<PAGE>
Filed Pursuant To Rule 424(b)(5)
File No. 333-52233
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 4, 1998)
$764,000,000 (APPROXIMATE)
LOGO
GREEN TREE FINANCIAL CORPORATION
(SELLER AND SERVICER)
GREEN TREE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1998-C
$122,000,000 (APPROXIMATE) 5.55375% ASSET-BACKED NOTES, CLASS A-1
$193,000,000 (APPROXIMATE) FLOATING RATE ASSET-BACKED NOTES, CLASS A-2
$150,000,000 (APPROXIMATE) 5.92% ASSET-BACKED NOTES, CLASS A-3
$111,000,000 (APPROXIMATE) 6.17% ASSET-BACKED NOTES, CLASS A-4
$104,000,000 (APPROXIMATE) 6.28% ASSET-BACKED NOTES, CLASS A-5
$36,000,000 (APPROXIMATE) 6.70% ASSET-BACKED NOTES, CLASS A-6
$32,000,000 (APPROXIMATE) 7.00% ASSET-BACKED NOTES, CLASS A-7
$16,000,000 (APPROXIMATE) 8.07% ASSET-BACKED CERTIFICATES, CLASS B-1
---------------
Green Tree Recreational, Equipment & Consumer Trust 1998-C (the "Trust")
will be governed pursuant to a Trust Agreement, to be dated as of September 1,
1998 (the "Trust Agreement"), among Green Tree Financial Corporation ("Green
Tree"), Green Tree Second GP Inc. (the "General Partner"), a wholly owned
subsidiary of Green Tree, and Wilmington Trust Company, as Owner Trustee. The
Trust will issue a class of floating rate Asset-Backed Notes, designated as
the Class A-2 Notes, and six classes of fixed rate Asset-Backed Notes,
designated as the Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and
Class A-7 Notes, respectively (the "Notes"), pursuant to an Indenture, to be
dated as of September 1, 1998 (the "Indenture"), between the Trust and U.S.
Bank Trust National Association, as Indenture Trustee. The Trust will also
issue two classes of fixed rate Asset-Backed Certificates, designated as the
Class B-1 and Class B-2 Certificates, respectively (the "Certificates" and,
together with the Notes, the "Securities"). Only the Notes and the Class B-1
Certificates are offered hereby (together, the "Offered Securities"). The
Class B-2 Certificates are not offered hereby, but may be offered from time to
time to the public pursuant to a separate supplement, directly or through
dealers, in negotiated transactions or otherwise, and at varying prices to be
determined at the time of sale.
(Continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE OFFERED SECURITIES, SEE "RISK FACTORS" ON PAGE
S-19 HEREIN AND ON PAGE 13 IN THE ACCOMPANYING PROSPECTUS.
---------------
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR
INTERESTS IN GREEN TREE, THE GENERAL PARTNER, THE UNDERWRITERS OR ANY
OF THEIR RESPECTIVE AFFILIATES, EXCEPT TO THE LIMITED EXTENT
DESCRIBED HEREIN.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT GREEN TREE(1)(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note............... 100% 0.10% 99.90%
- --------------------------------------------------------------------------------
Per Class A-2 Note............... 100% 0.17% 99.83%
- --------------------------------------------------------------------------------
Per Class A-3 Note............... 99.9883413% 0.28% 99.7083413%
- --------------------------------------------------------------------------------
Per Class A-4 Note............... 99.9839589% 0.35% 99.6339589%
- --------------------------------------------------------------------------------
Per Class A-5 Note............... 99.9994010% 0.40% 99.5994010%
- --------------------------------------------------------------------------------
Per Class A-6 Note............... 99.9922899% 0.50% 99.4922899%
- --------------------------------------------------------------------------------
Per Class A-7 Note............... 99.9699390% 0.91% 99.0599390%
- --------------------------------------------------------------------------------
Per Class B-1 Certificate........ 99.9904488% 0.91% 99.0804488%
- --------------------------------------------------------------------------------
Total............................ $763,950,160.02 $2,291,400.00 $761,658,760.02
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from and including September 28, 1998.
(2) Before deducting estimated expenses of $425,000 payable by Green Tree.
---------------
The Offered Securities are offered hereby by the Underwriters named below,
subject to receipt and acceptance by the Underwriters and their right to
reject any order in whole or in part. It is expected that delivery of the
Offered Securities will be made on or about September 28, 1998 (the "Closing
Date").
---------------
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
LEHMAN BROTHERS
NATIONSBANC MONTGOMERY SECURITIES LLC
The date of the Prospectus Supplement is September 4, 1998.
<PAGE>
(Continued from preceding page)
The Trust Property will include, among other things, a pool of retail
installment sales contracts and promissory notes for the purchase of a variety
of consumer products and equipment (the "Contracts"). This Prospectus
Supplement contains information regarding Contracts originated through July
31, 1998, which will be transferred to the Trust on the Closing Date (the
"Initial Contracts"). The Sale and Servicing Agreement provides that
additional Contracts, will be purchased by the Trust on the Closing Date (the
"Additional Contracts").
The Trust Property will include all rights to receive payments due on or after
August 1, 1998, in the case of the Initial Contracts, and the date of
origination in the case of Additional Contracts. (collectively, the "Cutoff
Date"). The Trust Property will also include an assignment of Green Tree's
security interests in the consumer products and equipment (the "Products")
securing the Contracts and certain other property, as more fully described
herein. Green Tree will also act as Servicer of the Contracts. Terms used and
not otherwise defined herein have the meanings ascribed thereto in the
Prospectus dated September 4, 1998 attached hereto (the "Prospectus").
Principal and interest on the Notes are payable on the 15th day of each month
(or, if the 15th day is not a business day, the next business day thereafter)
(a "Distribution Date"), beginning in October 1998. The rights of the holders
of the Class A-1, A-2, A-3, A-4 and A-5 Notes (together, the "Senior Notes")
to receive distributions on each Distribution Date will rank equally. The
rights of the holders of the Class A-6 and Class A-7 Notes and the
Certificates to receive distributions on each Distribution Date will be
subordinated to such rights of the Senior Noteholders; such rights of the
holders of the Class A-7 Notes and the Certificates will be subordinated to
such rights of the Class A-6 Noteholders; and such rights of the
Certificateholders will be subordinated to such rights of the Class A-7
Noteholders.
The Certificates will represent fractional undivided interests in the Trust.
Interest will be distributed to the Certificateholders on each Distribution
Date as set forth herein. The rights of the holders of the Class B-2
Certificates to receive distributions on each Distribution Date will be
subordinated to such rights of the Class B-1 Certificateholders. The Class B-2
Certificateholders will have the benefit of a Limited Guaranty of Green Tree
to protect against losses that would otherwise be absorbed by the Class B-2
Certificates. To the extent that available funds in the Collection Account are
insufficient to distribute to the holders of the Class B-2 Certificates the
Class B-2 Distributable Amount (as described herein), Green Tree will be
obligated to make a payment under the Limited Guaranty equal to the amount of
such deficiency.
The Notes initially will be represented by certificates registered in the name
of Cede & Co., the nominee of The Depository Trust Company ("DTC"). The
interests of beneficial owners of the Notes will be represented by book
entries on the records of the participating members of DTC. Definitive Notes
will be available only under the limited circumstances described herein.
Holders of the Notes may hold through DTC (in the United States) or, through
CEDEL or Euroclear (as defined herein) (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in
such systems. The Certificates will be issued in definitive form.
The Certificates may not be offered or sold in the United Kingdom. The Notes
may not be offered or sold in the United Kingdom by means of any document
except in circumstances which do not constitute an offer to the public within
the meaning of the Public Offers of Securities Regulations 1995. All
applicable provisions of the Financial Services Act of 1986 must be complied
with in connection with anything done in relation to the Notes in, from or
otherwise involving the United Kingdom. See "Underwriting."
There currently is no secondary market for the Offered Securities. The
Underwriters expect, but are not obligated, to make a market in the Offered
Securities. There is no assurance that any such market will develop or
continue.
---------------
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE OFFERED SECURITIES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SECURITIES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE OFFERED SECURITIES.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF OFFERED
SECURITIES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes are issued, unaudited monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to the Indenture Trustee, the
Owner Trustee, and Cede & Co., as registered holder of the Notes and the
nominee of DTC. See "Description of the Trust Documents and Indenture--
Statements to Securityholders," herein and "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Reports to Securityholders" in the
accompanying Prospectus. Note Owners may receive such reports, upon written
request, together with a certification that they are Note Owners and payment
of reproduction and postage expenses associated with the distribution of such
reports, from the Indenture Trustee at 180 East Fifth Street, St. Paul,
Minnesota 55101, Attention: Corporate Trust Administration, Structured
Finance. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Servicer, on
behalf of the Trust, will file with the Securities and Exchange Commission
(the "Commission") periodic reports concerning the Trust to the extent
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder. However, in
accordance with the Exchange Act and the rules and regulations of the
Commission thereunder, Green Tree expects that the Trust's obligation to file
such reports will be terminated following the end of 1998.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed to such terms
elsewhere in this Prospectus Supplement or the accompanying Prospectus.
Issuer........................ Green Tree Recreational, Equipment & Consumer
Trust 1998-C (the "Trust"), a Delaware business
trust governed pursuant to a Trust Agreement,
to be dated as of September 1, 1998 (the "Trust
Agreement"), among Green Tree Second GP Inc.
(the "General Partner"), Green Tree Financial
Corporation ("Green Tree") and Wilmington Trust
Company, as Owner Trustee (the "Owner
Trustee").
Seller and Servicer........... Green Tree Financial Corporation. See "Green
Tree Financial Corporation" herein and in the
accompanying Prospectus.
Indenture Trustee............. U.S. Bank Trust National Association, St. Paul,
Minnesota (the "Indenture Trustee"). See "The
Notes--The Indenture Trustee" in the
accompanying Prospectus.
Owner Trustee................. Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the
Trust Agreement. See "Description of the Trust
Documents--The Trustee" in the accompanying
Prospectus.
The Notes..................... The Trust will issue a class of floating rate
Asset-Backed Notes, designated as the Class A-2
Notes, and six classes of fixed rate Asset-
Backed Notes, designated as the Class A-1,
Class A-3, Class A-4, Class A-5 (collectively
referred to as the "Senior Notes"), Class A-6
and Class A-7 Notes, respectively (together,
the "Notes"). The rights of the holders of the
Senior Notes to receive distributions will rank
equally, the rights of the holders of the Class
A-6 and Class A-7 Notes to receive
distributions will be subordinated to the
rights of the holders of the Senior Notes, and
such rights of the Class A-7 Noteholders will
be subordinated to such rights of the Class A-6
Noteholders, in the manner and to the extent
described herein. The Notes will be issued
pursuant to an Indenture, to be dated as of
September 1, 1998 (the "Indenture"), between
the Trust and the Indenture Trustee. The Notes
will be offered for purchase in denominations
of $1,000 and integral multiples thereof in
book-entry form only. See "Certain Information
Regarding the Securities--Book-Entry
Registration" in the accompanying Prospectus.
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
Original Class A-1 Principal $122,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-2 Principal $193,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-3 Principal $150,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
S-3
<PAGE>
Original Class A-4 Principal $111,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-5 Principal $104,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-6 Principal $36,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
Original Class A-7 Principal $32,000,000 (Approximate. Subject to a
Balance....................... permitted variance of plus or minus 5%).
The Certificates.............. The Trust will issue two classes of fixed rate
Asset-Backed Certificates, designated as the
Class B-1 and Class B-2 Certificates
(collectively referred to as the
"Certificates") representing fractional
undivided interests in the Trust. Only the
Notes and the Class B-1 Certificates are
offered hereby (together, the "Offered
Securities"). The Class B-2 Certificates are
not offered hereby, but may be offered from
time to time to the public pursuant to a
separate supplement, directly or through
dealers, in negotiated transactions or
otherwise, and at varying prices to be
determined at the time of sale. The rights of
the holders of the Certificates to receive
distributions will be subordinated to the
rights of the holders of the Notes, and such
rights of the Class B-2 Certificateholders will
be subordinated to such rights of the Class B-1
Certificateholders, in the manner and to the
extent described herein. The Certificates will
be issued pursuant to the Trust Agreement. The
Class B-1 Certificates will be offered for
purchase in denominations of $1,000 and
integral multiples thereof in definitive form.
See "Certain Information Regarding the
Securities--Book-Entry Registration" in the
accompanying Prospectus.
Original Class B-1
Certificate Principal $16,000,000 (Approximate. Subject to a
Balance...................... permitted variance of plus or minus 5%).
Original Class B-2
Certificate Principal $36,000,000 (Approximate. Subject to a
Balance...................... permitted variance of plus or minus 5%).
Distribution Date............. The 15th day of each month (or if such 15th day
is not a Business Day, the next Business Day
thereafter) commencing in October 1998. A
"Business Day" is a day on which banking
institutions in Minneapolis or St. Paul,
Minnesota, or in New York City, New York, are
not required or authorized by law to be closed.
Record Date................... The Business Day immediately preceding the
related Distribution Date.
Trust Property................ Each Note will represent an obligation of, and
each Certificate will represent a fractional
undivided interest in, the Trust. The Trust's
assets (the "Trust Property") will include,
among other things, a pool (the "Contract
Pool") of retail installment sales contracts
and promissory notes for the purchase of a
variety of
S-4
<PAGE>
consumer products and equipment (the
"Contracts"), and all rights to receive
payments due thereon on or after the Cutoff
Date (as defined herein). The Trust Property
will also include an assignment of Green Tree's
security interests in the consumer products and
equipment (the "Products") securing the
Contracts and of the right to receive proceeds
from claims on certain insurance policies
covering the Products or the Obligors (as
defined herein); the Collection Account and
certain other accounts, including all
investments in the Collection Account and such
other accounts and all income from the
investment of funds therein and all proceeds
thereof; and certain other rights under the
Sale and Servicing Agreement to be dated as of
September 1, 1998 (the "Sale and Servicing
Agreement"), between Green Tree and the Trust.
The Contracts will be transferred by Green Tree
to the Trust pursuant to the Sale and Servicing
Agreement, and Green Tree will be obligated to
repurchase Contracts (each, a "Purchased
Contract") upon the occurrence of certain
breaches of representations and warranties
thereunder. Pursuant to the Indenture, the
Trust Property will be pledged to the Indenture
Trustee on behalf of the Noteholders. See "The
Trust".
Contracts..................... The Contracts were originated or purchased by
Green Tree in the ordinary course of business.
This Prospectus Supplement contains information
regarding the Initial Contracts. The Additional
Contracts will be purchased by the Trust on the
Closing Date. As of the Cutoff Date, the
Initial Contracts had a weighted average annual
percentage rate of 10.351% and a weighted
average remaining maturity of approximately 111
months. As of the Cutoff Date, no Initial
Contract had a scheduled maturity prior to
January 1999 and no Initial Contract was more
than 30 days past due. The final scheduled
payment date on the Contract with the latest
maturity occurs in August 2018. The Contracts
are generally prepayable at any time without
penalty to the person or persons who are
obligated to make payments thereunder (each, an
"Obligor"). See "The Contract Pool" herein and
"The Contracts" in the accompanying Prospectus.
Terms of the Notes............
The principal terms of the Notes will be as
described below:
A. Distributions............ Noteholders will be entitled to receive
distributions of interest and principal on each
Distribution Date, to the extent that the
Amount Available in the Collection Account is
sufficient therefor, in the manner and order of
priority set forth herein, and under
"Description of Notes." Distributions on the
Notes generally will be made with respect to
interest then payable on the Notes (first to
the Senior Notes, then to the Class A-6 Notes
and then to the Class A-7 Notes), and then with
respect to principal on the Notes in the order
described below.
The "Amount Available" on each Distribution
Date generally includes payments on the
Contracts due and received during the
S-5
<PAGE>
related Monthly Period, prepayments and other
unscheduled collections received during the
related Monthly Period, and all collections in
respect of principal on the Contracts received
during the current month up to and including
the third Business Day prior to such
Distribution Date (but in no event later than
the 10th day of the month in which the
Distribution Date occurs), any amounts
deposited in respect of Purchased Contracts,
any Guaranty Payment, and all earnings from the
investment of funds in the Collection Account,
minus, with respect to all Distribution Dates
other than the Distribution Date in October
1998, all collections of principal on the
Contracts received during the related Monthly
Period up to and including the third Business
Day prior to the preceding Distribution Date
(but in no event later than the 10th day of the
prior month). A "Monthly Period" with respect
to a Distribution Date is the calendar month in
which such Distribution Date occurs; provided
that the Monthly Period with respect to the
first Distribution Date is the two calendar
months immediately preceding the month in which
such Distribution Date occurs.
To the extent not paid in full prior to such
date, the outstanding principal amount of each
Class of Notes will be payable on the following
"Final Scheduled Distribution Date" for such
Class:
Class A-1: August 15, 1999
Class A-2: March 15, 2005
Class A-3: February 15, 2009
Class A-4: February 15, 2011
Class A-5: February 15, 2014
Class A-6: February 15, 2014
Class A-7: March 15, 2014
B. Interest Rates........... Class A-1 Notes : 5.55375% per annum (the
"Class A-1 Rate").
Class A-2 Notes : One-month LIBOR (as defined
below) for the monthly interest period plus
0.13%, subject to a maximum rate of 9.0% per
annum (the "Class A-2 Rate").
Class A-3 Notes : 5.92% per annum (the "Class
A-3 Rate").
Class A-4 Notes : 6.17% per annum (the "Class
A-4 Rate").
Class A-5 Notes : 6.28% per annum (the "Class
A-5 Rate").
Class A-6 Notes : 6.70% per annum (the "Class
A-6 Rate").
Class A-7 Notes : 7.00% per annum (the "Class
A-7 Rate").
Interest on the Class A-1 and Class A-2 Notes
will be calculated on the basis of the actual
number of days elapsed in a 360-day year.
Interest on all other Classes of Notes will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months.
"LIBOR" ("London Interbank Offered Rate") with
respect to any monthly interest period will be
established by the calculation agent appointed
by the Trust (the "Calculation Agent") and will
equal the offered rate for United States dollar
deposits for one month that appears on Telerate
Page 3750 as of 11:00 A.M.
S-6
<PAGE>
London time, on the second LIBOR Business Day
prior to such monthly interest period (a "LIBOR
Determination Date"). "Telerate Page 3750"
means the display page so designated on the Dow
Jones Telerate Service (or such other page as
may replace that page on that service, or such
other service as may be designated by the
Calculation Agent as the information vendor,
for the purpose of displaying London interbank
offered rates of major banks). If such rate
appears on Telerate Page 3750, LIBOR will be
such rate. "LIBOR Business Day" as used herein
means a day that is both a Business Day and a
day on which banking institutions in the City
of London, England are not required or
authorized by law to be closed. If on any LIBOR
Determination Date the offered rate does not
appear on Telerate Page 3750, the Calculation
Agent will request each of the reference banks
(which shall be major banks that are engaged in
transactions in the London interbank market
selected by the Calculation Agent) to provide
the Calculation Agent with its offered
quotation for United States dollar deposits for
one month to prime banks in the London
interbank market as of 11:00 A.M., London time,
on such date. If at least two reference banks
provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the
arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.00001%), with
five one-millionths of a percentage point
rounded upward, of all such quotations. If on
such date fewer than two of the reference banks
provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the
arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.00001%), with
five one-millionths of a percentage point
rounded upward, of the offered per annum rates
that one or more leading banks in New York City
selected by the Calculation Agent are quoting
as of 11:00 A.M., New York City time, on such
date to leading European banks for United
States dollar deposits for one month; provided,
however, that if such banks are not quoting as
described above, LIBOR for such date will be
LIBOR applicable to the monthly interest period
immediately preceding such monthly interest
period. The "Calculation Agent" will initially
be the Indenture Trustee.
