2
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
the beneficial interest evidenced by the within Trust Receipt and hereby
authorizes the transfer of registration of such interest to assignee on the
Trust Receipt Register of the Custodian.
I (We) further direct the Custodian to issue a new Trust Receipt relating
to the same Assets as the within Trust Receipt to the above named assignee and
deliver such Trust Receipt to the following address:
_______________________________________________________________________________.
_______________________________________________________________________________.
Dated:
------------------------------
Signature by or on behalf of
assignor
3
<PAGE>
Following is the identifying information for the Assets referred to in this
Trust Receipt:
4
<PAGE>
Exhibit B
---------
FORM OF ASSIGNMENT
FOR MH CONTRACTS
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that he is the ________________________ of
Green Tree Financial Corporation, a Delaware corporation ("Seller"), and that as
such he is duly authorized to execute and deliver this Assignment pursuant to
the Tri-Party Custodial Agreement dated as of June __, 1997 (the "Custodial
Agreement") by and among Smith Barney Mortgage Capital Group, Inc., Seller and
First Bank National Association, as Custodian (the "Custodian").
Seller does hereby assign to the Custodian under the terms of the Custodial
Agreement to be held on behalf of Seller and its transferees, as their interests
may appear, (i) all Seller's right, title and interest in and to the
manufactured housing installment sales contracts described on the List of MH
Contracts attached hereto (the "MH Contracts") and the proceeds thereof
(including, without limitation, all security interests created thereby and any
and all rights to receive payments which are due pursuant thereto from and after
the date specified on such List of MH Contracts), (ii) all rights under any
hazard insurance policy relating to a manufactured home securing an MH Contract
for benefit of the creditor of such MH Contract and all rights under any blanket
hazard insurance policy and the proceeds from the MH Contract holders' errors
and omissions protection policy to the extent they relate to such manufactured
homes, (iii) all rights under any FHA/VA regulation related to any FHA/VA
Contract, (iv) all documents contained in the Contract Files and/or Land-and-
Home Contract File and (v) all proceeds in any way derived from the foregoing.
The undersigned on behalf of Seller hereby certifies that the MH Contracts
and such List of MH Contracts are the MH Contracts and List of MH Contracts
referred to in the UCC-1 financing statement filed by Seller on __________ __,
1997 (file number _________________).
GREEN TREE FINANCIAL CORPORATION
By
-------------------------------
Name:
Title:
1
<PAGE>
Exhibit C
---------
FORM OF ASSIGNMENT FOR
HOME IMPROVEMENT LOANS
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that the undersigned is the ________
_________________ of Green Tree Financial Corporation, a Delaware corporation
("Seller"), and that as such the undersigned is duly authorized to execute and
deliver this Assignment pursuant to the Tri-Party Custodial Agreement dated as
of June __, 1997 (the "Custodial Agreement"), by and among Smith Barney Mortgage
Capital Group, Inc., Seller and First Bank National Association, as Custodian
(the "Custodian").
Seller does hereby assign to Custodian under the terms of the
Custodial Agreement to be held on behalf of Seller and its transferees, as their
interests may appear, (i) all Seller's right, title and interest in and to the
Home Improvement Loans described on the List of Home Improvement Loans attached
hereto and the proceeds thereof (including, without limitation, all liens
created thereby and any and all rights to receive payments, including principal
and interest, which are due pursuant thereto from and after the date specified
on such List of Home Improvement Loans and all recourse rights against third
persons), (ii) all rights under any FHA insurance and any hazard insurance
policy relating to real property securing a Home Improvement Loan for benefit of
the creditor of such Home Improvement Loan and all rights under any blanket
hazard insurance policy and the proceeds from the Home Improvement Loan holders'
errors and omissions protection policy to the extent they relate to such real
property, (iii) all rights under any FHA regulation related to any Title I Loan,
(iv) all documents contained in the Home Improvement Loan Files and (v) all
proceeds in any way derived from the foregoing.
The undersigned on behalf of Seller hereby certifies that the Home
Improvement Loans and such List of Home Improvement Loans are the Home
Improvement Loans and List of Home Improvement Loans referred to in the UCC-1
financing statement filed by Seller on __________ __, 1997 (file number
_________________).
Dated: , 19
---------------- --
GREEN TREE FINANCIAL CORPORATION
By:
-----------------------------
Name:
Title:
1
<PAGE>
Exhibit D
---------
FORM OF ASSIGNMENT FOR
HOME EQUITY LOANS
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that the undersigned is the ________
_________________ of Green Tree Financial Corporation, a Delaware corporation
("Seller"), and that as such the undersigned is duly authorized to execute and
deliver this Assignment pursuant to the Tri-Party Custodial Agreement dated as
of June __, 1997 (the "Custodial Agreement"), by and among Smith Barney Mortgage
Capital Group, Inc., Seller and First Bank National Association, as Custodian
(the "Custodian").
Seller does hereby assign to Custodian under the terms of the
Custodial Agreement to be held on behalf of Seller and its transferees, as their
interests may appear, (i) all Seller's right, title and interest in and to the
Home Equity Loans described on the List of Home Equity Loans attached hereto and
the proceeds thereof (including, without limitation, all liens created thereby
and any and all rights to receive payments, including principal and interest,
which are due pursuant thereto from and after the date specified on such List of
Home Equity Loans and all recourse rights against third persons), (ii) all
rights under any hazard insurance policy relating to real property securing a
Home Equity Loan for benefit of the creditor of such Home Equity Loan and all
rights under any blanket hazard insurance policy and the proceeds from the Home
Equity Loan holders' errors and omissions protection policy to the extent they
relate to such real property, (iii) all documents contained in the Home Equity
Loan Files and (iv) all proceeds in any way derived from the foregoing.
The undersigned on behalf of Seller hereby certifies that the Home Equity
Loans and such List of Home Equity Loans are the Home Equity Loans and List of
Home Equity Loans referred to in the UCC-1 financing statement filed by Seller
on __________ __, 1997 (file number _________________).
Dated: _______________, 19__
GREEN TREE FINANCIAL CORPORATION
By:
-----------------------------
Name:
Title:
1
<PAGE>
Exhibit E
---------
FORM OF ASSIGNMENT FOR
RETAIL INSTALMENT CONTRACTS
<PAGE>
ASSIGNMENT
The undersigned hereby certifies that he is the ________________________ of
Green Tree Financial Corporation, a Delaware corporation ("Seller"), and that as
such he is duly authorized to execute and deliver this Assignment pursuant to
the Tri-Party Custodial Agreement dated as of June __, 1997 (the "Custodial
Agreement") by and among Smith Barney Mortgage Capital Group, Inc., Seller and
First Bank National Association, as Custodian (the "Custodian").
Seller does hereby assign to the Custodian under the terms of the Custodial
Agreement to be held on behalf of Seller and its transferees, as their interests
may appear, (i) all Seller's right, title and interest in and to the retail
installment contracts described on the List of Contracts attached hereto (the
"Retail Installments Contracts") and the proceeds thereof (including, without
limitation, all security interests created thereby and any and all rights to
receive payments which are due pursuant thereto from and after the date
specified on such List of Retail Installments Contracts), (ii) all documents
contained in the Contract Files and (iii) all proceeds in any way derived from
the foregoing.
The undersigned on behalf of Seller hereby certifies that the Contracts and
such List of Retail Installments Contracts are the Retail Installments Contracts
and List of Retail Installments Contracts referred to in the UCC-1 financing
statement filed by Seller on __________ __, 1997 (file number
_________________).
GREEN TREE FINANCIAL CORPORATION
By
------------------------------
Name:
Title:
1
<PAGE>
ANNEX I
SUPPLEMENTAL TERMS TO MASTER REPURCHASE AGREEMENT,
DATED AS OF JUNE 1, 1997, BETWEEN
SMITH BARNEY MORTGAGE CAPITAL GROUP, INC. AND
GREEN TREE FINANCIAL CORPORATION
1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to
-------------
Master Repurchase Agreement (the "Master Repurchase Agreement", and
collectively with these Supplemental Terms, the "Agreement") modify the
terms and conditions under which the parties hereto, from time to time,
enter into Transactions.