The interest rates for the various classes of
Notes are referred to collectively herein as
the "Interest Rates."
C. Interest.................
Interest on the Principal Balance of each Class
of Notes will accrue from September 28, 1998,
or from the most recent Distribution Date on
which interest has been paid, to but excluding
the following Distribution Date, at the
Interest Rate for such Class. The "Principal
Balance" of any Class of Notes as of any
Distribution Date will be the Original
Principal Balance of such Class minus all
amounts previously distributed to the
Noteholders of such Class in respect of
principal. See "Description of Notes."
S-7
<PAGE>
Interest will be paid on the Senior Notes on
each Distribution Date to the extent of funds
available on such Distribution Date (as
described under "Description of Notes"). In the
event the funds available are not sufficient to
make a full distribution of interest on the
Senior Notes, the funds available will be
applied pro rata to each Class of Senior Notes
based on the amount payable to each such Class
and the amount of the shortfall will be carried
forward and added to the amount of interest
payable on the next Distribution Date. Any
amount so carried forward will bear interest at
the Interest Rate for such Class, to the extent
legally permissible.
Interest will be paid on the Class A-6 Notes on
each Distribution Date, to the extent of the
remaining funds available on such Distribution
Date after payment of (i) all interest accrued
on the Senior Notes and (ii) the First Priority
Principal Distribution Amount (if any). In the
event the remaining funds available are not
sufficient to make a full distribution of
interest on the Class A-6 Notes, the remaining
funds available will be applied to the payment
of interest on the Class A-6 Notes and the
amount of the shortfall will be added to the
amount of interest payable on the Class A-6
Notes on the next Distribution Date. Any amount
so carried forward will bear interest at the
Class A-6 Interest Rate, to the extent legally
permissible.
Interest will be paid on the Class A-7 Notes on
each Distribution Date, to the extent of the
remaining funds available on such Distribution
Date after payment of (i) all interest accrued
on the Senior Notes, (ii) the First Priority
Principal Distribution Amount (if any), (iii)
all interest accrued on the Class A-6 Notes and
(iv) the Second Priority Principal Distribution
Amount (if any). In the event the remaining
funds available are not sufficient to make a
full distribution of interest on the Class A-7
Notes, the remaining funds available will be
applied to the payment of interest on the Class
A-7 Notes and the amount of the shortfall will
be added to the amount of interest payable on
the Class A-7 Notes on the next Distribution
Date. Any amount so carried forward will bear
interest at the Class A-7 Interest Rate, to the
extent legally permissible.
D. Principal................ Noteholders will be entitled to receive on each
Distribution Date as payment of principal, in
the manner and order of priority set forth
below, an amount equal to the Total Principal
Distribution Amount (as described below) for
such Distribution Date. Such amount will paid
as principal on the Class A-1 Notes until the
Class A-1 Notes have been paid in full, then on
the Class A-2 Notes until the Class A-2 Notes
have been paid in full, and so on for the
remaining Classes of Notes until the Class A-7
Notes have been paid in full.
S-8
<PAGE>
The "Total Principal Distribution Amount" for
any Distribution Date will equal:
(i) the Formula Principal Distribution
Amount for such Distribution Date
(described below), plus
(ii) the aggregate of all Formula Principal
Shortfalls, if any, for prior Distribution
Dates (described below), plus
(iii) the First Priority Principal
Distribution Amount, if any (described
below), the Second Priority Principal
Distribution Amount, if any (described
below), the Third Priority Principal
Distribution Amount, if any (described
below) and the Fourth Priority Principal
Distribution Amount, if any (described
below), for such Distribution Date, minus
(iv) all amounts actually paid on the Notes
and Certificates on prior Distribution
Dates in respect of a First Priority
Principal Distribution Amount, Second
Priority Principal Distribution Amount,
Third Priority Principal Distribution
Amount or Fourth Priority Principal
Distribution Amount.
1. Formula Principal
Distribution Amount....
The "Formula Principal Distribution Amount"
with respect to any Distribution Date will be
an amount equal to the sum of the following
amounts with respect to the related Monthly
Period (as defined below), in each case
computed in accordance with the method
specified in each Contract:
(i) all scheduled payments of principal due
on each outstanding Contract during the
related Monthly Period (after adjustments
for previous Partial Principal Prepayments
and after any adjustments to a Contract's
amortization schedule as a result of a
bankruptcy or similar proceeding involving
the related Obligor),
(ii) the Scheduled Principal Balance (as
defined below) of each Contract which,
during the related Monthly Period, was
purchased by Green Tree pursuant to the
Sale and Servicing Agreement on account of
a breach of a representation or warranty,
(iii) all Partial Principal Prepayments
applied and all Principal Prepayments in
Full received on Contracts during the
related Monthly Period,
(iv) the Scheduled Principal Balance of
each Contract that became a Liquidated
Contract (as defined below) during the
related Monthly Period, plus the amounts of
any reduction in the outstanding principal
balance of a Contract during such Monthly
Period ordered as a result of a bankruptcy
or similar proceeding involving the related
Obligor,
(v) without duplication of the foregoing,
all collections in respect of principal on
the Contracts received during the
S-9
<PAGE>
current month up to and including the third
Business Day prior to such Distribution
Date (but in no event later than the 10th
day of the month in which such Distribution
Date occurs), minus
(vi) the amount, if any, included in the
Formula Principal Distribution Amount for
the preceding Distribution Date by virtue
of clause (v) above.
The "Scheduled Principal Balance" of a Contract
for any Monthly Period is its principal balance
as specified in its amortization schedule,
after giving effect to any previous Partial
Principal Prepayments and to the scheduled
payment due on its scheduled payment date (the
"Due Date") in that month, and after giving
effect to any adjustments due to bankruptcy or
similar proceedings. A "Liquidated Contract"
means any defaulted Contract as to which the
Servicer has determined that all amounts which
it expects to recover from or on account of
such Contract through the date of disposition
of the related Product have been recovered or
any defaulted Contract in respect of which the
related Product has been realized upon and
disposed of and the proceeds of such
disposition have been received. See
"Description of the Trust Documents and
Indenture--Distributions."
2. Formula Principal In the event the remaining funds available for
Shortfalls............. any Distribution Date are not sufficient to
make a full distribution of the Formula
Principal Distribution Amount, the amount of
such deficiency (the "Formula Principal
Shortfall" for such Distribution Date) will be
added to the Total Principal Distribution
Amount for the next Distribution Date.
3. First Priority
Principal Distribution
Amount.................
In the unlikely event that on any Distribution
Date,
(i) the aggregate Principal Balance of the
Senior Notes
is greater than
(ii) the Pool Scheduled Principal Balance
as of the immediately preceding
Distribution Date, minus the aggregate
Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "First
Priority Principal Distribution Amount") will
be payable as an additional payment of
principal on the Class of Notes then entitled
to receive the Total Principal Distribution
Amount, from funds available for distribution
on such Distribution Date after the payment of
all interest then payable on the Senior Notes
but prior to the payment of interest then
payable on the Class A-6 Notes.
S-10
<PAGE>
The "Pool Scheduled Principal Balance" as of
any Distribution Date is the aggregate
Scheduled Principal Balance of all Contracts
that were outstanding during the related
Monthly Period. A "Defaulted Contract" is any
Contract as to which the Servicer has commenced
repossession procedures or assigned such
Contract to a third party for repossession or
other enforcement, but which has not become a
Liquidated Contract.
4. Second Priority
Principal Distribution
Amount.................
Similarly, in the event that on any
Distribution Date,
(i) the aggregate Principal Balance of the
Senior Notes, plus the Principal Balance of
the Class A-6 Notes, minus the amount of
any First Priority Principal Distribution
Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance
as of the immediately preceding
Distribution Date, minus the aggregate
Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Second
Priority Principal Distribution Amount") will
be payable as an additional payment of
principal on the Class of Notes then entitled
to receive the Total Principal Distribution
Amount, from funds available for distribution
on such Distribution Date after the payment of
all interest then payable on the Senior Notes,
the First Priority Principal Distribution
Amount and all interest then payable on the
Class A-6 Notes, but prior to the payment of
interest then payable on the Class A-7 Notes.
5. Third Priority
Principal Distribution
Amount................. Similarly, in the event that on any
Distribution Date,
(i) the aggregate Principal Balance of the
Notes, minus the amount of any First
Priority Principal Distribution Amount paid
on such Distribution Date, and minus the
amount of any Second Priority Principal
Distribution Amount paid on such
Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance
as of the immediately preceding
Distribution Date, minus the aggregate
Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Third
Priority Principal Distribution Amount") will
be payable as an additional payment of
principal on the Class of Notes then entitled
to receive the
S-11
<PAGE>
Total Principal Distribution Amount, from funds
available for distribution on such Distribution
Date after the payment of all interest then
payable on the Senior Notes, the First Priority
Principal Distribution Amount, all interest
then payable on the Class A-6 Notes, the Second
Priority Principal Distribution Amount and all
interest then payable on the Class A-7 Notes,
but prior to the payment of interest then
payable on the Class B-1 Certificates.
6. Fourth Priority
Principal Distribution
Amount...................
Similarly, in the event that on any
Distribution Date,
(i) the aggregate Principal Balance of the
Notes, plus the Principal Balance of the
Class B-1 Certificates, minus the amount of
any First Priority Principal Distribution
Amount paid on such Distribution Date,
minus the amount of any Second Priority
Principal Distribution Amount paid on such
Distribution Date, and minus the amount of
any Third Priority Principal Distribution
Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance
as of the immediately preceding
Distribution Date, minus the aggregate
Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Fourth
Priority Principal Distribution Amount") will
be payable as an additional payment of
principal on the Class of Notes or Class B-1
Certificates then entitled to receive the Total
Principal Distribution Amount, from funds
available for distribution on such Distribution
Date after the payment of all interest then
payable on the Senior Notes, the First Priority
Principal Distribution Amount, all interest
then payable on the Class A-6 Notes, the Second
Priority Principal Distribution Amount, all
interest then payable on the Class A-7 Notes,
the Third Priority Principal Distribution
Amount and all interest then payable on the
Class B-1 Certificates, but prior to the
payment of the Formula Principal Distribution
Amount.
E. Subordination of
Class A-6 and Class A-7
Notes.................... Notwithstanding the Events of Default described
in the Prospectus under the caption "The
Notes--The Indenture--Events of Default; Rights
Upon Event of Default," until the Senior Notes
have been paid in full, the failure to pay
interest due on the Class A-6 or Class A-7
Notes will not be an Event of Default. Upon the
occurrence and during the continuation of an
Event of Default that has resulted in an
acceleration of the Notes or following an
Insolvency Event or dissolution with respect to
the General Partner, no distributions of
principal and interest on the Class A-6 or
Class A-7 Notes will be made until payment in
full of principal and interest on the Senior
Notes.
S-12
<PAGE>
Similarly, if the Senior Notes have been paid
in full but the Class A-6 Notes have not been
paid in full, the failure to pay interest due
on the Class A-7 Notes will not be an Event of
Default. Upon the occurrence and during the
continuation of an Event of Default that has
resulted in an acceleration of the Notes or
following an Insolvency Event or dissolution
with respect to the General Partner, no
distributions of principal and interest on the
Class A-7 Notes will be made until payment in
full of principal and interest on the Class A-6
Notes.
F. Optional Redemption...... The Notes will be redeemed in whole, but not in
part, on any Distribution Date on which Green
Tree or the Servicer exercises its option to
purchase the Contracts, which, subject to
certain provisions in the Sale and Servicing
Agreement, can occur after the Pool Scheduled
Principal Balance declines to 10% or less of
the Cutoff Date Pool Principal Balance, at a
redemption price equal to the unpaid principal
amount of the Notes plus accrued and unpaid
interest thereon. See "Description of the
Notes--Optional Redemption."
Terms of the Certificates..... The principal terms of the Certificates will be
as described below:
A. Distributions............. Certificateholders will be entitled to receive
on each Distribution Date commencing in October
1998, to the extent the Amount Available in the
Collection Account including the Guaranty
Payment described below is sufficient therefor,
distributions of interest and principal in the
manner and order of priority set forth below.
To the extent not paid in full prior to such
date, the outstanding principal amount of each
Class of Certificates will be payable on the
following "Final Scheduled Distribution Date"
for such Class:
Class B-1: September 15, 2018
Class B-2: March 15, 2019
B. Pass-Through Rates........ Class B-1 Certificates: 8.07% per annum (the
"Class B-1 Rate")
Class B-2 Certificates: 8.31% per annum (the
"Class B-2 Rate")
Interest on the Certificates will be calculated
on the basis of a 360-day year consisting of
twelve 30-day months.
The interest rates for the Class B-1 and B-2
Certificates are referred to collectively
herein as the "Pass-Through Rates."
C. Class B-1 Interest ....... Interest on the Principal Balance of the Class
B-1 Certificates will accrue from September 28,
1998, or from the most recent Distribution
Date, to but excluding the following
Distribution Date, at the Class B-1 Rate. The
"Class B-1 Principal Balance" as of any
Distribution Date will be the Original
Principal Balance of such Class minus all
amounts previously distributed to the
Certificateholders of such Class in respect of
principal.
S-13
<PAGE>
Interest will be paid on the Class B-1
Certificates on each Distribution Date to the
extent of funds available on such Distribution
Date, after payment of (i) interest on the
Notes, (ii) the First Priority Principal
Distribution Amount (if any), (iii) the Second
Priority Principal Distribution Amount (if any)
and (iv) the Third Priority Principal
Distribution Amount (if any).
In the event the remaining funds available are
not sufficient to make a full distribution of
interest on the Class B-1 Certificates, the
remaining funds available will be applied to
the payment of interest on such Class and the
amount of the shortfall will be carried forward
and added to the amount of interest payable on
the next Distribution Date. Any amount so
carried forward will bear interest at the Class
B-1 Rate, to the extent legally permissible.
See "Description of the Certificates."
D. Class B-1 Principal.......
No distributions of principal on the Class B-1
Certificates will be payable until all of the
Notes have been paid in full. On each
Distribution Date commencing on the
Distribution Date on which the Notes are paid
in full, principal will be paid on the Class B-
1 Certificates in an amount equal to the Total
Principal Distribution Amount for such
Distribution Date, to the extent of funds
available on such Distribution Date after
payment of interest on the Class B-1
Certificates.
E. Class B-2 Interest........ Interest on the Principal Balance of the Class
B-2 Certificates will accrue from September 28,
1998, or from the most recent Distribution
Date, to but excluding the following
Distribution Date, at the Class B-2 Rate. The
"Class B-2 Principal Balance" as of any
Distribution Date will be the Original
Principal Balance of such Class minus all
amounts previously distributed to the Class B-2
Certificateholders in respect of principal.
Interest will be paid on the Class B-2
Certificates on each Distribution Date to the
extent of funds available on such Distribution
Date, after payment of all interest and
principal then payable on the Notes and the
Class B-1 Certificates.
In the event the remaining funds available are
not sufficient to make a full distribution of
interest on the Class B-2 Certificates, the
remaining funds available will be applied to
the payment of interest on such Class and the
amount of the shortfall will be carried forward
and added to the amount of interest payable on
the next Distribution Date. Any amount so
carried forward will bear interest at the Class
B-2 Rate, to the extent legally permissible.
See "Description of the Certificates."
F. Class B-2 Principal....... No distributions of principal on the Class B-2
Certificates will be payable until all of the
Class B-1 Certificates have been paid in full
(other than a Class B-2 Principal Liquidation
Loss paid by Green Tree pursuant to the Limited
Guaranty). On each Distribution Date commencing
on the Distribution Date on which the Class B-1
Certificates are paid in full, principal will
be paid
S-14
<PAGE>
on the Class B-2 Certificates in an amount
equal to the Total Principal Distribution
Amount for such Distribution Date, to the
extent of funds available on such Distribution
Date after payment of interest on the Class B-2
Certificates.
G. Limited Guaranty.......... In order to mitigate the effect of the
subordination of the Class B-2 Certificates and
the effect of liquidation losses on the
Contracts, the Class B-2 Certificateholders are
entitled to receive on each Distribution Date
an amount equal to the Guaranty Payment, if
any, under Green Tree's Limited Guaranty. The
"Guaranty Payment" for any Distribution Date
will equal the difference, if any, between the
Class B-2 Distributable Amount and the
remaining funds available in the Collection
Account after payment of all interest and
principal on the Notes and the Class B-1
Certificates. The "Class B-2 Distributable
Amount" equals the unpaid and accrued interest
on the Class B-2 Certificates, plus on each
Distribution Date commencing on the
Distribution Date on which the Notes and the
Class B-1 Certificates are paid in full,
principal in an amount equal to the Total
Principal Distribution Amount for such
Distribution Date (less, on the Distribution
Date on which the Class B-1 Certificates are
paid in full, the portion thereof payable on
the Class B-1 Certificates), plus any Class B-2
Principal Liquidation Loss (described under
"Description of the Certificates--Losses on
Liquidated Contracts").
The Limited Guaranty will be an unsecured
general obligation of Green Tree and will not
be supported by any letter of credit or other
enhancement arrangement. The ratings assigned
to the Certificates may be affected by the
ratings of Green Tree's debt securities. Green
Tree's senior debt securities were recently
downgraded by Standard & Poor's Ratings
Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"), to "BBB-" and were
recently upgraded by Fitch IBCA, Inc. ("Fitch")
to "BBB+," which has been reflected in the
ratings assigned to the Class B-2 Certificates.
See "Summary of Terms--Ratings."
H. Optional Prepayment....... If Green Tree or the Servicer exercises its
option to purchase the Contracts, which,
subject to certain provisions in the Sale and
Servicing Agreement, can occur after the Pool
Scheduled Principal Balance declines to 10% or
less of the Cutoff Date Pool Principal Balance,
the Certificateholders will receive an amount
in respect of the Certificates equal to the
principal amount, together with accrued
interest at the applicable Pass-Through Rate,
and the Certificates will be retired. See
"Description of the Certificates--Optional
Prepayment."
Collection Account; Priority Except under certain conditions described
of Payments................... herein or as otherwise acceptable to S&P and
Fitch, the Servicer will be required to remit
payments received with respect to the Contracts
within one Business Day of receipt thereof to
an account in the name of the Indenture Trustee
(the "Collection Account"). On each
Distribution Date, the Servicer will instruct
the Indenture Trustee
S-15
<PAGE>
to withdraw funds on deposit in the Collection
Account and to apply such funds on such
Distribution Date as follows (in the priority
indicated):
(1) if Green Tree is not the Servicer, the
monthly servicing fee, together with any
unpaid servicing fees from prior
Distribution Dates;
(2) reimbursement of any advances made that
were recovered during the prior Monthly
Period;
(3) interest on the Senior Notes;
(4) the First Priority Principal
Distribution Amount, if any, to that Class
of Notes then entitled to distributions of
principal;
(5) interest on the Class A-6 Notes;
(6) the Second Priority Principal
Distribution Amount, if any, to that Class
of Notes then entitled to distributions of
principal;
(7) interest on the Class A-7 Notes;
(8) the Third Priority Principal
Distribution Amount, if any, to that Class
of Notes then entitled to distributions of
principal;
(9) interest on the Class B-1 Certificates;
(10) the Fourth Priority Principal
Distribution Amount, if any, to that Class
of Notes or Class B-1 Certificates then
entitled to distributions of principal;
(11) the remaining Total Principal
Distribution Amount to that Class of Notes
or Class B-1 Certificates then entitled to
distributions of principal;
(12) interest on the Class B-2
Certificates;
(13) the remaining Total Principal
Distribution Amount to the Class B-2
Certificates, if the Notes and the Class B-
1 Certificates have been paid in full; and
(14) any remaining amount to Green Tree as
the monthly servicing and guaranty fee (the
"Monthly Servicing and Guaranty Fee").
Tax Status.................... In the opinion of counsel to Green Tree, for
federal and Minnesota income tax purposes, the
Notes will be characterized as debt, and the
Trust will not be characterized as an associa-
tion (or a publicly traded partnership) taxable
as a corporation. Each Noteholder, by the ac-
ceptance of a Note, will agree to treat the
Notes as debt. Each Certificateholder, by the
acceptance of a Certificate, will agree to
treat the Trust as a partnership in which the
Certificateholders are partners for federal in-
come tax purposes.
S-16
<PAGE>
Alternative characterizations of the Trust and
the Certificates are possible, but would not
result in materially adverse tax consequences
to Certificateholders. See "Certain Federal and
State Income Tax Consequences" herein and "Cer-
tain Federal Income Tax Consequences" and "Cer-
tain State Income Tax Consequences" in the ac-
companying Prospectus.
Money Market Eligibility...... The Class A-1 Notes will be eligible securities
for purchase by money market funds under Rule
2a-7 under the Investment Company Act of 1940,
as amended. A fund should consult with its ad-
visor regarding the eligibility of the Class A-
1 Notes under Rule 2a-7 and the fund's invest-
ment policies and objectives.
ERISA Considerations.......... If the Notes are considered to be indebtedness
without substantial equity features under a
regulation issued by the United States
Department of Labor, the acquisition or holding
of Notes by or on behalf of a Benefit Plan will
not cause the assets of the Trust to become
plan assets, thereby generally preventing the
application of certain prohibited transaction
rules of the Employee Retirement Income
Security Act of 1974, as amended, and the
Internal Revenue Code of 1986, as amended, that
otherwise would possibly be applicable. Green
Tree believes that the Notes should be treated
as indebtedness without substantial equity
features for purposes of such regulation.
The Certificates may not be acquired by, or on
the behalf of, any employee benefit plan,
individual retirement account or Keogh Plan
subject to either Title I of the Employee
Retirement Income Security Act of 1974, as
amended, or the Internal Revenue Code of 1986,
as amended, subject to certain exceptions as
described herein. See "ERISA Considerations"
herein and in the accompanying Prospectus.
Ratings....................... It is a condition to the issuance of the
Securities that:
The Class A-1 Notes be rated "A-1+" by S&P and
"F-1+" by Fitch;
The Class A-2, Class A-3, Class A-4 and Class
A-5 Notes be rated at least "AAA" by S&P and
"AAA" by Fitch;
The Class A-6 Notes be rated at least "AA" by
S&P and at least "AA" by Fitch;
The Class A-7 Notes be rated at least "A" by
S&P and at least "A" by Fitch;
The Class B-1 Certificates be rated at least
"BBB" by S&P and at least "BBB" by Fitch; and
The Class B-2 Certificates be rated at least
"BBB-" by S&P and at least "BBB+" by Fitch.
A security rating is not a recommendation to
buy, sell or hold securities and may be subject
to revision or withdrawal at any time by a
Rating Agency. The ratings of the Class B-2
S-17
<PAGE>
Certificates will be based in part on an
assessment of Green Tree's ability to make
payments under the Limited Guaranty. Any
reduction in S&P's or Fitch's ratings of Green
Tree's debt securities may result in a similar
reduction in the ratings of the Class B-2
Certificates. Green Tree's senior debt
securities were recently downgraded by S&P to
"BBB-" and upgraded by Fitch to "BBB+."
Green Tree has not requested a rating of the
Securities from any rating agencies other than
S&P and Fitch. There can be no assurance as to
whether any other rating agency will rate the
Securities or, if one does, what rating would
be assigned by such rating agency.
S-18
<PAGE>
RISK FACTORS
Prospective holders of the Securities should consider, in addition to the
factors described under "Risk Factors" in the Prospectus, the following
factors in connection with the purchase of the Securities:
SUBORDINATION OF CLASS A-6 AND CLASS A-7 NOTES AND CERTIFICATES; LIMITED
ASSETS
Distributions of interest and principal on the Class A-6 and Class A-7 Notes
will be subordinated to the rights of the holders of the Senior Notes to
receive prior payment of interest and principal. Distributions of interest and
principal on the Certificates will be subordinated in priority of payment to
interest and principal due on the Notes.
Holders of the Notes and the Certificates must primarily rely for repayment
upon payments on the Contracts. The Trust will not have, nor is it permitted
or expected to have, any significant assets or sources of funds other than the
Contracts and, for payment of losses absorbed by the Class B-2 Certificates,
the Limited Guaranty of Green Tree.
DELINQUENCY, LOAN LOSS AND REPOSSESSION EXPERIENCE
Green Tree began originating installment sales contracts for recreational
vehicles in 1985 and for motorcycles in 1988, but has less extensive
underwriting and servicing experience with other types of products financed by
the Contracts. Although Green Tree has calculated and presented herein its
delinquency and net loss experience with respect to its servicing portfolio of
consumer product and equipment contracts, there can be no assurance that the
information presented will reflect actual experience with respect to the
Contracts. In addition, there can be no assurance that the future delinquency,
loan loss or repossession experience of the Trust with respect to the
Contracts will be better or worse than that set forth herein with respect to
Green Tree's servicing portfolio. See "The Contract Pool--Delinquency, Loan
Loss and Repossession Information."
GEOGRAPHIC CONCENTRATION OF INITIAL CONTRACTS
As of the Cutoff Date, the Obligors on approximately 15.06% and 11.48% of
the Initial Contracts (based on principal balance and billing address of the
Obligor) were located in California and Texas, respectively. See "The Contract
Pool." Accordingly, adverse economic conditions or other factors particularly
affecting these states could adversely affect the delinquency, loan loss or
repossession experience of the Trust with respect to the Contracts.
YIELD AND PREPAYMENT CONSIDERATIONS
The Trust Agreement provides that, in the event that the General Partner
becomes insolvent, withdraws or is expelled as General Partner of the Trust or
is terminated or dissolved (a "Dissolution Event"), the Trust will terminate
in 90 days and effect redemption of the Notes and prepayment of the
Certificates following the winding-up of the affairs of the Trust, unless
within such 90 days the Owners of a majority of the Certificates agree in
writing to continue the business of the Trust and to the appointment of a
successor to the General Partner, and the Owner Trustee receives an opinion of
counsel to the effect that the Trust will not thereafter be an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. See "Yield and Prepayment Considerations" herein and "Description of
the Trust Documents--Termination" in the accompanying Prospectus.
THE TRUST
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying
Prospectus. Prospective Securityholders should consider, in addition to the
information below, the information under "The Trusts" in the accompanying
Prospectus.
S-19
<PAGE>
GENERAL
Green Tree Recreational, Equipment & Consumer Trust 1998-C is a business
trust formed under the laws of the State of Delaware pursuant to the Trust
Agreement for the transactions described in this Prospectus Supplement. After
its formation, the Trust will not engage in any activity other than (i)
acquiring, holding and managing the Contracts and the other assets of the
Trust and proceeds therefrom, (ii) issuing the Notes and the Certificates,
(iii) making payments on the Notes and the Certificates and (iv) engaging in
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to $52,000,000
(approximate) from the sale of the Certificates. The Class B-2 Certificates
will be sold to Green Tree or an affiliate and the Class B-1 Certificates will
be sold to third party investors that are expected to be unaffiliated with
Green Tree or its affiliates. The equity of the Trust, together with the
proceeds of the initial sale of the Notes, will be used by the Trust to
purchase the Contracts from Green Tree pursuant to the Sale and Servicing
Agreement.
The Trust's principal offices are in Wilmington, Delaware, at the address
listed below under "--The Owner Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cutoff Date, as if the issuance and sale of the Notes and Certificates had
taken place on such date:
<TABLE>
<S> <C>
Class A-1 Notes.............................................. $122,000,000
Class A-2 Notes.............................................. 193,000,000
Class A-3 Notes.............................................. 150,000,000
Class A-4 Notes.............................................. 111,000,000
Class A-5 Notes.............................................. 104,000,000
Class A-6 Notes.............................................. 36,000,000
Class A-7 Notes.............................................. 32,000,000
Class B-1 Certificates....................................... 16,000,000
Class B-2 Certificates....................................... 36,000,000
------------
Total...................................................... $800,000,000
============
</TABLE>
THE OWNER TRUSTEE
Wilmington Trust Company is the Owner Trustee under the Trust Agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. The Owner Trustee will perform limited
administrative functions under the Trust Agreement, including making
distributions from the Certificate Distribution Account. The Owner Trustee's
liability in connection with the issuance and sale of the Certificates and the
Notes is limited solely to the express obligations of the Owner Trustee as set
forth in the Trust Agreement.
THE TRUST PROPERTY
The Trust Property will include, among other things, (i) the Contracts; (ii)
all rights to receive payments due thereon on or after the Cutoff Date
(excluding certain insurance premiums, late fees and other servicing charges);
(iii) such amounts as from time to time may be held in the Collection Account
and certain other accounts established and maintained by the Servicer pursuant
to the Sale and Servicing Agreement, as described below (including all
investments in the Collection Account and such other accounts and all income
from the investment of funds therein and all proceeds thereof); (iv) an
assignment of the security interests of Green Tree in the Products securing
the related Contracts; (v) an assignment of the right to receive proceeds from
claims on certain insurance policies covering the Products and the Obligors;
and (vi) certain other rights under the Trust Documents. See "The Contracts"
and "Description of the Trust Documents--Collections" in the accompanying
Prospectus.
S-20
<PAGE>
Each Certificate will represent a fractional undivided interest in the Trust
Property. Pursuant to the Indenture the Trust will grant a security interest
in the Trust Property in favor of the Indenture Trustee on behalf of the
Noteholders. Any proceeds of such security interest in the Trust Property
would be distributed according to the Indenture, as described below under
"Description of the Trust Documents and Indenture--Distributions."
Green Tree, as custodian on behalf of the Trust, will hold each original
Contract, as well as copies of documents and instruments relating to such
Contract and evidencing the security interest in the Product securing such
Contract (the "Contract Files"). In order to protect the Trust's ownership
interest in the Contracts, Green Tree will file a UCC-1 financing statement in
Minnesota and Delaware to give notice of the Trust's ownership of the
Contracts and the related Trust Property.
THE CONTRACT POOL
GENERAL
This Prospectus Supplement contains information regarding the Initial
Contracts, which were originated through July 31, 1998 and will be transferred
to the Trust on the Closing Date. The information for each Initial Contract is
as of the Cutoff Date for such Initial Contract. The Initial Contracts had an
aggregate principal balance as of the Cutoff Date of $498,904,486.09. The Sale
and Servicing Agreement provides that the Additional Contracts will be
purchased by the Trust on the Closing Date. Green Tree expects that, on the
Closing Date, the Contract Pool, which will consist of Initial Contracts and
Additional Contracts, will have an aggregate principal balance as of the
Cutoff Date of approximately $800,000,000. Although the Additional Contracts
sold to the Trust will have characteristics that differ somewhat from the
Initial Contracts described herein, Green Tree does not expect that the
characteristics of the Additional Contracts will vary materially from the
Initial Contracts. In addition, the Additional Contracts will conform to
certain criteria set forth in the Sale and Servicing Agreement.
All of the Contracts were purchased by Green Tree from dealers who regularly
originate and sell such contracts to Green Tree, or were originated by Green
Tree directly.
CERTAIN OTHER CHARACTERISTICS
The Initial Contracts (i) had a remaining maturity, as of the Cutoff Date,
of at least five months, but not more than 240 months, (ii) had an original
maturity of at least five months, but not more than 240 months, (iii) had an
original principal balance of at least $1,540.11 and not more than
$5,525,000.00, (iv) had a remaining principal balance as of the Cutoff Date of
at least $1,003.65 and not more than $5,525,000.00 and (v) had a contractual
rate of interest ("Contract Rate") of at least 6.99% and not more than 21.00%.
Neither Green Tree nor the Servicer may substitute other contracts for the
Contracts at any time during the term of the Sale and Servicing Agreement.
CHARACTERISTICS OF INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
CUTOFF AVERAGE AVERAGE WEIGHTED AVERAGE
% OF SCHEDULED DATE POOL AVERAGE REMAINING ORIGINAL AVERAGE LOAN-TO-
NUMBER OF CONTRACT PRINCIPAL PRINCIPAL PRINCIPAL TERM SCHEDULED CONTRACT VALUE
ASSET TYPE CONTRACTS POOL BALANCE BALANCE BALANCE (1)(2) TERM (2) RATE RATIO
---------- --------- -------- --------------- --------- ----------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft............... 251 1.02% $ 64,505,448.71 12.93% $256,993.82 133 133 8.850% 90%
Trucks................. 1,462 5.92 123,322,786.41 24.71 84,352.11 56 57 9.998 94
Recreational Vehicles.. 6,121 24.78 122,121,239.47 24.48 19,951.19 154 155 9.781 84
Motorcycles............ 6,017 24.36 55,580,747.81 11.14 9,237.29 67 68 12.688 85
Keyboard Instruments... 453 1.83 5,039,785.21 1.01 11,125.35 97 97 11.024 85
Marine Products........ 5,398 21.86 91,835,221.15 18.41 17,012.82 146 147 10.294 86
Horsetrailers.......... 1,920 7.77 20,580,877.01 4.13 10,719.21 124 124 10.745 84
Sport Vehicles......... 3,076 12.45 15,918,380.32 3.19 5,175.03 53 54 14.991 86
------ ------ --------------- ------ ----------- --- --- ------ ---
Total................. 24,698 100.00% $498,904,486.09 100.00% $ 20,200.20 111 111 10.351% 88%
====== ====== =============== ====== =========== === === ====== ===
</TABLE>
- --------
(1) Based on scheduled payments due after the Cutoff Date and assuming no
prepayments on the Initial Contracts.
(2) Expressed in number of months.
S-21
<PAGE>
GEOGRAPHIC CONCENTRATION OF INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF
AGGREGATE CONTRACTS
NUMBER OF % OF NUMBER PRINCIPAL BALANCE BY OUTSTANDING
CONTRACTS AS OF OF OUTSTANDING PRINCIPAL BALANCE
STATE (1) CUTOFF DATE CONTRACTS AS OF CUTOFF DATE AS OF CUTOFF DATE
--------- --------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama................. 525 2.13% $ 12,334,852.52 2.47%
Alaska.................. 63 .26 5,690,900.31 1.14
Arizona................. 1,173 4.75 21,392,133.94 4.29
Arkansas................ 353 1.43 7,996,918.42 1.60
California.............. 3,700 14.97 75,085,328.75 15.06
Colorado................ 711 2.88 13,656,698.84 2.74
Connecticut............. 294 1.19 2,474,613.70 .50
Delaware................ 40 .16 628,939.94 .13
District of Columbia.... 5 .02 155,908.64 .03
Florida................. 1,904 7.70 42,013,502.26 8.42
Georgia................. 844 3.42 14,302,127.73 2.87
Hawaii.................. 44 .18 686,571.34 .14
Idaho................... 66 .26 1,584,589.32 .31
Illinois................ 416 1.68 6,659,768.08 1.33
Indiana................. 296 1.20 4,749,340.87 .95
Iowa.................... 131 .53 2,924,349.62 .59
Kansas.................. 130 .53 5,946,781.25 1.19
Kentucky................ 279 1.13 3,308,355.45 .66
Louisiana............... 276 1.12 6,123,084.32 1.23
Maine................... 63 .26 765,540.65 .15
Maryland................ 303 1.23 7,648,419.18 1.53
Massachusetts........... 368 1.49 3,974,548.23 .80
Michigan................ 239 .97 10,010,506.79 2.01
Minnesota............... 518 2.10 12,853,884.00 2.58
Mississippi............. 228 .92 6,241,377.76 1.25
Missouri................ 514 2.08 10,798,167.90 2.16
Montana................. 24 .10 639,311.31 .13
Nebraska................ 111 .45 1,742,432.57 .35
Nevada.................. 540 2.19 11,192,154.87 2.24
New Hampshire........... 65 .26 3,011,309.43 .60
New Jersey.............. 635 2.57 9,349,121.65 1.87
New Mexico.............. 375 1.52 5,060,391.32 1.01
New York................ 706 2.86 13,154,218.86 2.64
North Carolina.......... 1,193 4.83 14,435,754.78 2.89
North Dakota............ 24 .10 448,876.75 .09
Ohio.................... 355 1.44 11,129,174.33 2.23
Oklahoma................ 452 1.83 10,375,055.33 2.08
Oregon.................. 611 2.47 10,757,635.34 2.16
Pennsylvania............ 413 1.67 5,285,265.25 1.06
Rhode Island............ 71 .29 641,269.92 .13
South Carolina.......... 436 1.77 10,685,353.75 2.14
South Dakota............ 67 .27 4,287,931.23 .86
Tennessee............... 505 2.04 9,570,579.24 1.92
Texas................... 2,670 10.80 57,221,562.26 11.48
Utah.................... 125 .51 4,558,685.81 .91
Vermont................. 21 .09 261,602.29 .05
Virginia................ 589 2.38 9,565,600.94 1.92
Washington.............. 957 3.87 19,820,393.14 3.97
West Virginia........... 52 .21 921,967.24 .18
Wisconsin............... 178 .72 3,579,320.64 .72
Wyoming................. 40 .16 1,202,308.03 .24
------ ------ --------------- ------
Total................. 24,698 100.00% $498,904,486.09 100.00%
====== ====== =============== ======
</TABLE>
- --------
(1) Based on the billing address of the Obligor set forth in Green Tree's
records.