2. ADDITIONAL DEFINITIONS.
----------------------
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Master Repurchase Agreement.
(b) "Buyer" shall refer to Smith Barney Mortgage Capital Group, Inc.
(c) "Consumer Products" refers to consumer goods consisting of
motorcycles, marine products (including boats, boat trailers and
outboard motors), pianos and organs, horse trailers, sport vehicles
(including snowmobiles, personal watercraft and all-terrain vehicles),
trucks, personal aircraft, recreational vehicles, and any other asset
as shall be acceptable to Buyer in its sole discretion, financed by
Seller pursuant to a Contract.
(d) "Contract" refers to promissory notes financing home improvements
(which are not treated as Home Improvement Loans), certain closed-end
home equity loans (which are not treated as Home Equity Loans) and any
retail installment contract which finances a purchase of a Consumer
Product, all rights to receive payments which are due pursuant
thereto, and any "purchase money security interest" (as defined in the
Uniform Commercial Code) created in favor of Seller in the Consumer
Product financed thereunder, the ownership of which is evidenced by a
Trust Receipt issued pursuant to the Custodial Agreement. This
definition of "Contract" shall include certain home improvement loans
and home equity loans that Seller believes may not
respectively satisfy the representations set forth in Exhibit B and
Exhibit C and
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<PAGE>
are thus not included in the definition of "Home Equity Loan" and
"Home Improvement Loan".
(e) "Custodial Agreement" shall refer to a custodial agreement, among the
parties having ownership interests in the related Securities and the
party named as custodian therein, providing for the maintenance of
ownership records relating to the Securities.
(f) "Custodian" refers to the party named as custodian in the Custodial
Agreement, or any permitted successor thereto.
(g) "Electronic Ledger" refers to the electronic master record of
installment sale contracts of the Seller.
(h) "FHA" shall refer to the Federal Housing Administration of HUD.
(i) "FHA/VA MH Contracts" shall refer to MH Contracts that are insured by
the FHA or guaranteed by the Department of Veterans Affairs.
(j) "Home Equity Loans" shall refer to the home equity loans other than
such home equity loans included in the definition of "Contract",
secured by first, second or third liens on single family residential
real property (including, without limitation, condominiums and planned
unit developments) certain documents relating to which have been
delivered to the Custodian pursuant to the Custodial Agreement and the
ownership of which is evidenced by a Trust Receipt issued pursuant to
the Custodial Agreement.
(k) "Home Improvement Loans" refers to home improvement installment loan
contracts and promissory notes other than such home improvement loans
described in the definition of "Contract", the ownership of which is
evidenced by a Trust Receipt issued pursuant to the Custodial
Agreement.
(l) "HUD" shall refer to the Department of Housing and Urban Development.
(m) "Land-and-Home Contract" refers to a MH Contract that is secured by a
mortgage or deed of trust on real estate on which the related
manufactured home is situated, and which manufactured home is
considered or classified as part of the real estate under the laws of
the jurisdiction in which it is located.
2
<PAGE>
(n) "Market Value" shall, in addition to the definition set forth in the
Master Repurchase Agreement, provide that:
(i) the Market Value of any Security shall be determined solely by
Buyer;
(ii) the Market Value of a Security shall be determined by valuing
such Security net of any applicable servicing fee;
(iii) that a value of zero shall be assigned to any Security which has
been delinquent for thirty (30) days or more; and
(iv) in no event shall the Market Value of a Security exceed the
outstanding principal amount thereof.
(o) "MH Contract" refers to a manufactured housing conditional sales
contract, including any Land-and-Home Contract, the ownership of which
is evidenced by a Trust Receipt issued pursuant to the Custodial
Agreement.
(p) "Owner" shall have the meaning set forth in the Custodial Agreement.
(q) "Secured Home Improvement Loans" refers to Home Improvement Loans
which are secured by first, second or third mortgages on property,
whether conventional or insured by the FHA.
(r) "Securities" shall refer to MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts; provided, however, that such MH Contracts,
-------- -------
Home Improvement Loans, Home Equity Loans and Contracts shall not be
deemed to be securities for any federal securities law or state blue
sky law purposes.
(s) "Seller" shall refer to Green Tree Financial Corporation.
(t) "Step-Up Rate Contract" shall refer to any Contract bearing interest
during an initial period at a fixed rate that is lower than the fixed
rate borne thereafter.
(u) "Title I Loan" shall refer to a Home Improvement Loan insured under
the FHA's Title I Program.
(v) "Transaction" shall, in addition to the definition set forth in the
Master Repurchase Agreement, refer to deliveries of Securities or cash
pursuant to Paragraph 4(a) of the Master Repurchase Agreement and
3
<PAGE>
substitutions pursuant to Paragraph 9 of the Master Repurchase
Agreement.
(w) "UCC" refers to the Uniform Commercial Code as in effect in the
applicable jurisdiction.
(x) "Unsecured Home Improvement Loans" refers to Home Improvement Loans
which are not secured by mortgaged property.
3. CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto
-------------
unless written notice of objection is given by the objecting party to the
other party within two (2) business days after the objecting party's
receipt of such Confirmation. In the case of Transactions involving MH
Contracts, Home Improvement Loans, Home Equity Loans or Contracts, the
Purchased Securities shall be identified on a detailed listing to be
provided by Seller to Buyer (a "List of MH Contracts" for MH Contracts, a
"List of Home Improvement Loans" for Home Improvement Loans, a "List of
Home Equity Loans" for Home Equity Loans and a "List of Contracts" for
Contracts) and may be identified in the related Confirmation by reference
to such lists.
4. INCOME PAYMENTS. So long as no Event of Default shall have occurred and be
---------------
continuing, Seller shall be entitled to all payments of principal and
interest and principal prepayments payable to the holder of the Purchased
Securities.
5. SECURITY INTEREST.
-----------------
(a) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the parties
intend that Buyer shall have a perfected first priority security
interest in all of the Purchased Securities.
(b) Seller shall pay all fees and expenses associated with perfecting such
security interest including, without limitation, the cost of filing
financing statements under the Uniform Commercial Code.
(c) In the event that Buyer elects to engage in repurchase transactions
with the Purchased Securities or otherwise elects to pledge or
hypothecate the Purchased Securities, Seller shall, at the request of
Buyer and at the expense of Seller, provide Buyer's counterparty in
such repurchase transaction with an opinion of counsel to the effect
that such counterparty has either an ownership interest or a perfected
first priority security interest in such Purchased Securities.
4
<PAGE>
6. REPRESENTATIONS.
---------------
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the execution, delivery and performance of the Agreement and the
performance of each Transaction do not and will not result in or
require the creation of any lien, security interest or other
charge or encumbrance (other than pursuant hereto) upon or with
respect to any of its properties; and
(ii) the Agreement is, and each Transaction when entered into under
the Agreement will be, a legal, valid and binding obligation of
it enforceable against it in accordance with the terms of the
Agreement.