S-22
<PAGE>
DISTRIBUTION OF ORIGINAL CONTRACT AMOUNTS OF INITIAL CONTRACTS
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
BALANCE % OF CONTRACTS
NUMBER OF OUTSTANDING BY OUTSTANDING
CONTRACTS AS OF CUTOFF PRINCIPAL BALANCE
ORIGINAL CONTRACT AMOUNT AS OF CUTOFF DATE DATE AS OF CUTOFF DATE
------------------------ ----------------- --------------- -----------------
<S> <C> <C> <C>
Less than $10,000.......... 11,427 $ 65,827,327.57 13.20%
Between $10,000 and
$19,999................... 8,188 115,984,044.73 23.26
Between $20,000 and
$29,999................... 2,155 51,458,008.02 10.32
Between $30,000 and
$39,999................... 825 28,168,081.65 5.65
Between $40,000 and
$49,999................... 505 22,447,293.12 4.50
Between $50,000 and
$59,999................... 347 18,735,540.72 3.76
Between $60,000 and
$69,999................... 206 13,186,585.37 2.64
Between $70,000 and
$79,999................... 209 15,625,701.53 3.13
Between $80,000 and
$89,999................... 209 17,727,475.11 3.55
Between $90,000 and
$99,999................... 166 15,698,300.47 3.15
Between $100,000 and
$109,999.................. 93 9,620,624.90 1.93
Between $110,000 and
$119,999.................. 56 6,407,667.06 1.28
Between $120,000 and
$129,999.................. 41 5,052,829.17 1.01
Between $130,000 and
$139,999.................. 22 2,947,838.80 .59
Between $140,000 and
$149,999.................. 22 3,186,651.05 .64
Between $150,000 and
$159,999.................. 18 2,779,405.57 .56
Between $160,000 and
$169,999.................. 11 1,827,754.27 .37
Between $170,000 and
$179,999.................. 17 2,964,299.27 .59
Between $180,000 and
$189,999.................. 11 2,026,616.40 .41
Between $190,000 and
$199,999.................. 13 2,517,721.21 .50
Between $200,000 and
$249,999.................. 25 5,552,714.25 1.11
Between $250,000 and
$299,999.................. 25 6,702,649.80 1.34
Between $300,000 and
$349,999.................. 12 3,875,166.84 .78
Between $350,000 and
$399,999.................. 22 7,975,736.48 1.60
Between $400,000 and
$449,999.................. 14 5,908,474.41 1.18
Between $450,000 and
$499,999.................. 9 4,350,171.27 .87
Between $500,000 and
$549,999.................. 6 3,105,462.82 .62
Between $550,000 and
$599,999.................. 1 569,740.72 .11
Between $600,000 and
$649,999.................. 2 1,254,829.38 .25
Between $650,000 and
$699,999.................. 1 671,805.44 .13
Between $700,000 and
$749,999.................. 6 4,265,054.24 .85
Between $750,000 and
$799,999.................. 4 3,101,200.79 .62
Between $800,000 and
$849,999.................. 5 4,122,426.66 .83
Between $850,000 and
$899,999.................. 1 860,061.25 .17
Between $900,000 and
$949,999.................. 3 2,699,046.50 .54
Between $950,000 and
$999,999.................. 2 1,959,671.92 .39
Over $999,999.............. 19 37,740,507.33 7.57
------ --------------- ------
Total.................... 24,698 $498,904,486.09 100.00%
====== =============== ======
</TABLE>
S-23
<PAGE>
YEAR OF ORIGINATION OF INITIAL CONTRACTS
<TABLE>
<CAPTION>
% OF CONTRACTS
AGGREGATE PRINCIPAL BY OUTSTANDING
YEAR OF NUMBER OF CONTRACTS BALANCE OUTSTANDING PRINCIPAL BALANCE
OIGINATIONR AS OF CUTOFF DATE AS OF CUTOFF DATE AS OF CUTOFF DATE
- ----------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
1986................... 1 $ 21,604.94 * %
1987................... 0 .00 .00
1988................... 0 .00 .00
1989................... 0 .00 .00
1990................... 0 .00 .00
1991................... 0 .00 .00
1992................... 0 .00 .00
1993................... 0 .00 .00
1994................... 0 .00 .00
1995................... 12 352,683.60 .07
1996................... 50 1,309,908.04 .26
1997................... 82 2,056,179.13 .41
1998................... 24,553 495,164,110.38 99.26
------ --------------- ------
Total................ 24,698 $498,904,486.09 100.00%
====== =============== ======
- --------
* Indicates an amount greater than zero but less than .005%.
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS OF INITIAL CONTRACTS
<CAPTION>
% OF
CONTRACTS
AGGREGATE PRINCIPAL BY OUTSTANDING
NUMBER OF CONTRACTS BALANCE OUTSTANDING PRINCIPAL BALANCE
LOAN-TO-VALUE RATIO AS OF CUTOFF DATE AS OF CUTOFF DATE AS OF CUTOFF DATE
------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 61%........... 1,730 $ 15,949,287.49 3.20%
From 61 to 65%.......... 661 7,557,770.80 1.51
From 66 to 70%.......... 1,007 13,056,576.81 2.62
From 71 to 75%.......... 1,565 21,988,464.77 4.41
From 76 to 80%.......... 2,362 40,718,679.19 8.16
From 81 to 85%.......... 3,405 63,903,796.60 12.81
From 86 to 90%.......... 6,915 114,488,817.18 22.95
From 91 to 95%.......... 3,415 87,361,279.46 17.51
Over 95%................ 3,638 133,879,813.79 26.83
------ --------------- ------
Total................. 24,698 $498,904,486.09 100.00%
====== =============== ======
</TABLE>
S-24
<PAGE>
INITIAL CONTRACT RATES
<TABLE>
<CAPTION>
% OF CONTRACTS
AGGREGATE PRINCIPAL BY OUTSTANDING
NUMBER OF CONTRACTS BALANCE OUTSTANDING PRINCIPAL BALANCE
CONTRACT RATE AS OF CUTOFF DATE AS OF CUTOFF DATE AS OF CUTOFF DATE
------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 7.001%.......... 12 $ 310,672.25 .06%
7.001% to 8.000%......... 166 31,668,794.11 6.35
8.001% to 9.000%......... 1,275 119,890,300.47 24.03
9.001% to 10.000%........ 4,749 125,627,225.21 25.19
10.001% to 11.000%........ 5,794 97,401,113.19 19.52
11.001% to 12.000%........ 3,933 48,156,777.55 9.65
12.001% to 13.000%........ 2,607 28,158,533.38 5.64
13.001% to 14.000%........ 2,008 19,102,457.33 3.83
14.001% to 15.000%........ 1,591 12,680,836.43 2.54
15.001% to 16.000%........ 1,075 6,807,808.42 1.36
16.001% to 17.000%........ 764 4,927,801.09 .99
Over 17.000%.............. 724 4,172,166.66 .84
------ --------------- ------
Total................... 24,698 $498,904,486.09 100.00%
====== =============== ======
REMAINING MONTHS TO MATURITY OF INITIAL CONTRACTS
<CAPTION>
% OF CONTRACTS
AGGREGATE PRINCIPAL BY OUTSTANDING
NUMBER OF CONTRACTS BALANCE OUTSTANDING PRINCIPAL BALANCE
REMAINING MONTHS TO MATURITY AS OF CUTOFF DATE AS OF CUTOFF DATE AS OF CUTOFF DATE
- ---------------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Fewer than 31............. 810 $ 10,621,957.81 2.13%
31 to 60................ 9,726 156,984,296.81 31.46
61 to 90................ 4,659 79,210,158.95 15.88
91 to 120................ 2,827 52,421,562.04 10.51
121 to 150................ 4,492 78,076,637.02 15.65
151 to 180................ 1,912 93,566,367.56 18.75
181 to 210................ 35 2,046,738.03 .41
211 to 240................ 237 25,976,767.87 5.21
------ --------------- ------
Total................... 24,698 $498,904,486.09 100.00%
====== =============== ======
</TABLE>
S-25
<PAGE>
GREEN TREE FINANCIAL CORPORATION
The following information supplements the information in the Prospectus
under the heading "Green Tree Financial Corporation."
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Green Tree's
delinquency, loan loss and repossession experience for each period indicated
with respect to all consumer product and equipment contracts it has purchased
and continues to service, including such contracts which do not meet the
criteria for selection as a Contract. Green Tree began originating installment
sales contracts for recreational vehicles in 1985 and for motorcycles in 1988,
but has less extensive underwriting and servicing experience with other types
of consumer products and equipment financed by the Contracts. Accordingly, the
delinquency, loan loss and repossession experience presented below largely
represents experience only with recreational vehicle and motorcycle contracts.
In addition, because of the rapid growth of Green Tree's portfolio of consumer
product and equipment contracts, the experience shown in more recent periods
may not be indicative of the experience to be expected from a more seasoned
portfolio.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31, AT
-------------------------------- JUNE 30,
1994 1995 1996 1997 1998
------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding
(1)................................ 21,137 49,998 104,698 158,418 184,197
Number of Contracts Delinquent (2)
30-59 Days........................ 181 643 1,390 1,613 1,328
60-89 Days........................ 50 219 494 692 566
90 Days or More................... 134 350 934 1,532 1,466
------ ------ ------- ------- -------
Total Contracts Delinquent.......... 365 1,212 2,818 3,837 3,360
====== ====== ======= ======= =======
Delinquencies as a Percentage of
Contracts
Outstanding (3).................... 1.73% 2.42% 2.69% 2.42% 1.82%
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(3) By number of contracts.
LOAN LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ JUNE 30,
1994 1995 1996 1997 1998
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)........... 21,283 50,265 105,369 159,496 185,068
Principal Balance of
Contracts (1).......... $148,734 $506,459 $1,350,964 $2,352,141 $2,917,605
Contract Liquidations:
Units................. 145 379 1,968 3,601 2,905
Percentage (2)........ 0.68% 0.75% 1.87% 2.26% 1.57%
Net Losses:
Dollars (3)........... $ 884 $ 1,907 $ 9,249 $ 15,050 $ 11,388
Percentage (4)........ 0.59% 0.38% 0.68% 0.64% 0.39%
</TABLE>
- --------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts being serviced as of
period end.
S-26
<PAGE>
There can be no assurance that the delinquency, loan loss or repossession
experience of the Trust with respect to the Contracts will be better than,
worse than or comparable to the experience set forth above. See "Risk
Factors--Delinquency, Loan Loss and Repossession Experience" herein.
RECENT DEVELOPMENTS
On June 30, 1998, Green Tree became a wholly owned subsidiary of Conseco,
Inc., pursuant to a Merger Agreement announced on April 7, 1998. Green Tree
will continue to operate from its existing headquarters in St. Paul,
Minnesota, and its 200 local offices throughout the country. Lawrence M. Coss,
Green Tree's Chairman and Chief Executive Officer, has agreed to continue to
manage Green Tree's business for at least one year. Headquartered in Carmel,
Indiana, Conseco is among the nation's leading providers of supplemental
health insurance, retirement annuities and universal life insurance.
On July 6, 1998, Conseco announced a second-quarter charge of $498 million,
net of income taxes, related to the acquisition of Green Tree. The charges are
directly related to (1) $148 million in merger-related costs, and (2) a $350
million non-cash supplemental reserve against the valuation of Green Tree's
interest-only securities and servicing rights.
Green Tree has been served with various lawsuits in the United States
District Court for the District of Minnesota. These lawsuits were filed by
certain stockholders of Green Tree as purported class actions on behalf of
persons or entities who purchased common stock of Green Tree during the
alleged class periods. In addition to Green Tree, certain current and former
officers and directors of Green Tree are named as defendants in one or more of
the lawsuits. Green Tree and the other defendants intend to seek consolidation
of each of the lawsuits in the United States District Court for the District
of Minnesota. Plaintiffs in the lawsuits assert claims under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs
allege that Green Tree and the other defendants violated federal securities
laws by, among other things, making false and misleading statements about the
current state and future prospects of Green Tree (particularly with respect to
prepayment assumptions and performance of certain of Green Tree's loan
portfolios) which allegedly rendered Green Tree's financial statements false
and misleading. Green Tree believes that the lawsuits are without merit and
intends to defend such lawsuits vigorously.
S-27
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements the information in the Prospectus
under the heading "Yield and Prepayment Considerations."
The Servicer and Green Tree each has the option to purchase from the Trust
all remaining Contracts, and thereby effect early redemption of the Notes and
early retirement of the Certificates, on any Distribution Date when the Pool
Scheduled Principal Balance is 10% or less of the Cutoff Date Pool Principal
Balance. In addition, if neither Green Tree nor the Servicer has exercised
such repurchase option, then on the third Distribution Date as of which the
Pool Scheduled Principal Balance is 10% or less of the Cutoff Date Pool
Principal Balance, the Indenture Trustee (or the Owner Trustee, if the Notes
have been paid in full) shall solicit bids for the purchase of the Contracts
remaining in the Trust. See "Description of the Trust Documents--Termination"
in the Prospectus and "Description of the Trust Documents and Indenture--
Termination" herein.
WEIGHTED AVERAGE LIFE OF THE NOTES AND THE CLASS B-1 CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments on the Contracts on the weighted average life of the Notes and the
Class B-1 Certificates under the stated assumptions and is not a prediction of
the prepayment rate that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes and the
Certificates will be influenced by the rate at which principal on the
Contracts is paid. Principal payments on the Contracts may be in the form of
scheduled amortization or prepayments (including, for this purpose,
liquidations due to default).
The Base Case prepayment model is Green Tree management's best estimate of
the prepayment rates that may be experienced on the Contracts. Because Green
Tree began originating and servicing contracts for many of the Products only
recently, such estimate is based in part on industry experience with similar
contracts rather than Green Tree's experience. There can be no assurance that
the Contracts will experience prepayments at such projected rates or in the
manner assumed by the prepayment model used for that type of Contract, or that
the Contracts in the aggregate will experience prepayments similar to the
overall prepayment rate or in the manner projected in the Base Case.
<TABLE>
<CAPTION>
BASE CASE
PRODUCT PREPAYMENT RATE
------- ---------------
<S> <C>
Horse Trailers, Sport Vehicles, Keyboard Instruments and
Recreational Vehicles.................................. 18% CPR
Marine Products......................................... 100%(1)
Motorcycles and Aircraft................................ 30% CPR
Trucks.................................................. 1.4% ABS
</TABLE>
- --------
(1) As a percentage of the Prepayment Assumption for Contracts secured by
marine products.
The models used in this Prospectus Supplement are the Constant Prepayment
Rate ("CPR"), the Prepayment Assumption for Contracts secured by marine
products, and the Absolute Prepayment Model ("ABS"). The CPR represents an
assumed constant rate of prepayment each month, expressed as a per annum
percentage of the outstanding principal balance of the Contracts secured by
all Products other than marine products and trucks. The ABS represents an
assumed rate of prepayment each month relative to the original number of
Contracts secured by trucks in the Contract pool.
The 100% Prepayment Assumption for Contracts secured by marine products
assumes a constant prepayment of 0% per annum of the then outstanding
principal balance of such loans in the first month of the life of such loans
and an additional 1.27% (precisely, 14/11%) per annum in each month thereafter
until the twelfth month. Beginning in the twelfth month and in each month
thereafter during the life of such loans, the 100% Prepayment Assumption for
Contracts secured by marine products assumes a constant prepayment rate of 14%
per annum each month.
S-28
<PAGE>
As used in the following tables, the columns headed 80%, 90%, 100%, 110% and
120% assume that prepayments on the Contracts are made at Base Case Prepayment
Rates of 80%, 90%, 100%, 110% and 120%, respectively. For example, 80% Base
Case Prepayment Rate and 120% Base Case Prepayment Rate mean that Contracts
related to horse trailers, sport vehicles, keyboard instruments and
recreational vehicles have been assumed to have a prepayment rate equal to
14.4% CPR and 21.6% CPR, respectively; Contracts related to marine products
have been assumed to have a prepayment rate equal to 80% and 120%,
respectively, of the Prepayment Assumption for Contracts secured by marine
products; Contracts related to motorcycles and aircraft have been assumed to
have a prepayment rate equal to 24% CPR and 36% CPR, respectively; and
Contracts related to trucks have been assumed to have a prepayment rate equal
to 1.12% ABS and 1.68% ABS, respectively. NEITHER CPR NOR ABS PURPORTS TO BE
AN HISTORICAL DESCRIPTION OF PREPAYMENT EXPERIENCE OR A PREDICTION OF THE
ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF CONTRACTS, INCLUDING THE
CONTRACTS.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
percentages of the Base Case prepayment model set forth in the table; (ii)
either Green Tree or the Servicer exercises its right of optional repurchase
described above; (iii) the aggregate principal balance of the Initial
Contracts as of the Cutoff Date is $498,904,486.09 and the Initial Contracts
have the characteristics described under "The Contract Pool"; (iv) the
Additional Contracts have the characteristics set forth in the table following
this paragraph and are assumed to have their first payments due in October
1998; (v) no interest shortfalls will arise in connection with prepayments in
full of the Contracts; (vi) distributions are made on the Notes and the
Certificates on the 15th day of each month commencing in October 1998; and
(vii) the Securities are issued on September 28, 1998. No representation is
made that the Contracts will not experience delinquencies or losses.
ASSUMED CHARACTERISTICS OF ADDITIONAL CONTRACTS AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
AGGREGATE PRINCIPAL WEIGHTED AVERAGE ORIGINAL TERM REMAINING TERM
BALANCE OUTSTANDING CONTRACT RATE (MONTHS) (MONTHS)
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Horse Trailers.......... $ 9,419,122.99 10.745% 124 124
Marine.................. 48,164,778.85 10.294 147 147
Motorcycles............. 39,419,252.19 12.688 68 68
Trucks.................. 91,677,213.59 9.998 57 57
Aircraft................ 25,494,551.29 8.850 133 133
Sport Vehicles.......... 14,081,619.68 14.991 54 54
Keyboard Instruments.... 4,960,214.79 11.024 97 97
Recreational Vehicles... 67,878,760.53 9.781 155 155
--------------- ------ --- ---
Total................. $301,095,513.91 10.351% 111 111
=============== ====== === ===
</TABLE>
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each Class of Notes and Class B-1
Certificates and set forth the percentages of the original Principal Balance
of each Class that would be outstanding after each of the dates shown, at the
indicated percentages of the Base Case prepayment model. Investors are urged
to make their investment decisions on a basis that includes their
determination as to anticipated prepayment rates under a variety of the
assumptions discussed herein.
S-29
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-1
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 0.28 0.26 0.24 0.22 0.20
- --------
(1) The weighted average life of a Class A-1 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-1 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-1 Note.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-2
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 63 56 49 41 34
September 15, 2000................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 1.16 1.08 1.00 0.93 0.87
- --------
(1) The weighted average life of a Class A-2 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-2 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-2 Note.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-3
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 100 100 100 100 100
September 15, 2000................................ 76 62 49 35 22
September 15, 2001................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 2.30 2.15 2.01 1.88 1.76
</TABLE>
- --------
(1) The weighted average life of a Class A-3 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-3 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-3 Note.
S-30
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-4
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 100 100 100 100 100
September 15, 2000................................ 100 100 100 100 100
September 15, 2001................................ 88 68 49 30 12
September 15, 2002................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 3.40 3.20 3.00 2.82 2.66
- --------
(1) The weighted average life of a Class A-4 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-4 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-4 Note.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-5
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 100 100 100 100 100
September 15, 2000................................ 100 100 100 100 100
September 15, 2001................................ 100 100 100 100 100
September 15, 2002................................ 96 78 60 43 28
September 15, 2003................................ 31 17 4 0 0
September 15, 2004................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 4.72 4.44 4.19 3.95 3.74
</TABLE>
- --------
(1) The weighted average life of a Class A-5 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-5 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-5 Note.
S-31
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-6
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 100 100 100 100 100
September 15, 2000................................ 100 100 100 100 100
September 15, 2001................................ 100 100 100 100 100
September 15, 2002................................ 100 100 100 100 100
September 15, 2003................................ 100 100 100 75 44
September 15, 2004................................ 86 50 17 0 0
September 15, 2005................................ 6 0 0 0 0
September 15, 2006................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 6.45 6.01 5.63 5.27 4.96
- --------
(1) The weighted average life of a Class A-6 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-6 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-6 Note.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-7
NOTES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 100 100 100 100 100
September 15, 2000................................ 100 100 100 100 100
September 15, 2001................................ 100 100 100 100 100
September 15, 2002................................ 100 100 100 100 100
September 15, 2003................................ 100 100 100 100 100
September 15, 2004................................ 100 100 100 0 0
September 15, 2005................................ 100 0 0 0 0
September 15, 2006................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 7.21 6.79 6.37 5.96 5.62
</TABLE>
- --------
(1) The weighted average life of a Class A-7 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-7 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-7 Note.
S-32
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE
CLASS B-1 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 80% 90% 100% 110% 120%
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................ 100% 100% 100% 100% 100%
September 15, 1999................................ 100 100 100 100 100
September 15, 2000................................ 100 100 100 100 100
September 15, 2001................................ 100 100 100 100 100
September 15, 2002................................ 100 100 100 100 100
September 15, 2003................................ 100 100 100 100 100
September 15, 2004................................ 100 100 100 0 0
September 15, 2005................................ 100 0 0 0 0
September 15, 2006................................ 0 0 0 0 0
Weighted Average Life(1) (Years).................. 7.21 6.80 6.38 5.96 5.63
</TABLE>
- --------
(1) The weighted average life of a Class B-1 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class B-1 Certificate to the stated Distribution Date,
(ii) adding the results, and (iii) dividing the sum by the initial
principal balance of such Class B-1 Certificate.
S-33
<PAGE>
DESCRIPTION OF THE NOTES
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying
Prospectus. Prospective Noteholders should consider, in addition to the
information below, the information in the accompanying Prospectus under "The
Notes," "Certain Information Regarding the Securities," and "Description of
the Trust Documents."
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture, as executed, will be filed with the Commission following the
issuance of the Securities. The following summary describes certain terms of
the Notes and the Indenture. The summary does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all the
provisions of the Notes and the Indenture. The following summary supplements
the description of the general terms and provisions of the Notes of any given
series and the related Indenture set forth in the accompanying Prospectus, to
which description reference is hereby made. U.S. Bank Trust National
Association, a national banking association headquartered in St. Paul,
Minnesota, will be the Indenture Trustee.
DISTRIBUTIONS
Noteholders will be entitled to receive distributions of interest and
principal on each Distribution Date commencing in October 1998, to the extent
that funds available are sufficient therefor. Distributions on the Notes
generally will be made from funds available first in respect on interest on
the Notes, then in respect of principal on the Notes, in the manner and order
of priority set forth below.
INTEREST
Interest on the Principal Balance of each Class of Notes will accrue from
September 28, 1998, or from the most recent Distribution Date on which
interest has been paid, to but excluding the following Distribution Date, at
the Interest Rate for such Class. The "Principal Balance" of any Class of
Notes as of any Distribution Date will be the Original Principal Balance of
such Class minus all amounts previously distributed to the Noteholders of such
Class in respect of principal.
Interest on the Class A-1 and Class A-2 Notes will be calculated on the
basis of the actual number of days elapsed in a 360-day year. Interest on all
other Classes of Notes will be calculated on the basis of a 360-day year of
twelve 30-day months.
Interest will be paid on the Senior Notes on each Distribution Date to the
extent of funds available on such Distribution Date. In the event the funds
available are not sufficient to make a full distribution of interest on the
Senior Notes, the funds available will be applied pro rata to each Class of
Senior Notes based on the amount payable to each such Class and the amount of
the shortfall will be carried forward and added to the amount of interest
payable on the next Distribution Date. Any amount so carried forward will bear
interest at the Interest Rate for such Class, to the extent legally
permissible.
Interest will be paid on the Class A-6 Notes on each Distribution Date, to
the extent of the remaining funds available on such Distribution Date after
payment of (i) all interest accrued on the Senior Notes and (ii) the First
Priority Principal Distribution Amount, if any (as described under "--
Principal" below). In the event the remaining funds available are not
sufficient to make a full distribution of interest on the Class A-6 Notes, the
remaining funds available will be applied to the payment of interest on the
Class A-6 Notes and the amount of the shortfall will be added to the amount of
interest payable on the Class A-6 Notes on the next Distribution Date. Any
amount so carried forward will bear interest at the Class A-6 Interest Rate,
to the extent legally permissible.
S-34
<PAGE>
Interest will be paid on the Class A-7 Notes on each Distribution Date, to
the extent of the remaining funds available on such Distribution Date after
payment of (i) all interest accrued on the Senior Notes, (ii) the First
Priority Principal Distribution Amount (if any), (iii) all interest accrued on
the Class A-6 Notes, and (iv) the Second Priority Principal Distribution
Amount, if any (as described under "--Principal" below). In the event the
remaining funds available are not sufficient to make a full distribution of
interest on the Class A-7 Notes, the remaining funds available will be applied
to the payment of interest on the Class A-7 Notes and the amount of the
shortfall will be added to the amount of interest payable on the Class A-7
Notes on the next Distribution Date. Any amount so carried forward will bear
interest at the Class A-7 Interest Rate, to the extent legally permissible.
PRINCIPAL
Noteholders will be entitled to receive on each Distribution Date as payment
of principal, in the manner and order of priority set forth below, an amount
equal to the Total Principal Distribution Amount for such Distribution Date.
Such amount will paid as principal on the Class A-1 Notes until the Class A-1
Notes have been paid in full, then on the Class A-2 Notes until the Class A-2
Notes have been paid in full, and so on for the remaining Classes of Notes
until the Class A-7 Notes have been paid in full.
To the extent not paid in full prior to such date, the outstanding principal
amount of each Class of Notes will be payable on the following "Final
Scheduled Distribution Date" for such Class:
Class A-1: August 15, 1999
Class A-2: March 15, 2005
Class A-3: February 15, 2009
Class A-4: February 15, 2011
Class A-5: February 15, 2014
Class A-6: February 15, 2014
Class A-7: March 15, 2014
The "Total Principal Distribution Amount" for any Distribution Date will
equal:
(i) the Formula Principal Distribution Amount for such Distribution Date
(described below), plus
(ii) the aggregate of all Formula Principal Shortfalls, if any, for prior
Distribution Dates (described below), plus
(iii) the First Priority Principal Distribution Amount, if any (described
below), the Second Priority Principal Distribution Amount, if any
(described below), the Third Priority Principal Distribution Amount, if any
(described below), and the Fourth Priority Principal Distribution Amount
(described below) for such Distribution Date, minus
(iv) all amounts actually paid on the Notes and Certificates on prior
Distribution Dates in respect of a First Priority Principal Distribution
Amount, Second Priority Principal Distribution Amount, Third Priority
Principal Distribution Amount, or Fourth Priority Principal Distribution
Amount.
The "Formula Principal Distribution Amount" with respect to any Distribution
Date will be an amount equal to the sum of the following amounts with respect
to the related Monthly Period (as defined below), in each case computed in
accordance with the method specified in each Contract:
(i) all scheduled payments of principal due on each outstanding Contract
during the related Monthly Period (after adjustments for previous Partial
Principal Prepayments and after any adjustments to a Contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related Obligor),
S-35
<PAGE>
(ii) the Scheduled Principal Balance (as defined below) of each Contract
which, during the related Monthly Period, was purchased by Green Tree
pursuant to the Sale and Servicing Agreement on account of a breach of a
representation or warranty,
(iii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received on Contracts during the related Monthly
Period,
(iv) the Scheduled Principal Balance of each Contract that became a
Liquidated Contract (as defined below) during the related Monthly Period,
plus the amount of any reduction in the outstanding principal balance of a
Contract during such Monthly Period ordered as a result of a bankruptcy or
similar proceeding involving the related Obligor,
(v) without duplication of the foregoing, all collections in respect of
principal on the Contracts received during the current month up to and
including the third Business Day prior to such Distribution Date (but in no
event later than the 10th day of the month in which such Distribution Date
occurs), minus
(vi) the amount, if any, included in the Formula Principal Distribution
Amount for the preceding Distribution Date by virtue of clause (v) above.
A "Monthly Period" with respect to a Distribution Date is the calendar month
immediately preceding the month in which such Distribution Date occurs;
provided that the Monthly Period with respect to the first Distribution Date
is the two calendar months immediately preceding the month in which such
Distribution Date occurs. The "Scheduled Principal Balance" of a Contract for
any Monthly Period is its principal balance as specified in its amortization
schedule, after giving effect to any previous Partial Principal Prepayments
and to the scheduled payment due on its scheduled payment date (the "Due
Date") in that month, and after giving effect to any adjustments due to
bankruptcy or similar proceedings. A "Liquidated Contract"means any defaulted
Contract as to which the Servicer has determined that all amounts which it
expects to recover from or on account of such Contract through the date of
disposition of the related Product have been recovered or any defaulted
Contract in respect of which the related Product has been realized upon and
disposed of and the proceeds of such disposition have been received.
In the event the remaining funds available for such Distribution Date are
not sufficient to make a full distribution of the Formula Principal
Distribution Amount, the amount of such deficiency (the "Formula Principal
Shortfall" for such Distribution Date) will be added to the Total Principal
Distribution Amount for the next Distribution Date.
In the unlikely event that on any Distribution Date,
(i) the aggregate Principal Balance of the Senior Notes
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "First Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes then entitled to receive the Total Principal Distribution Amount, from
funds available for distribution on such Distribution Date after the payment
of all interest then payable on the Senior Notes but prior to the payment of
interest then payable on the Class A-6 Notes.
The "Pool Scheduled Principal Balance" as of any Distribution Date is the
aggregate Scheduled Principal Balance of all Contracts. A "Defaulted Contract"
is any Contract as to which the Servicer has commenced repossession procedures
or assigned such Contract to a third party for repossession or other
enforcement, but which has not become a Liquidated Contract.
Similarly, in the event that on any Distribution Date,
S-36
<PAGE>
(i) the aggregate Principal Balance of the Senior Notes, plus the
Principal Balance of the Class A-6 Notes, minus the amount of any First
Priority Principal Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Second Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes then entitled to receive the Total Principal Distribution Amount, from
funds available for distribution on such Distribution Date after the payment
of all interest then payable on the Senior Notes, the First Priority Principal
Distribution Amount and all interest then payable on the Class A-6 Notes, but
prior to the payment of interest then payable on the Class A-7 Notes.
Similarly, in the event that on any Distribution Date,
(i) the aggregate Principal Balance of the Notes, minus the amount of any
First Priority Principal Distribution Amount paid on such Distribution
Date, and minus the amount of any Second Priority Principal Distribution
Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Third Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes then entitled to receive the Total Principal Distribution Amount, from
funds available for distribution on such Distribution Date after the payment
of all interest then payable on the Senior Notes, the First Priority Principal
Distribution Amount, all interest then payable on the Class A-6 Notes, the
Second Priority Principal Distribution Amount and all interest then payable on
the Class A-7 Notes, but prior to the payment of interest then payable on the
Class B-1 Certificates.
Similarly, in the event that on any Distribution Date,
(i) the aggregate Principal Balance of the Notes, plus the Principal
Balance of the Class B-1 Certificates, minus the amount of any First
Priority Principal Distribution Amount paid on such Distribution Date,
minus the amount of any Second Priority Principal Distribution Amount paid
on such Distribution Date, and minus the amount of any Third Priority
Principal Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Fourth Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes or Class B-1 Certificates then entitled to receive the Total Principal
Distribution Amount, from funds available for distribution on such
Distribution Date after the payment of all interest then payable on the Senior
Notes, the First Priority Principal Distribution Amount, all interest then
payable on the Class A-6 Notes, the Second Priority Principal Distribution
Amount, all interest then payable on the Class A-7 Notes, the Third Priority
Principal Distribution Amount and all interest then payable on the Class B-1
Certificates, but prior to the payment of the Formula Principal Distribution
Amount.
S-37
<PAGE>
SUBORDINATION OF CLASS A-6 AND CLASS A-7 NOTES
Notwithstanding the Events of Default described in the Prospectus under the
caption "The Notes--The Indenture--Events of Default; Rights Upon Event of
Default," until the Senior Notes have been paid in full, the failure to pay
interest due on the Class A-6 or Class A-7 Notes will not be an Event of
Default. Upon the occurrence and during the continuation of an Event of
Default that has resulted in an acceleration of the Notes or following an
Insolvency Event or dissolution with respect to the General Partner, no
distributions of principal and interest on the Class A-6 or Class A-7 Notes
will be made until payment in full of principal and interest on the Senior
Notes.
Similarly, if the Senior Notes have been paid in full but the Class A-6
Notes have not been paid in full, the failure to pay interest due on the Class
A-7 Notes will not be an Event of Default. Upon the occurrence and during the
continuation of an Event of Default that has resulted in an acceleration of
the Notes or following an Insolvency Event or dissolution with respect to the
General Partner, no distributions of principal and interest on the Class A-7
Notes will be made until payment in full of principal and interest on the
Class A-6 Notes.
OPTIONAL REDEMPTION
The Notes will be redeemed in whole, but not in part, on any Distribution
Date on which Green Tree exercises its option to purchase the Contracts. Green
Tree may purchase the Contracts when the Pool Scheduled Principal Balance has
declined to 10% or less of the Cutoff Date Pool Principal Balance, as
described in the accompanying Prospectus under "Description of the Trust
Documents--Termination." The "Pool Scheduled Principal Balance" is the
aggregate Scheduled Principal Balance of all outstanding Contracts during a
Monthly Period. Such redemption would effect early retirement of the Class A-7
Notes. The redemption price will be equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon.
BOOK-ENTRY REGISTRATION
Holders of the Notes may hold through DTC (in the United States) or CEDEL or
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in such systems.
Cede & Co., as nominee for DTC, will hold the Notes. CEDEL and Euroclear
will hold omnibus positions in the Notes on behalf of the CEDEL Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries"), which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between CEDEL Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. CEDEL Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
S-38
<PAGE>
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day. Cash
received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a Participant will
be received with value on the DTC settlement date but will be available in the
relevant CEDEL or Euroclear cash account only as of the business day following
settlement in DTC.
For a description of transfers between persons holding directly or
indirectly through DTC, see "Certain Information Regarding the Securities--
Book-Entry Registration" in the Prospectus.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in CEDEL in any of 28 currencies, including United
States dollars. CEDEL provides to its CEDEL Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary
Institute. CEDEL Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriters. Indirect access to CEDEL is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a CEDEL Participant, either directly
or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in Euroclear in any of 32
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described in Annex I hereto.
The Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System,
S-39
<PAGE>
and receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
Distributions with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Noteholder under the
Indenture on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
DESCRIPTION OF THE CERTIFICATES
The following information supplements the information contained in the
accompanying Prospectus. Prospective Certificateholders should consider, in
addition to the information below, the information in the accompanying
Prospectus under "The Certificates," "Certain Information Regarding the
Securities," and "Description of the Trust Documents."
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement, as executed, will be filed with the
Commission following the issuance of the Securities. The following summary
describes certain terms of the Certificates and the Trust Agreement. The
summary does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the Certificates and the
Trust Agreement. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Certificates of any given series and the related Trust
Agreement set forth in the Prospectus, to which description reference is
hereby made.
DISTRIBUTIONS
Certificateholders will be entitled to receive on each Distribution Date
commencing in October 1998, to the extent that funds available together with
the Guaranty Payment described below are sufficient therefor, distributions of
interest and principal in the manner and order of priority set forth below.
To the extent not paid in full prior to such date, the outstanding principal
amount of each Class of Certificates will be payable on the following "Final
Scheduled Distribution Date" for such Class:
Class B-1: September 15, 2018
Class B-2: March 15, 2019
CLASS B-1 INTEREST
Interest on the Principal Balance of the Class B-1 Certificates will accrue
from September 28, 1998, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class B-1 Rate. The
S-40
<PAGE>
"Class B-1 Principal Balance" as of any Distribution Date will be the Original
Principal Balance of such Class minus all amounts previously distributed to
the Class B-1 Certificateholders in respect of principal.
Interest will be paid on the Class B-1 Certificates on each Distribution
Date to the extent of funds available on such Distribution Date, after payment
of (i) interest on the Notes, (ii) the First Priority Principal Distribution
Amount (if any), (iii) the Second Priority Principal Distribution Amount (if
any) and (iv) the Third Priority Principal Distribution Amount (if any).
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class B-1 Certificates, the remaining funds
available will be applied to the payment of interest on such Class and the
amount of the shortfall will be carried forward and added to the amount of
interest payable on the next Distribution Date. Any amount so carried forward
will bear interest at the Class B-1 Rate to the extent legally permissible.
See "Description of the Certificates."
CLASS B-1 PRINCIPAL
No distributions of principal on the Class B-1 Certificates will be payable
until all of the Notes have been paid in full. On each Distribution Date
commencing on the Distribution Date on which the Notes are paid in full,
principal will be paid on the Class B-1 Certificates in an amount equal to the
Total Principal Distribution Amount for such Distribution Date, to the extent
of funds available on such Distribution Date after payment of interest on the
Class B-1 Certificates.
CLASS B-2 INTEREST
Interest on the Principal Balance of the Class B-2 Certificates will accrue
from September 28, 1998, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class B-2 Rate. The "Class
B-2 Principal Balance" as of any Distribution Date will be the Original
Principal Balance of such Class minus all amounts previously distributed to
the Class B-2 Certificateholders in respect of principal.
Interest will be paid on the Class B-2 Certificates on each Distribution
Date to the extent of funds available on such Distribution Date, after payment
of all interest and principal then payable on the Notes and the Class B-1
Certificates.
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class B-2 Certificates, the remaining funds
available will be applied to the payment of interest on such Class and the
amount of the shortfall will be carried forward and added to the amount of
interest payable on the next Distribution Date. Any amount so carried forward
will bear interest at the Class B-2 Rate, to the extent legally permissible.
CLASS B-2 PRINCIPAL
No distributions of principal on the Class B-2 Certificates will be payable
until all of the Class B-1 Certificates have been paid in full (other than a
Class B-2 Principal Liquidation Loss paid by Green Tree pursuant to the
Limited Guaranty). On each Distribution Date commencing on the Distribution
Date on which the Class B-1 Certificates are paid in full, principal will be
paid on the Class B-2 Certificates in an amount equal to the Total Principal
Distribution Amount for such Distribution Date, to the extent of funds
available on such Distribution Date after payment of interest on the Class B-2
Certificates.
LIMITED GUARANTY
In order to mitigate the effect of the subordination of the Certificates and
the effect of liquidation losses and delinquencies on the Contracts, the Class
B-2 Certificateholders are entitled to receive on each Distribution Date the
amount equal to the Guaranty Payment, if any, under Green Tree's Limited
Guaranty. The Guaranty Payment for any Distribution Date will equal the
difference, if any, between the Class B-2 Distributable Amount and the
S-41
<PAGE>
remaining funds available in the Collection Account after payment of all
interest and principal on the Notes and Class B-1 Certificates. The "Class B-2
Distributable Amount" equals the unpaid and accrued interest on the Class B-2
Certificates, plus on each Distribution Date commencing on the Distribution
Date on which the Notes and the Class B-1 Certificates are paid in full,
principal in an amount equal to the Total Principal Distribution Amount for
such Distribution Date (less, on the Distribution Date on which the Class B-1
Certificates are paid in full, the portion thereof payable on the Class B-1
Certificates), plus any Class B-2 Principal Liquidation Loss for such
Distribution Date (described below under "--Losses on Liquidated Contracts").
The Limited Guaranty will be an unsecured general obligation of Green Tree
and will not be supported by any letter of credit or other enhancement
arrangement. The ratings assigned to the Certificates may be affected by the
ratings of Green Tree's debt securities. Green Tree's senior debt securities
were recently downgraded by S&P to "BBB-" and upgraded by Fitch to "BBB+"
which has been reflected in the ratings assigned to the Class B-2
Certificates. See "Summary of Terms--Ratings."