(b) Seller represents and warrants to Buyer, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the documents disclosed by Seller to Buyer pursuant to these
Supplemental Terms are either original documents or genuine and
true copies thereof;
(ii) Seller is a separate and independent corporate entity from the
custodian named in the Custodial Agreement, Seller does not own a
controlling interest in such custodian either directly or through
affiliates and no director or officer of Seller is also a
director or officer of such custodian;
(iii) Seller shall be at the time it delivers any Purchased Securities
for any Transaction, and shall continue to be, through the
Purchase Date relating to each such Transaction, the legal and
beneficial owner of such Purchased Securities free and clear of
any lien, security interest, option or encumbrance except for the
security interest created by the Agreement;
(iv) each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract was originated by Seller directly or through its
correspondent network in its ordinary course of business and has
not been purchased in any bulk transaction, unless otherwise
expressly approved by Buyer in writing;
5
<PAGE>
(v) each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract was underwritten in accordance with the written
underwriting standards of Seller furnished by Seller to Buyer,
and no material change to such underwriting standards has
occurred since the date of the last written revision to such
standards was furnished to Buyer by Seller; and
(vi) since the date of the most recent financial statement of Seller,
delivered by it pursuant to Paragraph 9 hereof, there has been no
material adverse change in the financial condition or results or
operations of Seller.
(c) Seller makes the representations and warranties to Buyer concerning
the MH Contracts, and shall as of the Purchase Date of any Transaction
be deemed to make such representations and warranties, as are set
forth at Exhibit A-1 hereto, with respect to those MH Contracts
relating to manufactured housing that is not considered to be real
property under applicable state law, and Exhibit A-2 hereto, with
respect to those MH Contracts relating to manufactured housing that is
considered to be real property under applicable state law. Seller
further represents and warrants to Buyer that the Exhibit A-1 and A-2
representations and warranties, as applicable, shall continue to be
true for all MH Contracts through the Repurchase Date of the related
Transaction. The representations and warranties set forth at Exhibits
A-1 and A-2 hereto are incorporated herein in their entirety.
(d) Seller makes the representations and warranties to Buyer concerning
the Home Improvement Loans, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties, as
are set forth at Exhibit B hereto. Seller further represents and
warrants to Buyer that the Exhibit B representations and warranties
shall continue to be true for all Home Improvement Loans through the
Repurchase Date of the related Transactions. The representations and
warranties set forth at Exhibit B hereto are incorporated herein in
their entirety.
(e) Seller makes the representations and warranties to Buyer concerning
the Home Equity Loans, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties, as
are set forth at Exhibit C hereto. Seller further represents and
warrants to Buyer that the Exhibit C representations and warranties
shall continue to be true for all Home Equity
6
<PAGE>
Loans through the Repurchase Date of the related Transactions. The
representations and warranties set forth at Exhibit C hereto are
incorporated herein in their entirety.
(f) Seller makes the representations and warranties to Buyer concerning
the Contracts, and shall as of the Purchase Date of any Transaction be
deemed to make such representations and warranties, as are set forth
at Exhibit D hereto. Seller further represents and warrants to Buyer
that the Exhibit D representations and warranties shall continue to be
true for all Contracts through the Repurchase Date of the related
Transactions. The representations and warranties set forth at Exhibit
D hereto are incorporated herein in their entirety.
7. EVENTS OF DEFAULT.
-----------------
(a) The term "Event of Default" shall, in addition to the definition set
forth in the Master Repurchase Agreement, include the following
events:
(i) any governmental or self-regulatory authority shall take
possession of Buyer or Seller or its property or appoint any
receiver, conservator or other official, or such party shall take
any action to authorize any of the actions set forth in this
clause (i);
(ii) Buyer shall have reasonably determined that Seller is or will be
unable to meet its commitments under the Agreement, shall have
notified Seller of such determination and Seller shall not have
responded with appropriate information to the contrary to the
satisfaction of Buyer within twenty-four (24) hours;
(iii) the Agreement shall for any reason cease to create either an
ownership interest (which ownership interest shall be confirmed
upon request of Buyer in an opinion of counsel provided by
Seller) or a valid, first priority security interest in any of
the Purchased Securities purported to be covered thereby;
(iv) a final judgment by any competent court in the United States of
America for the payment of money in an amount of at least
$1,000,000 is rendered against the defaulting party, and the same
remains undischarged for a period of 60 days during which
7
<PAGE>
execution of such judgment is not effectively stayed;
(v) any representation or warranty made by Seller in the Agreement or
the Custodial Agreement shall have been incorrect or untrue when
made or repeated or when deemed to have been made or repeated or,
in the case of continuing representations, shall be untrue in any
material respect during the term of any Transaction under the
Agreement; or
(vi) HUD or the Federal Housing Administration shall have withdrawn or
adversely modified its approval of Seller to act as an FHA-
approved mortgagee and servicer (including an FHA-approved
mortgagee and servicer under Title I).
(b) Upon the occurrence and during the continuance of an Event of Default
by Seller:
(i) all rights of Seller to receive payments which it would otherwise
be authorized to receive pursuant to Paragraph 4 of these
Supplemental Terms shall cease, and all such rights shall
thereupon become vested in Buyer, which shall thereupon have the
sole right to receive such payments and apply them to the
aggregate unpaid Repurchase Prices owed by Seller; and
(ii) all payments which are received by Seller contrary to the
provisions of the preceding clause (i) shall be received in trust
for the benefit of Buyer and shall be segregated from other funds
of Seller.
8. ADDITIONAL EVENTS OF TERMINATION.
--------------------------------
(a) At the option of Buyer, exercised by written notice to Seller, the
Repurchase Date for each Transaction under the Agreement shall be
deemed to immediately occur in the event that:
(i) in the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Seller;
(ii) Buyer shall request written assurances as to the financial well-
being of Seller and such assurances shall not have been provided
within twenty-four (24) hours of such request; or
8
<PAGE>
(iii) Seller shall be in default with respect to any normal and
customary covenants under any contract or agreement to which it
is a party (which covenants include, but are not limited to, an
Act of Insolvency of Seller or the failure of Seller to make
required payments of at least $100,000 and remains unpaid under
such contract or agreement as they become due).
(b) The events specified in Paragraph 8(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for each Transaction shall be in addition to any other
rights of Buyer to cause such an acceleration under the Agreement.
9. FINANCIAL STATEMENTS. As of the date hereof, the parties hereto shall each
--------------------
provide the other with its audited year-end financial statements and its
most recent publicly available interim financial statement. The parties
hereto shall from time to time each provide the other with audited year-end
financial statements and additional publicly available interim financial
statements upon the other's reasonable request. Each delivery of Purchased
Securities by Seller to Buyer hereunder will constitute a representation by
Seller that there has been no material adverse change in Seller's financial
condition not disclosed to Buyer since the date of Seller's most recent
financial statement delivered to Buyer. Seller shall provide Buyer, from
time to time at Seller's expense, with such information of a financial or
operational nature as Buyer may reasonably request promptly upon receipt of
such request.
10. USE OF PROCEEDS. Seller represents, warrants and covenants that none of
---------------
the Purchase Price for any Purchased Securities will be used either
directly or indirectly to acquire any security, as that term is defined in
Regulation G or Regulation T of the Board of Governors of the Federal
Reserve System, and that Seller has not taken any action that might cause
any Transaction to violate any regulation of the Federal Reserve Board.
11. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. The parties hereto agree
-----------------------------------------------
and acknowledge that Transactions hereunder will be entered into by Buyer
in its sole discretion and that Buyer is under no obligation to enter into
any Transaction with Seller. With respect to any Transaction and without
limiting the discretion of Buyer referred to in the foregoing sentence and
in Paragraph 16 of these Supplemental Terms:
(a) the minimum amount of any Transaction under this Agreement shall have
a Purchase Price of $5,000,000;
9
<PAGE>
(b) the aggregate outstanding Purchase Price for all Purchased Securities
shall not exceed $500,000,000 at any one time; and
(c) the percentage used to determine Buyer's Margin Amount shall be as
mutually agreed upon by Buyer and Seller but in no event less than
110%.
12. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date
------------------------------------
shall include that portion of the Price Differential that has accrued but
has not been paid. The Price Differential shall accrue and be calculated
on a daily basis for each MH Contract, Home Improvement Loan, Home Equity
Loan and Contract (such calculation to be made on the basis of a 360-day
year and the actual number of days elapsed). The Price Differential shall
be payable weekly in arrears to Buyer with respect to each MH Contract,
Home Improvement Loan, Home Equity Loan and Contract on the earlier of
Friday of each week or the termination date for the related Transaction.
The Price Differential for any MH Contract, Home Improvement Loan, Home
Equity Loan and Contract shall be equal to the product of (i) the Purchase
Price and (ii) a per annum percentage 50 basis points (or such other number
of basis points as Buyer and Seller may mutually agree) in excess of the
prevailing overnight rate on Federal funds (as reported on Page 5 of
Telerate) existing at the opening of business on the date of calculation.
Payment of the Price Differential to Buyer shall be made by wire transfer
in immediately available funds.
13. ADDITIONAL INFORMATION.
----------------------
(a) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in their
possession pertaining to each Purchased Security that is the subject
of such Transaction. Such inspection shall occur upon the request of
Buyer at a mutually agreeable location during regular business hours
and on a date not more than two (2) business days after the date of
such request.
(b) Seller agrees to provide Buyer from time to time with such information
concerning Seller of a financial or operational nature as Buyer may
request.
(c) Seller shall provide Buyer with copies of all filings made by or on
behalf of Seller with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended, promptly upon
making such filings.
10
<PAGE>
14. BUYER MAY REJECT SECURITIES. Buyer may, in its sole discretion, refuse to
---------------------------
purchase any Security offered for sale by Seller under the Agreement or
offered as Additional Purchased Securities pursuant to Paragraph 4(a) or
for substitution pursuant to Paragraph 9 of the Master Repurchase Agreement
or may require an immediate repurchase of any such Security in the manner
provided in the Custodial Agreement. Seller shall have no right to object
to such repurchase.
15. MARGIN MAINTENANCE.
------------------
(a) Paragraph 4(a) of the Master Repurchase Agreement is hereby modified
to provide that if the notice to be given by Buyer to Seller under
such paragraph is given at or prior to 10:00 a.m. New York City time,
Seller shall transfer the Additional Purchased Securities or cash to
Buyer prior to the close of business in New York City on the date of
such notice, and if such notice is given after 10:00 a.m. New York
City time, Seller shall transfer the Additional Purchased Securities
or cash prior to the close of business in New York City on the
business day following the date of such notice.
(b) Additional Purchased Securities that are MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts that are
transferred by Seller to Buyer pursuant to Paragraph 4(a) of the
Master Repurchase Agreement shall be transferred to the Custodian for
the benefit of Buyer pursuant to the provisions of the Custodial
Agreement. Any cash transferred by Seller to Buyer shall be sent via
wire transfer in immediately available funds to the account designated
by Buyer.
(c) Paragraph 4 of the Master Repurchase Agreement is hereby amended by
adding the following at the end thereof:
"(g) In the case of any Transactions that have a term greater
than one business day, any cash paid by either party in respect
of a margin payment or reduction made pursuant to paragraph 4(a)
or (b) shall be deemed to neither increase or decrease the
Purchase Price for purposes of calculating the Price
Differential; provided however, that the parties hereto
-------- -------
acknowledge that any such cash paid or reduction made shall be
deemed to increase or decrease the Repurchase Price accordingly."
16. TRANSACTIONS OPTIONAL; NO COMMITMENT. Notwithstanding any other provision
------------------------------------
of the Agreement or the Custodial Agreement to the contrary, Buyer shall be
under no obligation to enter
11
<PAGE>
into Transactions with Seller and the initiation of each Transaction is
subject to the approval of Buyer in its sole discretion.
17. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction
---------------------
under this Agreement, Seller shall cause each of the following conditions
to occur:
(a) A Custodial Agreement relating to the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts, in form and substance
satisfactory to Buyer, shall have been executed and delivered by the
parties thereto;
(b) Seller shall have disclosed information satisfactory to Buyer with
respect to the scheduled maturities and termination provisions of all
outstanding credit facilities and debt of Seller; and
(c) Seller shall, on the Purchase Date of the first Transaction hereunder
and, upon the request of Buyer, on the Purchase Date of any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon
permitted as to any person or entity that purchases the Securities
from Buyer in a repurchase transaction, an opinion of counsel, in form
and substance satisfactory to Buyer and its counsel, concerning (i)
the authorization and authority of Seller to enter into the Agreement
and the Custodial Agreement and Transactions thereunder, (ii) the
ownership interest or perfected security interest of Buyer or its
agent in the Purchased Securities and (iii) such other matters as
Buyer may reasonably require.
18. SERVICING ARRANGEMENTS.
----------------------
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts contemplated hereby, Seller shall continue
to service the MH Contracts, Home Improvement Loans, Home Equity Loans
and Contracts for the benefit of Buyer and, if Buyer shall exercise
its rights to sell the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts pursuant to this Agreement prior to the
related Repurchase Date, Buyer's assigns; provided, however, that the
-------- -------
obligation of Seller to service the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts for the benefit of Buyer as
aforesaid shall cease upon the payment to Buyer of the Repurchase
Price therefor.
12
<PAGE>
(b) Seller shall service the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts and shall enforce its rights and the rights
of the beneficial owner thereunder in accordance with the standards of
a prudent lender in the manufactured housing industry, the home
improvement loan industry, the home equity loan industry and the
consumer finance industry, as applicable.
(c) Seller shall service all FHA/VA MH Contracts and all FHA/VA Home
Improvement Loans in a manner such that such insurance or guarantee
will not be impaired and will remain in full force and effect.
(d) Buyer may, in its sole discretion if an Event of Default shall have
occurred and be continuing, without payment of any termination fee or
any other amount to Seller, (i) sell its right to the MH Contracts,
Home Improvement Loans, Home Equity Loans and Contracts on a servicing
released basis or (ii) terminate Seller as servicer of the MH
Contracts, Home Improvement Loans, Home Equity Loans and Contracts
with or without cause.
19. TRANSFERS TO THIRD PARTIES. Buyer and Seller agree that, notwithstanding
--------------------------
any provision of the Agreement or the Custodial Agreement to the contrary,
Buyer may engage in repurchase transactions with the Purchased Securities
and may otherwise pledge or hypothecate the Purchased Securities, provided
that no such transaction shall relieve Buyer of its obligations under the
Agreement.
20. SINGLE AGREEMENT. Paragraph 12 of the Master Repurchase Agreement is
----------------
amended by adding at the end thereof the following:
"Buyer and Seller agree that, upon an Act of Insolvency by Buyer, on
the one hand, or Seller or any of its affiliates, on the other hand,
or the default by Buyer, on the one hand, or Seller or any of its
affiliates, on the other hand, under any transaction with the other
party hereto (the party to which such Act of Insolvency or default
relates being herein referred to as "Party A" and the other party
being referred to herein as "Party B"), Party B may: (a) liquidate
any transaction between Party A and Party B, (b) reduce any amounts
due and owing to Party A under this or any other transactions between
Party A and Party B by setting off against such amounts any amounts
due and owing to Party B by Party A, and (c) treat all security for
any transactions between Party A and Party B as security for all
transactions between Party A and Party B.
13
<PAGE>
21. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Buyer and Seller hereby agree
-------------------------------------------
to submit to the courts of the State of New York in any action or
proceeding arising out of this Agreement. Buyer and Seller each hereby
waives the right of trial by jury in any litigation arising hereunder.
22. BINDING TERMS. All of the covenants, stipulations, promises and agreements
-------------
in the Agreement shall bind the successors and assigns of the parties
hereto, whether expressed or not.
23. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which counterparts shall be deemed to be an original,
and such counterparts shall constitute but one and the same instrument.
24. INCORPORATION OF TERMS. The Master Repurchase Agreement as supplemented by
----------------------
this Annex I and by Exhibits A-1, A-2, B, C and D shall be read, taken and
construed as one and the same instrument.
14
<PAGE>
EXHIBIT A-1
-----------
Representations with respect to MH Contracts
(not relating to real property)
--------------------------------------------
A. Payments. The scheduled payment of principal and interest for the
--------
most recent Due Date was made by or on behalf of the obligor (without any
advance from Seller or any Person acting at the request of Seller) or was not
delinquent for more than 30 days.
B. No Waivers. The terms of the MH Contract have not been waived,
----------
altered or modified in any respect, except by instruments or documents
identified in the MH Contract file.
C. Binding Obligation. The MH Contract is the legal, valid and binding
------------------
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. No Defenses. The MH Contract is not subject to any right of
-----------
rescission, setoff, counterclaim or defense, including the defense of usury, and
the operation of any of the terms of the MH Contract or the exercise of any
right thereunder will not render the MH Contract unenforceable in whole or in
part or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto.
E. Insurance. Seller or its agent has monitored the existence of a
---------
hazard insurance policy with respect to the manufactured home securing a MH
Contract and if the Seller has determined that no such policy exists, Seller has
arranged for such insurance and has billed the related obligor through its loan
account.
F. Origination. The MH Contract was originated by a manufactured housing
-----------
dealer or Seller in the regular course of its business and, if originated by a
manufactured housing dealer, was purchased by Seller in the regular course of
its business.
G. Lawful Assignment. The MH Contract was not originated in and is not
-----------------
subject to the laws of any jurisdiction whose laws would make the transfer of
the MH Contract to the Custodian or the ownership of the MH Contracts by the
Owner unlawful.
1
<PAGE>
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by the Custodian
or the Owner's ownership of the MH Contracts, and Seller shall maintain in its
possession, available for the Buyer's inspection, and shall deliver to the Buyer
upon demand, evidence of compliance with all such requirements.
I. MH Contract in Force. The MH Contract has not been satisfied or
--------------------
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. Valid Security Interest. The MH Contract creates a valid and
-----------------------
enforceable perfected first priority security interest in favor of Seller in the
manufactured home covered thereby as security for payment of the outstanding
principal balance of such MH Contract and all other obligations of the obligor
under such MH Contract; such security interest has been assigned by Seller to
the Custodian, and the Custodian has and will, on behalf of the Owners of the MH
Contracts, have a valid and perfected and enforceable first priority security
interest in such manufactured home.
K. Capacity of Parties. All parties to the MH Contract had capacity to
-------------------
execute the MH Contract.
L. Good Title. In the case of a MH Contract purchased from a
----------
manufactured housing dealer, Seller purchased the MH Contract for fair value and
took possession thereof in the ordinary course of its business, without
knowledge that the MH Contract was subject to a security interest. Seller has
not sold, assigned or pledged the MH Contract to any Person other than the
Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Seller has not waived any such default, breach, violation or event
permitting acceleration.
N. No Liens. There are, to the best of Seller's knowledge, no liens or
--------
claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
2
<PAGE>
O. Equal Installments. The MH Contract either has a fixed rate or is a
------------------
Step-Up Rate Contract and provides for level monthly payments which fully
amortize the loan over its term.
P. Enforceability. The MH Contract contains customary and enforceable
--------------
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed MH Contract, which
------------
is held by Seller.
R. Loan-to-Value Ratio. At the time of its origination each MH Contract
-------------------
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Seller's
underwriting guidelines in effect at the time the MH Contract was originated.
S. Primary Resident. At the time of origination of the MH Contract the
----------------
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
T. Not Real Estate. The related manufactured home is not considered or
---------------
classified as part of the real estate on which it is located under the laws of
the jurisdiction in which it is located and such manufactured home is, to the
best of Seller's knowledge, free of damage and in good repair.
U. Notation of Security Interest. If the related manufactured home is
-----------------------------
located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the title
document shows, or if a new or replacement title document with respect to such
manufactured home is being applied for such title document will be issued within
180 days and will show, Seller as the holder of a first priority security
interest in such manufactured home. If the related manufactured home is located
in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in manufactured housing, such filings or
recordings have been duly made and show Seller as secured party. In either
case, the Custodian has the same rights as the secured party of record would
have (if such secured party were still the owner of the MH Contract) against all
Persons claiming an interest in such manufactured home.
V. Qualified Mortgage for REMIC. Each MH Contract is a "qualified
----------------------------
mortgage" under Section 860G(a)(3) of the Code, and the
3
<PAGE>
related manufactured home is "manufactured housing" within the meaning of
Section 25(e)(10) of the Code.
W. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the
-------------------
MH Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
X. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the MH Contracts.
4
<PAGE>
EXHIBIT A-2
-----------
Representations with respect to MH Contracts
(relating to real property)
--------------------------------------------
A. Payments. The scheduled payment of principal and interest for the
--------
most recent Due Date was made by or on behalf of the obligor (without any
advance from Seller or any Person acting at the request of Seller) or was not
delinquent for more than 30 days.
B. No Waivers. The terms of the MH Contract have not been waived,
----------
altered or modified in any respect, except by instruments or documents
identified in the MH Contract file.
C. Binding Obligation. The MH Contract is the legal, valid and binding
------------------
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. No Defenses. The MH Contract is not subject to any right of
-----------
rescission, setoff, counterclaim or defense, including the defense of usury, and
the operation of any of the terms of the MH Contract or the exercise of any
right thereunder will not render the MH Contract unenforceable in whole or in
part or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto.
E. Insurance. Seller or its agent has monitored the existence of a
---------
hazard insurance policy with respect to the manufactured home securing a MH
Contract and if the Seller has determined that no such policy exists, Seller has
arranged for such insurance and has billed the related obligor through its loan
account.
F. Origination. The MH Contract was originated by a manufactured housing
-----------
dealer or Seller in the regular course of its business and, if originated by a
manufactured housing dealer, was purchased by Seller in the regular course of
its business.
G. Lawful Assignment. The MH Contract was not originated in and is not
-----------------
subject to the laws of any jurisdiction whose laws would make the transfer of
the MH Contract to the Custodian or the ownership of the MH Contracts by the
Owner unlawful.
1
<PAGE>
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by the Custodian
or the Owner's ownership of the MH Contracts, and Seller shall maintain in its
possession, available for the Buyer's inspection, and shall deliver to the Buyer
upon demand, evidence of compliance with all such requirements.
I. MH Contract in Force. The MH Contract has not been satisfied or
--------------------
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. Interest in Real Property. Each mortgage is a valid first lien in
-------------------------
favor of Seller on real property securing the amount owed by the obligor under
the related MH Contract subject only to (a) the lien of current real property
taxes and assessments, (b) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of recording of
such mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally in the area wherein the property subject to the
mortgage is located or specifically reflected in the appraisal obtained in
connection with the origination of the related MH Contract obtained by Seller
and (c) other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be provided
by such Mortgage. Seller has assigned all of its right, title and interest in
such MH Contract and related mortgage, including the security interest in the
manufactured home covered thereby, to the Custodian. The Custodian has and will
have a valid and perfected and enforceable first priority security interest in
such MH Contract. The MH Contract creates a valid and enforceable perfected
first priority security interest in favor of Seller in the manufactured home
covered thereby (to the extent such manufactured home is not considered real
property) as security for payment of the outstanding principal balance of such
MH Contract and all other obligations of the obligor under such MH Contract;
such security interest has been assigned by Seller to the Custodian, and the
Custodian has and will, on behalf of the Owners of the MH Contracts, have a
valid and perfected and enforceable first priority security interest in such
manufactured home.