The Limited Guaranty will not benefit in any way, or result in any payment
to, the Noteholders or the Class B-1 Certificateholders.
As compensation for servicing the Contracts and providing the Limited
Guaranty, Green Tree will be entitled to receive the Monthly Servicing and
Guaranty Fee on each Distribution Date, which will be equal to the Amount
Available remaining after payment of the Class B-2 Distributable Amount.
OPTIONAL PREPAYMENT
If Green Tree exercises its option to purchase the Contracts when the Pool
Scheduled Principal Balance declines to 10% or less of the Cutoff Date Pool
Principal Balance, Certificateholders will receive an amount in respect of the
Certificates equal to the outstanding principal amount together with accrued
interest at the applicable Pass-Through Rate, which distribution will effect
early retirement of the Certificates. See "Description of the Trust
Documents--Termination" in the accompanying Prospectus.
TRANSFERS OF CERTIFICATES
Certificateholders, other than individuals or entities holding Certificates
through a broker who reports sales of securities on Form 1099-B, are required
under the Trust Agreement to notify the Owner Trustee of any transfer of their
Certificates in a taxable sale or exchange within 30 days of such transfer.
LOSSES ON LIQUIDATED CONTRACTS
As described above, the distribution of principal to the Securities is
intended to equal the Total Principal Distribution Amount. Such amount
includes the Scheduled Principal Balance of each Contract that became a
Liquidated Contract during the Monthly Period preceding such Distribution
Date. If the Net Liquidation Proceeds from such Liquidated Contract are less
than the Scheduled Principal Balance of such Liquidated Contract, the
deficiency will, in effect, be absorbed first by the Monthly Servicing and
Guaranty Fee otherwise payable to Green Tree and then by the Class B-2
Certificateholders (although Green Tree will be obligated to make a Guaranty
Payment equal to any shortfall in the distribution to the Class B-2
Certificateholders).
If the Pool Scheduled Principal Balance for any Distribution Date is less
than the sum of the aggregate outstanding Principal Balance of the Notes and
the Certificates after giving effect to all distributions of principal on such
Distribution Date, then Green Tree will be obligated to pay the amount of such
deficiency (a "Class B-2 Principal Liquidation Loss") under the Limited
Guaranty. If Green Tree should fail to pay such amount, however, the Class B-2
Principal Balance would not be reduced and interest would continue to accrue
on the full Class B-2 Principal Balance. Securityholders would, however, be
entitled to receive such unpaid amount as part of the Total Principal
Distribution Amount prior to any payment of the Monthly Servicing and Guaranty
Fee to Green Tree on any subsequent Distribution Date.
S-42
<PAGE>
DESCRIPTION OF THE TRUST DOCUMENTS AND INDENTURE
The following summary describes certain terms of the Sale and Servicing
Agreement and the Trust Agreement (together, the "Trust Documents") and the
Indenture. Forms of the Trust Documents and Indenture, as executed, have been
filed as exhibits to the Registration Statement. A copy of each of the Trust
Documents and Indenture will be filed with the Commission following the
issuance of the Securities. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Trust Documents and Indenture. The following summary supplements, the
description of the general terms and provisions of the Trust Documents and
Indenture (as such terms are used in the accompanying Prospectus) set forth in
the accompanying Prospectus, to which description reference is hereby made.
ACCOUNTS
The Servicer will establish and maintain one or more accounts, in the name
of the Indenture Trustee on behalf of the Noteholders and the
Certificateholders, into which all payments made on or with respect to the
Contracts will be deposited (the "Collection Account"). The Servicer will
establish and maintain an account, in the name of the Indenture Trustee on
behalf of the Noteholders, in which amounts released from the Collection
Account for distribution to Noteholders will be deposited and from which all
distributions to Noteholders will be made (the "Note Distribution Account").
The Servicer will also establish and maintain an account, in the name of the
Owner Trustee on behalf of the Certificateholders, in which amounts released
from the Collection Account for distribution to Certificateholders will be
deposited and from which all distributions to Certificateholders will be made
(the "Certificate Distribution Account"). See "Description of the Trust
Documents--Collections" in the accompanying Prospectus.
DISTRIBUTIONS
On each Distribution Date, the Servicer shall instruct the Indenture Trustee
to distribute from the Collection Account the Amount Available in the
following order of priority:
1. If Green Tree or an affiliate is no longer the Servicer, then to the
Servicer, the Monthly Servicing Fee for the related Monthly Period.
2. To the Servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior Monthly Period.
3. To the Note Distribution Account, all accrued interest on the Senior
Notes.
4. To the Note Distribution Account, the First Priority Principal
Distribution Amount, if any.
5. To the Note Distribution Account, all accrued interest on the Class A-
6 Notes.
6. To the Note Distribution Account, the Second Priority Principal
Distribution Amount, if any.
7. To the Note Distribution Account, all accrued interest on the Class A-
7 Notes.
8. To the Note Distribution Account, the Third Priority Principal
Distribution Amount, if any.
9. To the Certificate Distribution Account, all accrued interest on the
Class B-1 Certificates;
10. To the Note Distribution Account (or, if all the Notes have been paid
in full, to the Certificate Distribution Account), the Fourth Priority
Principal Distribution Amount, if any.
11. To the Note Distribution Account (or, if all the Notes have been paid
in full, to the Certificate Distribution Account), the remaining Total
Principal Distribution Amount.
12. To the Certificate Distribution Account, all accrued interest on the
Class B-2 Certificates.
13. To the Certificate Distribution Account, the remaining Total
Principal Distribution Amount (for payment to the Class B-2 Certificates,
if the Notes and the Class B-1 Certificates have been paid in full).
14. To Green Tree, any remaining amount as the Monthly Servicing and
Guaranty Fee.
On each Distribution Date, the Indenture Trustee or its Paying Agent will
distribute all amounts on deposit in the Note Distribution Account in payment
of interest and principal on the Notes in the manner described above.
S-43
<PAGE>
On each Distribution Date, the Owner Trustee or its Paying Agent will
distribute all amounts on deposit in the Certificate Distribution Account,
plus any Guaranty Payment made by Green Tree, in payment of interest and
principal on the Certificates in the manner described above.
For the purposes hereof, the following terms shall have the following
meanings:
"Amount Available" with respect to any Distribution Date, means generally
the sum of payments on the Contracts due and received during the related
Monthly Period, prepayments and other unscheduled collections received during
the related Monthly Period, all collections in respect of principal on the
Contracts received during the current month up to and including the third
Business Day prior to such Distribution Date (but in no event later than the
10th day of the month in which the Distribution Date occurs), any amounts
deposited in respect of Purchased Contracts, any Guaranty Payment, and all
earnings from the investment of funds in the Collection Account, minus, with
respect to all Distribution Dates other than the Distribution Date in October
1998, all collections of principal on the Contracts received during the
related Monthly Period up to and including the third Business Day prior to the
preceding Distribution Date (but in no event later than the 10th day of the
prior month).
The "Formula Principal Distribution Amount" with respect to any Distribution
Date will be an amount equal to the sum of the following amounts with respect
to the related Monthly Period, in each case computed in accordance with the
method specified in each Contract:
(i) all scheduled payments of principal due on each outstanding Contract
during the related Monthly Period (after adjustments for previous Partial
Principal Prepayments and after any adjustments to a Contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related Obligor),
(ii) the Scheduled Principal Balance of each Contract which, during the
related Monthly Period, was purchased by Green Tree pursuant to the Sale
and Servicing Agreement on account of a breach of a representation or
warranty,
(iii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received on Contracts during the related Monthly
Period,
(iv) the Scheduled Principal Balance of each Contract that became a
Liquidated Contract (as defined below) during the related Monthly Period,
plus the amounts of any reduction in the outstanding principal balance of a
Contract during such Monthly Period ordered as a result of a bankruptcy or
similar proceeding involving the related Obligor,
(v) without duplication of the foregoing, all collections in respect of
principal on the Contracts received during the current month up to and
including the third business day prior to such Distribution Date (but in no
event later than the 10th day of the month in which such Distribution Date
occurs), minus
(vi) the amount, if any, included in the Formula Principal Distribution
Amount for the preceding Distribution Date by virtue of clause (v) above.
"Liquidated Contract" means any defaulted Contract as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Contract through the date of disposition of the related Product have
been recovered; provided that any defaulted Contract in respect of which the
related Product has been realized upon and disposed of and proceeds of such
disposition have been received shall be deemed to be a Liquidated Contract.
"Purchased Contract" means a Contract (i) that Green Tree has become
obligated to repurchase (or, under certain circumstances, has elected to
repurchase) as a result of an uncured breach by Green Tree of a representation
or warranty made by Green Tree with respect to such Contract or (ii) that the
Servicer has become obligated to repurchase (or, under certain circumstances,
has elected to repurchase) as a result of an uncured breach of the covenants
made by it with respect to such Contract.
S-44
<PAGE>
"Principal Balance" means, with respect to any Distribution Date and any
Class of Notes or Certificates, the Original Principal Balance of such Class
minus all amounts previously distributed in respect of principal of such
Class.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Indenture Trustee a statement to be delivered to the Noteholders and to
the Owner Trustee a statement to be delivered to the Certificateholders on
such Distribution Date. Such statements will be based on the information in
the related Servicer's Certificate setting forth certain information required
under the Trust Documents. Each such statement to be delivered to Noteholders
will include the following information as to the Notes, and each such
statement to be delivered to Certificateholders will include the following
information as to the Certificates, with respect to such Distribution Date or
the period since the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to interest on or with
respect to each Class of Notes and Certificates;
(ii) the amount of the distribution allocable to principal on or with
respect to each Class of Notes and Certificates;
(iii) the aggregate outstanding principal balance and the Note Pool
Factor for each Class of Notes and the Certificate Principal Balance and
the Certificate Pool Factor for each Class of Certificates after giving
effect to all payments reported under (ii) above on such date;
(iv) the Interest Shortfall for each Class of Notes, the Interest
Shortfall for each Class of Certificates, if any, and the change in such
amounts from the preceding statement;
(v) the amount, if any, of Class B-2 Principal Liquidation Losses,
aggregate unreimbursed Class B-2 Principal Liquidation Losses since the
Closing Date and the amount of the distribution allocable to such losses
for the Class B-2 Certificates;
(vi) the amount, if any, of the Guaranty Payment;
(vii) the amount of the Monthly Servicing and Guaranty Fee paid to the
Servicer;
(viii) the number and aggregate principal balances of delinquent
Contracts, the number of Products repossessed and repossessed and remaining
in inventory and the number of Contracts that became Liquidated Contracts
with respect to the immediately preceding Monthly Period; and
(ix) the aggregate amount of Servicer Advances made by the Servicer with
respect to such Distribution Date, and the aggregate amount paid to the
Servicer as reimbursement of Servicer Advances made on prior Distribution
Dates.
Each amount set forth pursuant to subclauses (i) through (vi) with respect
to Notes or Certificates will be expressed as a dollar amount per $1,000 of
the initial principal amount of the Notes or the initial Certificate Principal
Balance, as applicable.
Unless and until Definitive Notes are issued, such reports will be sent on
behalf of the Trust to Cede & Co., as registered holder of the Notes and the
nominee of DTC. Note Owners may receive copies of such reports upon written
request, together with a certification that they are Note Owners and payment
of any expenses associated with the distribution of such reports, from the
Indenture Trustee. See "Reports to Securityholders" herein and "Reports to
Securityholders" and "Certain Information Regarding the Securities" in the
accompanying Prospectus.
Within the required period of time after the end of each calendar year, the
Indenture Trustee and the Owner Trustee, as applicable, will furnish to each
person who at any time during such calendar year was a Noteholder or
Certificateholder, a statement as to the aggregate amounts of interest and
principal paid to such Noteholder or Certificateholder, information regarding
the amount of servicing compensation received by the Servicer and such
S-45
<PAGE>
other information as Green Tree deems necessary to enable such Noteholder or
Certificateholder to prepare its tax returns. See "Certain Federal Income Tax
Consequences" herein.
TERMINATION
As described in the Prospectus under "Description of the Trust Documents--
Termination," Green Tree and the Servicer each will be permitted, at its
option, to purchase from the Trust, on any Distribution Date immediately
following any Monthly Period as of the last day of which the Pool Scheduled
Principal Balance is equal to or less than 10% of the Cutoff Date Pool
Principal Balance, all remaining Contracts and the other remaining Trust
Property at a price equal to the unpaid principal amount of the Securities,
plus accrued and unpaid interest thereon. The exercise of this right will
effect an early retirement of the Certificates and the Class A-7 Notes.
ADMINISTRATOR
Green Tree Financial Servicing Corporation, a Delaware corporation (the
"Administrator"), will provide the notices and perform other administrative
obligations required by the Indenture and the Trust Agreement. The
Administrator, a subsidiary of Green Tree, will enter into an Administration
Agreement with the Trust and the Indenture Trustee relating to its duties and
obligations as Administrator.
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal and state income
tax consequences relating to the purchase, ownership, and disposition of the
Notes and the Certificates. The discussion is based upon the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury regulations promulgated thereunder, and judicial or ruling authority,
all of which are subject to change, which change may be retroactive. For
additional information regarding federal and state income tax consequences,
see "Certain Federal Income Tax Consequences--Owner Trust Series" and "Certain
State Income Tax Consequences" in the Prospectus.
Prospective investors should consult their own tax advisors to determine the
federal, state, local and other tax consequences of the purchase, ownership
and disposition of the Notes and the Certificates. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "IRS") with respect to any of the federal income tax
consequences discussed herein or in the accompanying Prospectus, and no
assurance can be given that the IRS will not take contrary positions.
Moreover, there are no cases or IRS rulings on transactions similar to those
described herein with respect to the Trust, involving both debt and equity
interests issued by a trust with terms similar to those of the Notes and the
Certificates. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the
Securities.
In the opinion of Briggs and Morgan, Professional Association, for federal
and Minnesota income tax purposes, the Notes will be characterized as debt and
the Trust will not be characterized as an association (or a publicly traded
partnership) taxable as a corporation. Each Certificateholder, by the
acceptance of a Certificate, agrees to treat the Trust as a partnership in
which the Certificateholders are partners for federal income tax purposes. The
Notes will not be issued with original issue discount ("OID").
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code, prohibit a pension, profit-
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan") from
engaging in certain
S-46
<PAGE>
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax
or other penalties and liabilities under ERISA and the Code for such persons.
Title I of ERISA also requires that fiduciaries of a Benefit Plan subject to
ERISA make investments that are prudent, diversified (except if prudent not to
do so) and in accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Securities might be deemed to constitute prohibited transactions under ERISA
and the Code if assets of the Trust were deemed to be assets of a Benefit
Plan. Under a regulation issued by the United States Department of Labor (the
"Plan Assets Regulation"), the assets of the Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquires an "Equity Interest" in the Trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An equity
interest is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Green Tree believes that the Notes
should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. However, without regard to whether the
Notes are treated as an Equity Interest for such purposes, the acquisition or
holding of Notes by or on behalf of a Benefit Plan could be considered to give
rise to a prohibited transaction if the Trust, the Owner Trustee or the
Indenture Trustee, the owner of collateral, the Underwriters, or any of their
respective affiliates is or becomes a party in interest or a disqualified
person with respect to such Benefit Plan. In such case, certain exemptions
from the prohibited transaction rules could be applicable depending on the
type of asset invested and the position of the plan fiduciary making the
decision to acquire a Note. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 84-14, regarding transactions effected by
"qualified professional asset managers"; and PTCE 96-23, regarding
transactions effected by "in-house asset managers."
The Certificates may not be acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (including an insurance company acting on behalf of
its general account). Prior to its purchase of a Certificate, each
Certificateholder must certify in writing to Green Tree, the Owner Trustee,
the Underwriters and the Servicer that its purchase of such Certificate will
satisfy certain conditions specified in the exemptive relief granted by, and
regulations proposed by, the Department of Labor. In this regard, purchasers
that are insurance companies should consult with their counsel with respect to
the United States Supreme Court case interpreting the fiduciary responsibility
rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris Trust and
Savings Bank (decided December 13, 1993). In John Hancock, the Supreme Court
ruled that assets held in an insurance company's general account may be deemed
to be "plan assets" for ERISA purposes under certain circumstances.
Prospective purchasers should determine whether the decision affects their
ability to make purchases of the Certificates. In particular, such an
insurance company should consider the exemptive relief granted by the
Department of Labor for transactions involving insurance company general
accounts in PTCE 95-60 and proposed by the Department of Labor in proposed
ERISA regulation Section 2550.401(c)-1, 62 Fed. Reg. 66908 (December 22,
1997). For additional information regarding treatment of the Certificates
under ERISA, see "ERISA Considerations" in the Prospectus.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. Such plans may, however, be
subject to the provisions of other applicable federal and state laws,
including, for any such governmental or church plan qualified under Section
401(a) of the Code and exempt from taxation under Section 501(a) of the Code,
the prohibited transaction rules set forth in Section 503 of the Code.
A plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential
consequences.
S-47
<PAGE>
UNDERWRITING
The Underwriters have agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from Green Tree the respective principal
amounts of Notes and Class B-1 Certificates set forth opposite their names
below:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
NOTES NOTES NOTES NOTES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated....... $ 30,500,000 $ 48,250,000 $ 37,500,000 $ 27,750,000
J.P. Morgan Securities
Inc....................... 30,500,000 48,250,000 37,500,000 27,750,000
Lehman Brothers Inc........ 30,500,000 48,250,000 37,500,000 27,750,000
NationsBanc Montgomery
Securities LLC............ 30,500,000 48,250,000 37,500,000 27,750,000
------------ ------------ ------------ ------------
Totals................... $122,000,000 $193,000,000 $150,000,000 $111,000,000
============ ============ ============ ============
<CAPTION>
CLASS A-5 CLASS A-6 CLASS A-7 CLASS B-1
NOTES NOTES NOTES CERTIFICATES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated...... $ 26,000,000 $ 9,000,000 $ 8,000,000 $ 4,000,000
J.P. Morgan Securities
Inc....................... 26,000,000 9,000,000 8,000,000 4,000,000
Lehman Brothers Inc........ 26,000,000 9,000,000 8,000,000 4,000,000
NationsBanc Montgomery
Securities LLC............ 26,000,000 9,000,000 8,000,000 4,000,000
------------ ------------ ------------ ------------
Totals................... $104,000,000 $ 36,000,000 $ 32,000,000 $ 16,000,000
============ ============ ============ ============
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Offered Securities offered hereby, if any of such Offered
Securities are purchased.
Green Tree has been advised by the Underwriters that they propose initially
to offer the Offered Securities to the public at the respective offering
prices set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of the
respective amounts set forth in the table below (expressed as a percentage of
the relative Note Principal Balance or Certificate Principal Balance). The
Underwriters may allow and such dealers may reallow a discount not in excess
of the respective amounts set forth in the table below to certain other
dealers.
<TABLE>
<CAPTION>
SELLING REALLOWANCE
CLASS CONCESSION DISCOUNT
----- ---------- -----------
<S> <C> <C>
A-1................................................. .060% .045%
A-2................................................. .100% .075%
A-3................................................. .175% .131%
A-4................................................. .210% .158%
A-5................................................. .250% .188%
A-6................................................. .300% .225%
A-7................................................. .550% .413%
B-1................................................. .550% .413%
</TABLE>
Until the distribution of the Offered Securities is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Offered Securities. As an exception to
these rules, the Underwriters are permitted to engage in certain transactions
that stabilize the price of the Offered Securities. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of the Offered Securities.