K. Capacity of Parties. All parties to the MH Contract had capacity to
-------------------
execute the MH Contract.
2
<PAGE>
L. Good Title. In the case of a MH Contract purchased from a
----------
manufactured housing dealer, Seller purchased the MH Contract for fair value and
took possession thereof in the ordinary course of its business, without
knowledge that the MH Contract was subject to a security interest. Seller has
not sold, assigned or pledged the MH Contract to any Person other than the
Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Seller has not waived any such default, breach, violation or event
permitting acceleration.
N. No Liens. There are, to the best of Seller's knowledge, no liens or
--------
claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
O. Equal Installments. The MH Contract either has a fixed rate or is a
------------------
Step-Up Rate Contract and provides for level monthly payments which fully
amortize the loan over its term.
P. Enforceability. The MH Contract contains customary and enforceable
--------------
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed MH Contract, which
------------
is held by Seller.
R. Loan-to-Value Ratio. At the time of its origination each MH Contract
-------------------
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Seller's
underwriting guidelines in effect at the time the MH Contract was originated.
S. Primary Resident. At the time of origination of the MH Contract the
----------------
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
T. Good Repair. The related manufactured home is, to the best of
-----------
Seller's knowledge, free of damage and in good repair.
U. Qualified Mortgage for REMIC. Each MH Contract is a "qualified
----------------------------
mortgage" under Section 860G(a)(3) of the Code, and the
3
<PAGE>
related manufactured home is "manufactured housing" within the meaning of
Section 25(e)(10) of the Code.
V. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the
-------------------
MH Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
W. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the MH Contracts.
4
<PAGE>
EXHIBIT B
---------
Representations with respect
to Home Improvement Loans
----------------------------
A. Payments. The scheduled payment of principal and interest due under
--------
the Home Improvement Loan with respect to the prior Due Date was made on or
before such Due Date by or on behalf of the obligor (without any advance from
Seller or any Person acting at the request of Seller) or was not delinquent for
more than 30 days after such Due Date.
B. No Waivers. The terms of the Home Improvement Loan have not been
----------
waived, altered or modified in any respect, except by instruments or documents
identified in the Home Improvement Loan File (as defined in the Custodial
Agreement). All costs, fees and expenses incurred in making, closing and
perfecting the lien and/or security interest, as applicable, of the Home
Improvement Loan have been paid.
C. Binding Obligation. The Home Improvement Loan is the legal, valid and
------------------
binding obligation of the obligor thereunder and is enforceable in accordance
with its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally. In the case of Home Improvement
Loans other than Unsecured Home Improvement Loans, Seller has delivered, or
caused to be delivered, to the Custodian the original Mortgage, with evidence of
recording thereon, or if the original Mortgage has not yet been returned from
the recording office, a true copy of the Mortgage which has been delivered for
recording in the appropriate recording office of the jurisdiction in which the
Real Property is located.
D. No Defenses. The Home Improvement Loan is not subject to any right of
-----------
rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Improvement Loan or the
exercise of any right thereunder will not render the Home Improvement Loan
unenforceable in whole or in part or subject to any right of rescission, set
off, counterclaim or defense, including the defense of usury, and no such right
of rescission, set off, counterclaim or defense has been asserted with respect
thereto.
E. Insurance. In the case of Home Improvement Loans other than Unsecured
---------
Home Improvement Loans, all improvements on the related real property are
covered by a hazard insurance policy. All premiums due on such insurance have
been paid in full.
1
<PAGE>
Each Title I Loan was originated in compliance with FHA regulations and is
insured, without set-off, surcharge or defense, by FHA insurance. Seller has,
in conformity with FHA regulations, filed all reports necessary for the Title I
Loan to be registered for FHA insurance. Following assignment of the Title I
Loan to Custodian, on behalf of the Owners, Custodian will be entitled to the
full benefits of the FHA insurance.
F. Origination. The Home Improvement Loan was originated by a home
-----------
improvement contractor or Seller in the regular course of its business and, if
originated by a home improvement contractor, was purchased by Seller in the
regular course of its business.
G. Lawful Assignment. The Home Improvement Loan was not originated in
-----------------
and is not subject to the laws of any jurisdiction whose laws would make the
transfer of the Home Improvement Loan to Custodian or the ownership of the Home
Improvement Loans by the Owner thereof unlawful or make the Home Improvement
Loan unenforceable.
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws and the FHA regulations, applicable to the Home Improvement
Loan have been complied with and such compliance is not affected by the holding
of the Home Improvement Loans by Custodian or the Owner's ownership of the Home
Improvement Loans, and Seller shall for at least the period of this Agreement,
maintain in its possession, available for Custodian's inspection, and shall
deliver to Custodian upon demand, evidence of compliance with all such
requirements.
I. Home Improvement Loan in Force. The Home Improvement Loan has not
------------------------------
been satisfied or subordinated (except for such subordination as may be allowed
under FHA regulations) in whole or in part or rescinded, and, in the case of
Home Improvement Loans other than Unsecured Home Improvement Loans, the real
property securing the Home Improvement Loan, as applicable, has not been
released from the lien of the Home Improvement Loan in whole or in part.
J. Valid Lien. The Home Improvement Loan has been duly executed and
----------
delivered by the obligor and either the related Mortgage is a valid and
subsisting first, second or third lien on the property therein described or the
Home Improvement Loan is an unsecured borrowing of the obligor; any related
Mortgage has been assigned by Seller to Custodian, and Custodian has and will
have, on behalf of the Owners of the Home Improvement Loans, a valid and
subsisting lien on the property therein described. Seller has full right to sell
and assign the Home Improvement Loans to Custodian.
2
<PAGE>
K. Capacity of Parties. All parties to the Home Improvement Loan had
-------------------
capacity to execute the Home Improvement Loan.
L. Good Title. Prior to transfer to Custodian, Seller is the sole owner
----------
of the Home Improvement Loan and has the authority to sell, transfer and assign
the Home Improvement Loan. Seller has not sold, assigned or pledged the Home
Improvement Loan to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the Home Improvement Loan and no event
which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Home Improvement Loan. Seller has not waived any such default,
breach, violation or event permitting acceleration.
N. No Liens. In the case of Home Improvement Loans other than Unsecured
--------
Home Improvement Loans, there are, to the best of Seller's knowledge, no liens
or claims which have been filed for work, labor or materials affecting the real
property securing the Home Improvement Loan which are or may be liens prior to,
or equal or coordinate with, the lien of the Home Improvement Loan.
O. Equal Installments. The Home Improvement Loan has a fixed rate and
------------------
provides for level monthly payments which fully amortize the loan over its term.
P. Enforceability. The Home Improvement Loan contains customary and
--------------
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security provided thereby.
Q. One Original. There is only one original executed Home Improvement
------------
Loan contract and note, each of which has been delivered to the Custodian.
R. Primary Resident. At the time of origination of the Home Improvement
----------------
Loan, the obligor was the primary resident of the related real property.
S. Qualified Mortgage for REMIC. Each Home Improvement Loan that is
----------------------------
secured by a Mortgage on the property described therein is a "qualified
mortgage" under Section 860G(a)(3) of the Code.
T. Proceedings. There is no proceeding pending or, to Seller's knowledge,
-----------
threatened for the total or partial condemnation of collateral securing a Home
Improvement Loan.