If the Underwriters create a short position in the Offered Securities in
connection with the offering, i.e., if they sell more Offered Securities than
are set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing Offered Securities
in the open market.
S-48
<PAGE>
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither Green Tree nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Offered Securities.
In addition, neither Green Tree nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Underwriting Agreement provides that Green Tree will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or will contribute to payments the
Underwriters may be required to make in respect thereof.
Each of the Underwriters has represented, warranted and agreed that (i) it
has not offered or sold and, prior to the expiration of the period of six
months from the Closing Date, will not offer or sell any Notes to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Notes in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue of the Notes to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 (as amended) or is a person to whom such document may otherwise lawfully
be issued or passed on.
The Notes have not been and will not be registered under the Securities and
Exchange Law of Japan (the "Securities and Exchange Law") and each of the
Underwriters has agreed that it will not offer or sell any of the Notes,
directly or indirectly, in Japan or to, or for the benefit of, any resident of
Japan (which term as used herein means any person resident in Japan, including
any corporation or other entity organized under the laws of Japan), except
pursuant to an exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any other applicable
laws, regulations and ministerial guidelines of Japan.
Green Tree does not intend to apply for listing of the Offered Securities on
a national securities exchange, but has been advised by the Underwriters that
the Underwriters currently intend to make a market in the Offered Securities,
as permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Offered Securities and any such
market may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Offered Securities.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, Green Tree and
the Underwriters will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
LEGAL MATTERS
Certain matters with respect to the legality of the Notes and Certificates
and with respect to the federal and Minnesota income tax matters discussed
under "Certain Federal and State Income Tax Consequences" will be passed upon
for Green Tree by Briggs and Morgan, Professional Association, Minneapolis and
St. Paul, Minnesota. The validity of the Notes and Certificates will be passed
upon for the Underwriters by Brown & Wood LLP, New York, New York.
S-49
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Notes will be available only in
book-entry form (the "Global Notes"). Investors in the Global Notes may hold
such Global Notes through any of DTC, CEDEL or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Notes through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Notes will be subject to
U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investors securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no
"lock-up" or restricted period. Global Notes will be credited to the
securities custody accounts on the settlement date against payments in same-
day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Notes are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the
A-1
<PAGE>
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear, as applicable, will instruct its Depositary to
receive the Global Notes against payment. Payment will include interest
accrued on the Global Notes from and including the last coupon payment date to
and excluding the settlement date. Payment will then be made by such
Depositary to the DTC Participant's account against delivery of the Global
Notes. After settlement has been completed, the Global Notes will be credited
to the applicable clearing system and by the clearing system, in accordance
with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The Global Notes credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Notes will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Notes would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Notes were credited to their
accounts. However, interest on the Global Notes would accrue from the value
date. Therefore, in many cases the investment income on the Global Notes
earned during that one-day period may substantially reduce or offset the
amount of such overdraft charges, although this result will depend on each
CEDEL Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Notes to the
respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global Notes
are to be transferred by the respective clearing systems, through their
respective Depositaries, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
CEDEL or Euroclear will instruct their respective Depositaries, as
appropriate, to deliver the Notes to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Notes from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would be back-
valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the CEDEL Participant or Euroclear Participant
have a line of credit with its clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the bank-
valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use CEDEL or Euroclear and that
purchase Global Notes from DTC Participants for delivery to CEDEL Participants
or Euroclear Participants should note that these trades would automatically
fail on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
A-2
<PAGE>
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their CEDEL or Euroclear account in
order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Notes holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of Notes that
are non-U.S. Persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status)
and a certificate under penalties of perjury (the "Tax Certificate") that
such beneficial owner is (i) not a controlled foreign corporation (within
the meaning of Section 957(a) of the Code) that is related (within the
meaning of Section 864(d)(4) of the Code) to the Trust or the Transferor
and (ii) not a 10 percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Trust or the Transferor. If the
information shown on Form W-8 or the Tax Certificate changes, a new Form W-
8 or Tax Certificate, as the case may be, must be filed within 30 days of
such change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of Notes
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the beneficial owner of Notes or such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8 and
Form 1001 are effective for three calendar years and Form 4224 is effective
for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
federal income tax withholding that may be relevant to foreign holders of the
Global Notes. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Notes.
A-3
<PAGE>
PROSPECTUS
GREEN TREE RECREATIONAL, EQUIPMENT & CONSUMER TRUSTS
ASSET-BACKED CERTIFICATES
ASSET-BACKED NOTES
----------------
GREEN TREE FINANCIAL CORPORATION
(SELLER AND SERVICER)
----------------
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and
to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). Each series of Securities will include either one or more
classes of Certificates or, if Notes are issued as part of a series, one or
more classes of Notes and one or more classes of Certificates, as set forth in
the related Prospectus Supplement.
The Certificates and the Notes, if any, of any series of Securities will be
issued by a trust (a "Trust") to be formed with respect to such series by
Green Tree Financial Corporation ("Green Tree"). The assets of each Trust (the
"Trust Property") will include a pool of retail installment sales contracts
and promissory notes for the purchase of a variety of consumer products
(collectively, the "Products") as further described herein (such retail
installment sales contracts are referred to herein as the "Contracts"). The
Trust Property will also include certain monies paid or payable under the
Contracts after the Cutoff Date set forth in the related Prospectus Supplement
(the "Cutoff Date"), an assignment of Green Tree's security interests in the
Products financed thereby and certain other property, as more fully described
herein and in the related Prospectus Supplement. In addition, if so specified
in the related Prospectus Supplement, the Trust Property will include monies
on deposit in one or more trust accounts to be established with an Indenture
Trustee, which may include a Pre-Funding Account which would be used to
purchase additional Contracts (the "Subsequent Contracts") from the Seller
from time to time during the Pre-Funding Period specified in the related
Prospectus Supplement.
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into between
Green Tree, as Seller and Servicer, and the Trustee specified in the related
Prospectus Supplement (the "Trustee") or (ii) a Trust Agreement (the "Trust
Agreement") to be entered into among the Seller, the Trust and certain other
parties as specified in the related Prospectus Supplement. If the Trust is
formed pursuant to a Trust Agreement, a Sale and Servicing Agreement (the
"Sale and Servicing Agreement") will be entered into among Green Tree, as
Seller and Servicer and the Trust. The Pooling and Servicing Agreement or the
Trust Agreement and the Sale and Servicing Agreement are collectively referred
to herein as the "Trust Documents." The Notes, if any, of a series will be
issued and secured pursuant to an Indenture (the "Indenture") between the
Trust and the Indenture Trustee specified in the related Prospectus Supplement
(the "Indenture Trustee").
(Continued on next page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" AT PAGE 13 HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT.
----------------
THE CERTIFICATES REPRESENT INTERESTS IN AND THE NOTES REPRESENT OBLIGATIONS
OF THE RELATED TRUST AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF GREEN
TREE (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN AND IN THE RELATED
PROSPECTUS SUPPLEMENT) OR ANY AFFILIATE OF GREEN TREE.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 4, 1998.
<PAGE>
(Continued from previous page)
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related
Contracts in the manner described herein and in the related Prospectus
Supplement. The right of each class of Securities to receive payments may be
senior or subordinate to the rights of one or more of the other classes of
such series. A series may include two or more classes of Certificates or Notes
which differ as to the timing and priority of payment, interest rate or amount
of distributions in respect of principal or interest or both. A series may
include one or more classes of Certificates or Notes entitled to distributions
in respect of principal, with disproportionate, nominal or no interest
distributions, or to interest distributions, with disproportionate, nominal or
no distributions in respect of principal. Distributions on Certificates of any
series will be subordinated in priority to payments due on the related Notes,
if any, to the extent described herein and in the related Prospectus
Supplement. The Certificates will represent fractional undivided interests in
the related Trust.
Each class of Securities will represent the right to receive distributions
or payments in the amounts, at the rates, and on the dates set forth in the
related Prospectus Supplement. The rate of distributions in respect of
principal on Certificates and payment in respect of principal on Notes, if
any, of any class will depend on the priority of payment of such class and the
rate and timing of payments (including prepayments, liquidations and
repurchases of Contracts) on the related Contracts.
If specified in the related Prospectus Supplement, a financial guaranty
insurance policy, letter of credit, surety bond, Green Tree guaranty, cash
reserve fund, or other form of credit enhancement, or any combination thereof,
may be provided with respect to a Trust or any class of Securities.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates and the Notes, if any, of any series initially will be
represented by certificates and notes registered in the name of Cede & Co.,
the nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Securities will be represented by book entries on the
records of the participating members of DTC. Definitive Securities will be
available only under limited circumstances.
There currently is no secondary market for the Securities. There can be no
assurance that any such market will develop or, if it does develop, that it
will continue. The Securities will not be listed on any securities exchange.
2
<PAGE>
AVAILABLE INFORMATION
Green Tree, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement which is available for
inspection without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission at
Seven World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of which may be obtained from the Commission
at prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, unless and
until Definitive Certificates or Definitive Notes are issued, unaudited
monthly and annual reports, containing information concerning each Trust and
prepared by the Servicer, will be sent on behalf of the Trust to the Trustee
for the Certificateholders, the Indenture Trustee for the Noteholders and Cede
& Co., as registered holder of the Certificates and the Notes and the nominee
of DTC. See "Certain Information Regarding the Securities--Statements to
Securityholders" and "--Book-Entry Registration." Certificateholders and
Noteholders are collectively referred to herein as the "Securityholders."
Certificate Owners or Note Owners may receive such reports, upon written
request, together with a certification that they are Certificate Owners or
Note Owners and payment of reproduction and postage expenses associated with
the distribution of such reports, from the Trustee, with respect to
Certificate Owners, or the Indenture Trustee, with respect to Note Owners, at
the addresses specified in the related Prospectus Supplement. Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles. Green Tree does not intend to send any of its
financial reports to Securityholders. The Servicer, on behalf of each Trust,
will file with the Commission periodic reports concerning each Trust to the
extent required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
However, in accordance with the Exchange Act and the rules and regulations of
the Commission thereunder, Green Tree expects that each Trust's obligation to
file such reports will be terminated following the end of the year in which
such Trust is formed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Green Tree's Annual Report on Form 10-K for the year ended December 31, 1997
and Form 8-K dated April 6, 1998, which have been filed with the Commission,
are hereby incorporated by reference in this Prospectus and the related
Prospectus Supplement.
All documents filed by the Servicer on behalf of each Trust pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the related
Securities shall be deemed to be incorporated by reference into this
Prospectus and the related Prospectus Supplement and to be a part hereof and
thereof from the respective dates of filing of such documents. Any statement
contained herein or in a document all or any portion of which is deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the related Prospectus Supplement to the
extent that a statement contained herein or in any other subsequently filed
document which also is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or the related Prospectus Supplement.
Green Tree will provide without charge to any person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any
or all of the foregoing documents incorporated herein by reference (other than
certain exhibits to such documents). Requests for such copies should be
directed to John Dolphin, Vice President and Director of Investor Relations,
Green Tree Financial Corporation, 1100 Landmark Towers, 345 St. Peter Street,
Saint Paul, Minnesota 55102-1639, telephone number (651) 293-3400.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of each series of Securities. Certain capitalized terms used in this
Prospectus Summary are defined elsewhere in this Prospectus and in the related
Prospectus Supplement.
<TABLE>
<S> <C>
Issuer.............................. With respect to each series of Securities,
a trust (the "Trust") will be formed by
Green Tree pursuant to either a Pooling and
Servicing Agreement between Green Tree, in
its capacity as Seller and as Servicer (in
such capacity referred to herein as the
"Servicer"), and the Trustee specified in
the related Prospectus Supplement (each
such trust, a "grantor trust"), or a Trust
Agreement between the Seller, the Trustee
specified in the related Prospectus
Supplement and certain other parties as
specified in the related Prospectus
Supplement (each such trust, an "owner
trust").
Seller and Servicer................. Green Tree Financial Corporation. See
"Green Tree Financial Corporation."
Trustee............................. The Trustee for a grantor trust or the
Owner Trustee for an owner trust, in each
case as specified in the related Prospectus
Supplement. The Trustee or Owner Trustee
for any Trust will be referred to in this
Prospectus as the "Trustee," although the
Prospectus Supplement relating to an owner
trust that issues Notes will refer to the
Trustee as the "Owner Trustee" in order to
distinguish the Owner Trustee and the
Indenture Trustee for such Series. See
"Description of the Trust Documents--The
Trustee."
Indenture Trustee................... With respect to any Series of Securities
including one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture
Trustee").
The Certificates.................... Each series of Securities will include one
or more classes of Certificates which will
be issued pursuant to the related Trust
Documents.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in denominations of
$1,000 and in integral multiples thereof
and will be available in book-entry form
only. Unless otherwise specified in the
related Prospectus Supplement, beneficial
owners of Certificates ("Certificate
Owners") will be able to receive Definitive
Certificates only in the limited
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities--Book-
Entry Registration." Unless otherwise
specified in the related Prospectus
Supplement, each class of Certificates will
have a stated Certificate Balance (as defined
in the related Prospectus Supplement) and
will accrue interest on such Certificate
Balance at a specified rate (with respect to
each class of Certificates, the "Pass-Through
Rate"). Each class of Certificates may have a
different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through
Rate, or any combination of the foregoing.
The related Prospectus Supplement will
specify the Pass-Through Rate for each class
of Certificates, or the initial Pass-Through
Rate and the method for determining
subsequent changes to the Pass-Through Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority of
payment, seniority, allocation of loss, Pass-
Through Rate or amount of distributions in
respect of principal or interest, or as to
which distributions in respect of principal
or interest on any class may or may not be
made upon the occurrence of specified events
or on the basis of collections from
designated portions of the Contract Pool. In
addition, a series may include one or more
classes of Certificates ("Stripped
Certificates") entitled to (i) distributions
in respect of principal with
disproportionate, nominal or no interest
distributions, or (ii) interest
distributions, with disproportionate, nominal
or no distributions in respect of principal.
With respect to any series of Securities
including one or more classes of Notes,
distributions in respect of the Certificates
may be subordinated in priority of payment to
payments on the Notes, to the extent
specified in the related Prospectus
Supplement. If the Seller or Servicer
exercises its option to purchase the
Contracts of a Trust on the terms and
conditions described below under "Description
of the Trust Documents--Termination,"
Certificate Owners will receive an amount in
respect of the Certificates as specified in
the related Prospectus Supplement. In
addition, if the related Prospectus
Supplement provides that the property of a
Trust will include a Pre-Funding Account (as
such term is defined in the related
Prospectus Supplement, the "Pre-Funding
Account"),
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Certificate Owners will receive a
distribution in respect of principal on or
immediately following the end of the
funding period specified in the related
Prospectus Supplement (the "Pre-Funding
Period") in an amount and manner specified
in the related Prospectus Supplement.
The Notes........................... With respect to any series of Securities
including one or more classes of Notes,
such Notes will be issued pursuant to an
Indenture.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be
available for purchase in denominations of
$1,000 and integral multiples thereof, and
will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, beneficial owners of
Notes ("Note Owners") will be able to
receive Definitive Notes only in the
limited circumstances described herein or
in the related Prospectus Supplement. See
"Certain Information Regarding the
Securities--Book-Entry Registration."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes
will have a stated principal amount and
will bear interest at a specified rate or
rates (with respect to each class of Notes,
the "Interest Rate"). Each class of Notes
may have a different Interest Rate, which
may be a fixed, variable or adjustable
Interest Rate, or any combination of the
foregoing. The related Prospectus
Supplement will specify the Interest Rate
and the method for determining subsequent
changes to the Interest Rate.
A series may include two or more classes of
Notes which differ as to the timing and
priority of payment, seniority, allocations
of loss, Interest Rate or amount of
payments of principal or interest, or as to
which payments of principal or interest may
or may not be made upon the occurrence of
specified events or on the basis of
collections from designated portions of the
Contract Pool. In addition, a series may
include one or more classes of Notes
("Stripped Notes") entitled to (i)
principal payments with disproportionate,
nominal or no interest payments or (ii)
interest payments with disproportionate,
nominal or no principal payments.
If the Seller or the Servicer exercises its
option to purchase the Contracts of a Trust
on the terms and conditions described below
under "Description of the Trust Documents--
Termination," the outstanding Notes, if
any, of such series will be redeemed as set
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
forth in the related Prospectus Supplement.
In addition, if the related Prospectus
Supplement provides that the property of a
Trust will include a Pre-Funding Account,
the outstanding Notes, if any, of such
series will be subject to partial
redemption on or immediately following the
end of the Pre-Funding Period in an amount
and manner specified in the related
Prospectus Supplement. In the event of such
partial redemption, the Note Owners may be
entitled to receive a prepayment premium
from the Trust, in the amount and to the
extent provided in the related Prospectus
Supplement.
Trust Property...................... Each Certificate will represent a
fractional undivided interest in, and each
Note, if any, will represent an obligation
of, the related Trust. The assets of each
Trust (the "Trust Property") will include,
among other things, a pool (the "Contract
Pool") of retail installment sales
contracts and promissory notes (the
"Contracts") for the purchase of a variety
of consumer products as further described
under "Green Tree Financial Corporation"
herein (collectively, the "Products"),
certain monies paid or payable thereunder
on or after the Cutoff Date (as specified
in the related Prospectus Supplement), an
assignment of Green Tree's security
interests in the Products, an assignment of
the right to receive proceeds from claims
on certain insurance policies covering the
Products, and or the Obligors, the
assignment of certain rights of Green Tree
against the Dealers originating such
Contracts, the Collection Account,
including all investments therein, all
income from the investment of funds therein
and all proceeds thereof, certain other
accounts and the proceeds thereof and
certain other rights under the Trust
Documents. In addition, if so specified in
the related Prospectus Supplement, the
Trust Property will include monies on
deposit in a Pre-Funding Account to be
established with the Indenture Trustee or
the Trustee, which will be used to purchase
Subsequent Contracts (as defined below)
from the Seller from time to time during
the Pre-Funding Period specified in the
related Prospectus Supplement, as well as
any Subsequent Contracts so purchased. See
"The Trusts."
If and to the extent provided in the
related Prospectus Supplement, the related
Trust will be obligated to purchase from
Green Tree (subject to the satisfaction of
certain conditions described in the
applicable Sale and Servicing Agreement),
additional Contracts (the "Subsequent
Contracts") from time to time (as
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
frequently as daily) during the Pre-Funding
Period specified in the related Prospectus
Supplement having an aggregate principal
balance approximately equal to the amount
on deposit in the Pre-Funding Account (the
"Pre-Funded Amount") on such Closing Date.
Green Tree will be obligated to repurchase
Contracts upon the occurrence of certain
breaches of representations and warranties
(a "Repurchase Event"). See "Description of
the Trust Documents--Sale and Assignment of
the Contracts" and "--Servicing
Procedures."
Enhancement......................... If and to the extent specified in the
related Prospectus Supplement, enhancement
with respect to a Trust or any class of
Securities may include any one or more of
the following: a financial guaranty
insurance policy, letter of credit, Green
Tree guaranty, cash reserve fund,
derivative product, or other form of credit
enhancement, or any combination thereof.