3
<PAGE>
U. Marking Records. Seller has caused the portions of the Electronic
---------------
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Improvement Loans are owned by Custodian in accordance
with the terms of the related Custodial Agreement.
V. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the Home Improvement Loans.
4
<PAGE>
EXHIBIT C
---------
Representations with respect
to Home Equity Loans
-----------------------
A. Payments. The scheduled payment of principal and interest due under
--------
the Home Equity Loan with respect to the prior Due Date was made on or before
such Due Date by or on behalf of the obligor (without any advance from Seller or
any Person acting at the request of Seller) or was not delinquent for more than
30 days after such Due Date.
B. No Waivers. The terms of the Home Equity Loan have not been waived,
----------
altered or modified in any respect, except by instruments or documents
identified in the Home Equity Loan File. All costs, fees and expenses incurred
in making, closing and perfecting the lien and/or security interest, as
applicable, of the Home Equity Loan have been paid.
C. Binding Obligation. The Home Equity Loan is the legal, valid and
------------------
binding obligation of the obligor thereunder and is enforceable in accordance
with its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally. Seller has delivered, or caused
to be delivered, to the Custodian the original Mortgage, with evidence of
recording thereon, or if the original Mortgage has not yet been returned from
the recording office, a true copy of the Mortgage which has been delivered for
recording in the appropriate recording office of the jurisdiction in which the
Real Property is located.
D. No Defenses. The Home Equity Loan is not subject to any right of
-----------
rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Equity Loan or the exercise of
any right thereunder will not render the Home Equity Loan unenforceable in whole
or in part or subject to any right of rescission, set off, counterclaim or
defense, including the defense of usury, and no such right of rescission, set
off, counterclaim or defense has been asserted with respect thereto.
E. Insurance. All improvements on the related real property are covered
---------
by a hazard insurance policy. All premiums due on such insurance have been paid
in full.
F. Origination. The Home Equity Loan was originated by a home equity
-----------
lender or Seller in the regular course of its business and, if originated by a
home equity lender, was purchased by Seller in the regular course of its
business.
1
<PAGE>
G. Lawful Assignment. The Home Equity Loan was not originated in and is
-----------------
not subject to the laws of any jurisdiction whose laws would make the transfer
of the Home Equity Loan to Custodian or the ownership of the Home Equity Loans
by the Owner thereof unlawful or make the Home Equity Loan unenforceable.
H. Compliance with Law. All requirements of any federal, state or local
-------------------
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the Home Equity Loan have been complied with and
such compliance is not affected by the holding of the Home Equity Loans by
Custodian or the Owners' ownership of the Home Equity Loans, and Seller shall
for at least the period of this Agreement, maintain in its possession, available
for Custodian's inspection, and shall deliver to Custodian upon demand, evidence
of compliance with all such requirements.
I. Home Equity Loan in Force. The Home Equity Loan has not been
-------------------------
satisfied or subordinated in whole or in part or rescinded, and the real
property securing the Home Equity Loan has not been released from the lien of
the Home Equity Loan in whole or in part.
J. Valid Lien. The Home Equity Loan has been duly executed and delivered
----------
by the obligor and the related Mortgage is a valid and subsisting first, second
or third lien on the property therein described; any related Mortgage has been
assigned by Seller to Custodian, and Custodian has and will have, on behalf of
the Owners of the Home Equity Loans, a valid and subsisting lien on the property
therein described. Seller has full right to sell and assign the Home Equity
Loans to Custodian.
K. Capacity of Parties. All parties to the Home Equity Loan had capacity
-------------------
to execute the Home Equity Loan.
L. Good Title. Prior to transfer to Custodian, Seller is the sole owner
----------
of the Home Equity Loan and has the authority to sell, transfer and assign the
Home Equity Loan. Seller has not sold, assigned or pledged the Home Equity Loan
to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the Home Equity Loan and no event which,
with notice and the expiration of any grace or cure period, would constitute
such a default, breach, violation or event permitting acceleration under such
Home Equity Loan. Seller has not waived any such default, breach, violation or
event permitting acceleration.
2
<PAGE>
N. No Liens. There are, to the best of Seller's knowledge, no liens or
--------
claims which have been filed for work, labor or materials affecting the real
property securing the Home Equity Loan which are or may be liens prior to, or
equal or coordinate with, the lien of the Home Equity Loan.
O. Equal Installments. The Home Equity Loan has a fixed rate and
------------------
provides for level monthly payments which fully amortize the loan over its term.
P. Enforceability. The Home Equity Loan contains customary and
--------------
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security provided thereby.
Q. One Original. There is only one original executed Home Equity Loan
------------
note, and it has been delivered to the Custodian.
R. Primary Resident. At the time of origination of the Home Equity Loan,
----------------
the obligor was the primary resident of the related real property.
S. Qualified Mortgage for REMIC. Each Home Equity Loan that is secured
----------------------------
by a Mortgage on the property described therein is a "qualified mortgage" under
Section 860G(a)(3) of the Code.
T. Proceedings. There is no proceeding pending or, to Seller's
-----------
knowledge, threatened for the total or partial condemnation of collateral
securing a Home Equity Loan.
U. Marking Records. Seller has caused the portions of the Electronic
---------------
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Equity Loans are owned by Custodian in accordance with
the terms of the related Custodial Agreement.
V. No Adverse Selection. Except for the effect of the representations
--------------------
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the Home Equity Loans.
W. Real Property. Each mortgaged property is improved by a single family
-------------
dwelling which constitutes real property under state law and is the principal
residence of the obligor.
3
<PAGE>
EXHIBIT D
---------
Representations with respect to Contracts
-----------------------------------------
A. List of Contracts. The information set forth in the List of Contracts
-----------------
is true and correct as of its date.
B. Payments. The most recent scheduled payment was made by or on behalf
--------
of the obligor (without any advance from Seller or any Person acting at the
request of Seller) or was not delinquent for more than 59 days.
C. No Waivers. The terms of the Contract have not been waived, altered
----------
or modified in any respect, except by instruments or documents identified in the
Contract File.
D. Binding Obligation. The Contract is the legal, valid and binding
------------------
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally.
E. No Defenses. The Contract is not subject to any right of rescission,
-----------
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Contract or the exercise of any right
thereunder will not render the Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
F. Origination. Each Contract other than a Home Improvement Contract or
-----------
a Home Equity Contract was originated by a dealer of goods of a class including
the Consumer Product subject to the Contract, or by Seller, in the regular
course of its business and, if originated by a dealer, was purchased by Seller
in the regular course of its business. Each Home Improvement Contract was
originated by a home improvement contractor, or by Seller, in the ordinary
course of its business and, if originated by a contractor, was purchased by
Seller, in the ordinary course of its business. Each Home Equity Contract was
originated by a home equity lender, or by Seller, in the ordinary course of its
business and, if originated by a lender, was purchased by Seller in the ordinary
course of its business.
G. Lawful Assignment. The Contract was not originated in and is not
-----------------
subject to the laws of any jurisdiction whose laws
1
<PAGE>
would make the transfer of the Contract to the Custodian unlawful or render the
Contract unenforceable.
H. Compliance with Law. At the date of origination of the Contract, all
-------------------
requirements of any federal and state laws, rules and regulations applicable to
the Contract, including, without limitation, usury, truth in lending and equal
credit opportunity laws, have been complied with, and (if such Contract is an
FHA-Insured Contract) the FHA Regulations have been complied with, and Seller
shall for at least the period of this Agreement, maintain its possession,
available for the Custodian's inspection, and shall deliver to the Custodian
upon demand, evidence of compliance with all such requirements. Such compliance
is not affected by the Custodian's ownership of the Contract.
I. Contract in Force. The Contract has not been satisfied or
-----------------
subordinated in whole or in part or rescinded, and the Consumer Product or real
property, if any, securing the Contract has not been released in whole or in
part.
J. Valid Security Interest or Lien. As to each Contract other than a
-------------------------------
Home Improvement Contract or a Home Equity Contract: (a) the Contract creates a
valid and enforceable perfected first priority security interest in favor of
Seller in the Consumer Product covered thereby as security for payment of the
outstanding principal balance of such Contract; (b) the Company has assigned all
of its right, title and interest in such Contract, including the security
interest in the Consumer Product covered thereby to the Custodian; and (c) the
Custodian has and will have a valid and perfected and enforceable first priority
security interest in such Consumer Product. As to each Home Equity Contract,
the Contract has been duly executed and delivered by the obligor, and the lien
created thereby has been duly recorded, or has been delivered to the appropriate
governmental authority for recording and will be duly recorded within 30 days
and constitutes a valid and perfected first, second or third priority lien on
the real estate described in such Contract.
K. Capacity of Parties. The signature(s) of the obligor(s) on the
-------------------
Contract are genuine and all parties to the Contract had full legal capacity to
execute the Contract.
L. Good Title. In the case of a Contract purchased from a dealer, home
----------
improvement contractor or home equity lender, Seller purchased the Contract for
fair value and took possession thereof in the ordinary course of its business,
without knowledge that the Contract was subject to a security interest. Seller
has not sold, assigned or pledged the Contract to any Person and prior to
the transfer of the Contract by Seller to the Custodian, Seller had good and
marketable title thereto free and clear of any encumbrance, equity, loan,
pledge, charge, claim or security
2
<PAGE>
interest and was the sole owner thereof with full right to transfer the Contract
to the Custodian. If such Contract is an FHA-Insured Contract, because the
Custodian is a lender approved by HUD to originate and purchase Title I loans
under a valid Title I contract of insurance, Seller has the authority to sell,
transfer and assign such Contract to the Custodian. No financing statement
describing or referring to any Contract (other than any financing statement
naming the Custodian as secured party, or filed by Seller as secured party to
perfect its interest in a Contract purchased from a dealer) is on file in any
public office.
M. No Defaults. There was no default, breach, violation or event
-----------
permitting acceleration existing under the Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such Contract
(except payment delinquencies permitted by clause (b) above). Seller has not
waived any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (b) above. The related
Consumer Product is, to the best of Seller's knowledge, free of damage and in
good repair.
N. No Liens. As to each Contract other than a Home Improvement Contract
--------
or a Home Equity Contract, there are, to the best of Seller's knowledge, no
liens or claims which have been filed for work, labor or materials affecting the
Consumer Product securing the Contract which are or may be liens prior to, or
equal or coordinate with, the lien of the Contract.
O. Equal Installments. Each Contract has a fixed Contract Rate and
------------------
provides for level monthly payments (except, in the case of a Balloon Loan, for
the final monthly payment of such loan) which fully amortize the loan over its
term.
P. Enforceability. The Contract contains customary and enforceable
--------------
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed Contract (other
------------
than an original in the possession of the relevant obligor), which Contract has
been delivered to the Custodian on or before the date hereof. Each Contract
other than a Home Improvement Contract or a Home Equity Contract has been
stamped to reflect the assignment of such Contract to the Custodian. Each Home
Equity Contract and Home Improvement Contract has been delivered to the
Custodian on or before the date hereof.
R. Notation of Security Interest. With respect to each Contract other
-----------------------------
than a Home Improvement Contract or a Home Equity Contract, if the related
Consumer Product is located in a state in
3
<PAGE>
which notation of a security interest on the title document is required or
permitted to perfect such security interest, the title document shows, or if a
new or replacement title document with respect to such Consumer Product is being
applied for such title document will be issued within 180 days and will show,
Seller as the holder of a first priority security interest in such Consumer
Product; if the related Consumer Product is located in a state in which the
filing of a financing statement under the UCC is required to perfect a security
interest in goods of the type including the Consumer Product, such filings or
recordings have been duly made and show Seller as secured party; and if the
related Consumer Product is an aircraft subject to registration with the Federal
Aviation Administration's Aircraft Registry, and the recordation of a mortgage,
security agreement or similar conveyance with such Registry is required to
perfect the lien created thereby, such recordation has been duly made and shows
Seller as secured party or mortgagee. In any case, the Custodian has the same
rights as the secured party of record would have (if such secured party were
still the owner of the Contract) against all Persons (including Seller and any
trustee in bankruptcy of Seller) claiming an interest in such Consumer Product.
S. No Government Contracts. No obligor is the United States government
-----------------------
or an agency, authority, instrumentality or other political subdivision of the
United States government.
4
<PAGE>
Exhibit 11.(a)
--------------
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
COMPUTATION OF PRIMARY EARNINGS PER SHARE
-----------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net earnings $199,896,000 $141,784,000
============ ============
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 137,412,176 136,575,021
Dilutive effect of stock
options after application
of treasury-stock method 3,255,765 3,338,406
------------ ------------
140,667,941 139,913,427
============ ============
Earnings per share $ 1.42 $ 1.01
============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net earnings $108,093,000 $ 75,422,000
============ ============
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 136,313,043 136,925,519
Dilutive effect of stock
options after application
of treasury-stock method 2,803,276 3,316,510
------------ ------------
139,116,319 140,242,029
============ ============
Earnings per share $ .78 $ .54
============ ============
</TABLE>
<PAGE>
Exhibit 11.(b)
--------------
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net earnings $199,896,000 $141,784,000
============ ============
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 137,412,176 136,575,021
Dilutive effect of stock
options after application
of treasury-stock method 3,255,765 3,408,706
------------ ------------
140,667,941 139,983,727
============ ============
Earnings per share $ 1.42 $ 1.01
============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net earnings $108,093,000 $ 75,422,000
============ ============
Weighted average number of
common and common equivalent
shares outstanding:
Weighted average common
shares outstanding 136,313,043 136,925,519
Dilutive effect of stock
options after application
of treasury-stock method 3,261,982 3,316,510
------------ ------------
139,575,025 140,242,029
============ ============
Earnings per share $ .77 $ .54
============ ============
</TABLE>
<PAGE>
Exhibit 12.
-----------
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
<TABLE>
<CAPTION>
Six months
ended
June 30, 1997
-------------
(unaudited)
<S> <C>
Earnings:
Earnings before income taxes $322,412,000
Fixed charges:
Interest 64,015,000
One-third rent 1,957,850
------------
65,972,850
------------
$388,384,850
============
Fixed charges:
Interest $ 64,015,000
One-third rent 1,957,850
------------
$ 65,972,850
============
Ratio of earnings to fixed charges (1) 5.89
====
</TABLE>
(1) For purposes of computing the ratio, earnings consist of earnings before
income taxes plus fixed charges.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES FOR
THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 780,065,000
<SECURITIES> 1,336,615,000
<RECEIVABLES> 1,211,922,000
<ALLOWANCES> 0
<INVENTORY> 879,730,000
<CURRENT-ASSETS> 0
<PP&E> 149,012,000
<DEPRECIATION> 55,916,000
<TOTAL-ASSETS> 4,477,877,000
<CURRENT-LIABILITIES> 0
<BONDS> 290,599,000
0
0
<COMMON> 1,411,000
<OTHER-SE> 1,367,746,000
<TOTAL-LIABILITY-AND-EQUITY> 4,477,877,000
<SALES> 339,930,000
<TOTAL-REVENUES> 584,300,000
<CGS> 0
<TOTAL-COSTS> 195,694,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,194,000
<INCOME-PRETAX> 322,412,000
<INCOME-TAX> 122,516,000
<INCOME-CONTINUING> 199,896,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 199,896,000
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
</TABLE>