The enhancement with respect to any Trust
or any class of Securities may be
structured to provide protection against
delinquencies and/or losses on the
Contracts, against changes in interest
rates, or other risks, to the extent and
under the conditions specified in the
related Prospectus Supplement. Unless
otherwise specified in the related
Prospectus Supplement, any form of
enhancement will have certain limitations
and exclusions from coverage thereunder,
which will be described in the related
Prospectus Supplement. Further information
regarding any provider of credit
enhancement, including financial
information when material, will be included
in the related Prospectus Supplement. See
"Description of the Trust Documents--
Enhancement."
Servicing........................... The Servicer will be responsible for
managing, administering, servicing and
making collections on the Contracts held by
each Trust. Unless otherwise specified in
the related Prospectus Supplement, with
respect to each series of Securities
compensation to the Servicer will include a
monthly fee (the "Servicing Fee") which
will be payable from the related Trust to
the Servicer on each Distribution Date, in
an amount equal to the product of one-
twelfth of .75% per annum multiplied by the
aggregate principal balance of the
Contracts (the "Aggregate Principal
Balance") as of the first day of the prior
calendar month, plus any late fees and
other administrative fees and expenses or
similar charges collected with respect to
the Contracts during such
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Monthly Period. See "Description of the
Trust Documents--Servicing Compensation."
Advances........................... Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
obligated to make Advances each month of
any scheduled payments on the Contracts
that were due but not received during the
prior Due Period. The Servicer will be
entitled to reimbursement of an Advance
from Available Funds in the Collection
Account for the related Trust. The Servicer
will be obligated to make an Advance only
to the extent that it determines that such
Advance will be recoverable from subsequent
funds available therefor in the Collection
Account for the related Trust. See
"Description of the Trust Documents--
Advances."
Contracts.......................... The Contracts forming part of the Trust
Property of each Trust were or will have
been originated by Dealers and sold by the
Dealers to Green Tree in the ordinary course
of business. The Contracts will generally be
prepayable at any time without penalty to
the purchaser of the related Product or
other person or persons who are obligated to
make payments thereunder (each, an
"Obligor"). See "The Contracts." Information
with respect to each Contract Pool,
including the proportions of each type of
Product financed, the weighted average
annual percentage rate and the weighted
average remaining maturity, will be set
forth in the related Prospectus Supplement.
Collection Account................. With respect to each series of Securities,
the Servicer will establish and maintain
one or more separate accounts (the
"Collection Account") in the name of the
Trustee or, in the case of any series
including one or more classes of Notes, in
the name of the Indenture Trustee for the
benefit of the Certificate Owners and the
Note Owners. All payments from Obligors
that are received by the Servicer on behalf
of each Trust will be deposited in the
related Collection Account no later than
one Business Day after receipt thereof.
Unless otherwise specified in the related
Prospectus Supplement, all payments from
Obligors and all proceeds (net of
reasonable expenses of collection) with
respect to Liquidated Contracts
("Liquidation Proceeds") that are received
by the Servicer will be deposited in the
related Collection Account no later than
one Business Day after receipt thereof.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
permitted to use any
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
alternative remittance schedule acceptable
to the Rating Agencies (as defined below).
See "Description of the Trust Documents--
Collections."
Mandatory Purchase of Certain With respect to each series of Securities,
Contracts........................ Green Tree will make certain
representations and warranties relating to
the Contracts held by the related Trust to
the Trustee for the benefit of the related
Trust and if such series of Securities
includes one or more classes of Notes, the
Trustee will assign its right to enforce
such representations and warranties to the
related Indenture Trustee as collateral for
the Notes. The Trustee and the Indenture
Trustee, if any, will be entitled to
require that Green Tree repurchase any
Contract if the interests of the
Certificate Owners, the Note Owners, if
any, or the related Trust therein are
materially and adversely affected by a
breach of any such representation or
warranty (a "Repurchase
Event"). See "Description of the Trust
Documents--Sale and Assignment of the
Contracts."
Optional Purchase of Contracts.... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, the Seller or the
Servicer may purchase all the
Contracts held by the related Trust on any
Distribution Date following the first
Monthly Period as of which the Aggregate
Principal Balance has declined to 10% or
less (or such other percentage as may be
specified in the related Prospectus
Supplement) of the Cutoff Date Principal
Balance, subject to certain provisions in
the related Trust Documents. See
"Description of the Trust Documents--
Termination."
Tax Status........................ If the Trust is structured as an owner
trust, in the opinion of Counsel to the
Seller, for federal and Minnesota income tax
purposes, the Notes will be characterized as
debt and the Trust will not be characterized
as an association or a publicly traded
partnership taxable as a corporation. Each
Noteholder, by the acceptance of a Note, will
agree to treat the Notes as debt. Each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as
a partnership in which the Certificateholders
are partners for federal income tax purposes.
Alternative characterizations of the Trust,
the Notes and the Certificates are possible,
but would not result in materially adverse
tax consequences to Noteholders or
Certificateholders. See "Certain Federal
Income Tax Consequences--Owner Trust Series"
and "Certain State Income Tax Consequences"
herein.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
If the Trust is structured as a grantor
trust, in the opinion of Counsel to the
Seller, for federal and Minnesota income
tax purposes, the Trust will be classified
as a grantor trust and not as an
association which is taxable as a
corporation. Each Certificateholder will be
treated as the owner of an undivided
interest in the Contracts and other Trust
Property. See "Certain Federal Income Tax
Consequences--Grantor Trust Series" and
"Certain State Income Tax Consequences"
herein.
ERISA Considerations .............. Subject to the considerations discussed
under "ERISA Considerations" herein and in
the related Prospectus Supplement, and
unless otherwise specified in the related
Prospectus Supplement, the Notes will be
eligible for purchase by employee benefit
plans. The related Prospectus Supplement
will provide further information with
respect to the eligibility of a class of
Certificates for purchase
by employee benefit plans. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Rating............................. As a condition of issuance, the Securities
of each series offered pursuant to this
Prospectus will be rated in one of the four
highest rating categories by at least one
nationally recognized rating agency (a
"Rating Agency"). There is no assurance
that the rating initially assigned to such
Securities will not be subsequently lowered
or withdrawn by the Rating Agency. In the
event the rating initially assigned to any
Securities is subsequently lowered for any
reason, no person or entity will be
obligated to provide any credit enhancement
in addition to the credit enhancement, if
any, specified in the related Prospectus
Supplement.
Registration of Certificates....... Unless otherwise specified in the related
Prospectus Supplement, the Certificates and
the Notes, if any, of each series will be
registered in the name of Cede & Co., as
the nominee of DTC, and will be available
for purchase only in book-entry form on the
records of DTC and participating members
thereof. Certificates and Notes will be
issued in definitive form only under the
limited circumstances described herein. All
references herein to "Holders" or
"Certificateholders" or "Noteholders" shall
reflect the rights of beneficial owners of
Certificates (the "Certificate Owners") or
of Notes ("Note Owners"), as the case may
be, as they may
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
indirectly exercise such rights through DTC
and participating members thereof, except
as otherwise specified herein or in the
related Prospectus Supplement. See
"Description of the Trust Documents--Book-
Entry Registration."
</TABLE>
12
<PAGE>
RISK FACTORS
CERTAIN LEGAL ASPECTS RELATING TO THE OWNERSHIP AND ENFORCEABILITY OF THE
CONTRACTS
With respect to each series of Securities, the transfer of the Contracts to
the related Trust will be subject to the requirements of the Uniform
Commercial Code (the "UCC") as in effect in Minnesota. The Seller will take or
cause to be taken such action as is required to perfect the Trust's rights in
the Contracts.
Unless otherwise provided in the related Prospectus Supplement, Green Tree
will hold the Contract Files on behalf of each Trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in Green Tree's possession. UCC
financing statements will be filed in Minnesota reflecting the sale and
assignment of the Contracts to the Trustee, and Green Tree's accounting
records and computer systems will also reflect such sale and assignment. In
addition, the Contracts will be stamped or otherwise marked to indicate that
such Contracts have been sold to the related Trust. Despite these precautions,
if, through inadvertence or otherwise, any of the Contracts were sold to
another party (or a security interest therein were granted to another party)
that purchased (or took such security interest in) any of such Contracts in
the ordinary course of its business and took possession of such Contracts, the
purchaser (or secured party) would acquire an interest in the Contracts
superior to the interest of the related Trust if the purchaser (or secured
party) acquired (or took a security interest in) the Contracts for new value
and without actual knowledge of such Trust's interest.
Due to the administrative burden and expense, the documents reflecting Green
Tree's security interest in the Products will not be amended to reflect the
assignment of the security interests in the Products by Green Tree to the
Trustee. In the absence of such an amendment, the Trustee may not have a
perfected security interest in the Products. Moreover, statutory liens for
repairs or unpaid taxes may have priority even over perfected security
interests in the Products. See "Description of the Trust Documents--Sale and
Assignment of the Contracts" and "Certain Legal Aspects of the Contracts."
GREEN TREE'S EXPERIENCE WITH THE PRODUCTS
Green Tree began originating and servicing retail installment contracts for
recreational vehicles in 1985 and for motorcycles in 1988 but has less
extensive underwriting and servicing experience with the other types of
products financed by Contracts that will be included in a Trust. Green Tree's
extensive experience in originating and servicing consumer financing contracts
for certain types of products, including manufactured housing, may not be
directly applicable to the servicing of consumer financing contracts secured
by other types of products.
RISKS TO INVESTORS UPON ANY INSOLVENCY OF GREEN TREE
Green Tree intends that any transfer of Contracts to the related Trust will
constitute a sale, rather than a pledge of the Contracts to secure
indebtedness of Green Tree. However, if Green Tree were to become a debtor
under the federal bankruptcy code or similar applicable state laws
(collectively, "Insolvency Laws"), a creditor or trustee in bankruptcy of
Green Tree or Green Tree as debtor-in-possession might argue that such sale of
Contracts by Green Tree was a pledge of the Contracts rather than a sale. This
position, if presented to or accepted by a court, could cause the related
Trust to experience a delay in or reduction of collections on the Contracts.
A case decided by the United States Court of Appeals for the Tenth Circuit,
Octagon Gas Systems, Inc. v. Rimmer, contains language to the effect that
accounts sold by an entity that subsequently became bankrupt remained property
of the debtor's bankruptcy estate. Although the Contracts (other than the Home
Improvement Contracts and the Home Equity Contracts) constitute chattel paper
rather than accounts under the UCC, sales of chattel paper, like sales of
accounts, are governed by Article 9 of the UCC. If Green Tree were to become a
debtor under any Insolvency Law and a court were to follow the reasoning of
the Tenth Circuit Court of Appeals and apply such reasoning to chattel paper,
a Trust could experience a delay in or reduction of collections on the
Contracts.
13
<PAGE>
SUBORDINATION OF CERTAIN CLASSES OF SECURITIES; LIMITED ASSETS
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on some or all classes of Securities of a series may
be subordinated in priority of payment to interest and principal due on the
Notes (if any) of such series and/or to distributions of interest and
principal on other classes of Securities of such series. In addition, holders
of certain classes of Securities of any series may have the right to take
actions that are detrimental to the interests of the holders of Securities of
certain other classes of Securities of such series. For example, holders of a
class of more senior Securities may be entitled to instruct the Indenture
Trustee or Trustee to liquidate the Trust Property when it is not in the
interest of holders of more junior classes of Securities of such series to do
so. Conversely, certain actions may require the consent of a majority of
Security Owners of all classes of a series, which may mean that Security
Owners of more junior classes can prevent the Security Owners of more senior
classes of such series from taking action. Moreover, no Trust will have any
significant assets or sources of funds other than the Contracts and, to the
extent provided in the related Prospectus Supplement, a Pre-Funding Account
and any credit enhancement specified in the related Prospectus Supplement. The
Notes, if any, of any series will represent obligations solely of, and the
Certificates of such series will represent interests solely in, the related
Trust, and, except as specified in the related Prospectus Supplement, neither
the Notes nor the Certificates of any such series will be insured or
guaranteed by Green Tree, the Servicer, the applicable Owner Trustee, the
applicable Indenture Trustee or any other person or entity. Consequently,
holders of the Securities of any series must rely for payment upon payments on
the related Contracts and, if and to the extent available, amounts on deposit
in the Pre-Funding Account, if any, and any credit enhancement, if any, as
specified in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, credit enhancement for a class of Securities of a
series may cover one or more other classes of Securities of such series, and
accordingly may be exhausted for the benefit of some classes and thereafter be
unavailable for such other classes.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Securities will be reduced by full or
partial prepayments on the Contracts. The Contracts will generally be
prepayable at any time without penalty. Prepayments (or, for this purpose,
equivalent payments to the related Trust) may result from payments by
Obligors, liquidations due to default, the receipt of proceeds from physical
damage or credit insurance, repurchases by Green Tree as a result of certain
uncured breaches of the warranties made by it with respect to the Contracts,
purchases by the Servicer as a result of certain uncured breaches of the
covenants with respect to the Contracts made by it in the related Agreement,
or Green Tree or the Servicer exercising its option to purchase all of the
remaining Contracts.
Unless otherwise specified in the related Prospectus Supplement, the amounts
paid to Securityholders in respect of principal on any Distribution Date will
include all prepayments on the Contracts during the corresponding Monthly
Periods. The Certificate Owners and the Note Owners will bear all reinvestment
risk resulting from the timing of payments of principal on the Securities.
LIMITED LIQUIDITY OF THE SECURITIES
There is currently no market for the Securities of any series. Although
Green Tree expects that the underwriters of any particular series will intend
to make a secondary market for such Securities, they will have no obligation
to do so. There can be no assurance that any such market will develop or, if
it does develop, that it will provide Certificate Owners or Note Owners with
liquidity of investment or will continue for the life of the Securities. The
Securities will not be listed on any securities exchange.
Unless otherwise specified in the related Prospectus Supplement, the
Securities will be issued in book-entry, rather than physical, form and, as a
result, in certain circumstances, the liquidity of the Securities in the
secondary market and the ability of the Certificate Owners and Note Owners to
pledge them may be adversely affected. See "Plan of Distribution" and "Certain
Information Regarding the Securities--Book-Entry Registration."
14
<PAGE>
THE TRUSTS
With respect to each series of Securities, Green Tree will establish a Trust
pursuant to the related Trust Documents. Prior to the sale and assignment of
the related Contracts pursuant to the related Trust Documents, the Trust will
have no assets or obligations. The Trust will not engage in any business
activity other than acquiring and holding the Trust Property, issuing the
Certificates and the Notes, if any, of such series and distributing payments
thereon.
Each Certificate will represent a fractional undivided interest in, and each
Note, if any, will represent an obligation of, the related Trust. The Trust
Property of each Trust will include, among other things, (i) a Contract Pool;
(ii) all monies paid or payable thereon on or after the Cutoff Date (as
specified in the related Prospectus Supplement); (iii) such amounts as from
time to time may be held in the Collection Account (including all investments
in the Collection Account and all income from the investment of funds therein
and all proceeds thereof) and certain other accounts (including the proceeds
thereof); (iv) an assignment of the security interests of Green Tree in the
Products securing the related Contracts; (v) an assignment of the right to
receive proceeds from claims on certain insurance policies covering the
related Products or Obligors; and (vi) certain other rights under the related
Trust Documents. See "The Contracts" and "Description of the Trust Documents--
Collections." The Trust Property will also include, if so specified in the
related Prospectus Supplement, monies on deposit in a Pre-Funding Account to
be established with the Indenture Trustee or the Trustee, which will be used
to purchase Subsequent Contracts from the Seller from time to time (and as
frequently as daily) during the Pre-Funding Period specified in the related
Prospectus Supplement. Any Subsequent Contracts so purchased will be included
in the related Contract Pool forming part of the Trust Property, subject to
the prior rights of the related Indenture Trustee and the Noteholders therein.
In addition, to the extent specified in the related Prospectus Supplement, a
form of credit enhancement may be issued to or held by the Trustee or the
Indenture Trustee for the benefit of holders of one or more classes of
Securities.
The Servicer will service the Contracts held by each Trust and will receive
fees for such services. See "Description of the Trust Documents--Servicing
Compensation." Unless otherwise specified in the related Prospectus
Supplement, Green Tree, on behalf of each Trust, will hold the original
installment sales contract or promissory note as well as copies of documents
and instruments relating to each Contract and evidencing the security interest
in the Product securing each Contract (the "Contract Files"). In order to
protect the Trust's ownership interest in the Contracts, Green Tree will file
a UCC-1 financing statement in Minnesota to give notice of such Trust's
ownership of the related Contracts and the related Trust Property.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the Securities of such series will be limited solely to the express
obligations of such Trustee set forth in the related Trust Documents. A
Trustee may resign at any time, in which event the General Partner (if the
related Trust is structured as an owner trust) or the Servicer or its
successor (if the related Trust is structured as a grantor trust) will be
obligated to appoint a successor trustee. The General Partner (if the related
Trust is structured as an owner trust) or the Servicer (if the related Trust
is structured as a grantor trust) may also remove the Trustee if the Trustee
ceases to be eligible to continue as Trustee under the related Trust Documents
or if the Trustee becomes insolvent. In such circumstances, the General
Partner (if the related Trust is structured as an owner trust) or the Servicer
(if the related Trust is structured as a grantor trust) will be obligated to
appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will be subject to any conditions or
approvals specified in the related Prospectus Supplement and will not become
effective until acceptance of the appointment by the successor trustee.
15
<PAGE>
THE CONTRACTS
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of retail installment sales contracts and promissory notes (the
"Contracts") to finance the purchase of Products (described below). The
Contracts will be originated or purchased by Green Tree on an individual basis
in the ordinary course of business. Except as otherwise specified in the
related Prospectus Supplement, the Contracts will be fully amortizing and will
bear interest at a fixed or variable rate (the "Contract Rate").
The Products financed by the Contracts included in a Contract Pool are
expected to include all the types of consumer products Green Tree is then
financing for retail customers (subject to the availability of such contracts
and subject to any eligibility criteria specified in the Trust Documents).
Currently, Green Tree provides financing for the purchase of motorcycles;
marine products (including boats, boat trailers and outboard motors); pianos
and organs; horse trailers; sport vehicles (including snowmobiles, personal
watercraft and all-terrain vehicles); trucks; aircraft; and recreational
vehicles. Any Trust whose Securities are offered pursuant to this Prospectus
will include only Contracts secured by the foregoing types of Products. The
types of Products securing a Contract Pool and the relative concentrations of
each such type, will be specified in the related Prospectus Supplement.
Because Green Tree has less extensive experience in underwriting and servicing
retail installment sales contracts for items such as the Products, Green Tree
has no basis upon which to distinguish the expected delinquency, default or
prepayment experience of Contracts secured by different types of Products.
GREEN TREE FINANCIAL CORPORATION
GENERAL
Green Tree is a Delaware corporation that, as of December 31, 1997, had
stockholders' equity of approximately $1,332,000,000. Through its various
divisions, Green Tree purchases, pools, sells and services retail conditional
sales contracts for manufactured housing and retail installment sales
contracts for home improvements, a variety of consumer products and equipment
finance, and provides credit to manufactured housing dealers for purposes of
purchasing manufactured home inventory from manufacturers. Green Tree conducts
its business throughout the United States through 50 manufactured housing
offices, 80 home improvement locations and three regional wholesale lending
centers, as well as centralized operations in St. Paul, Minnesota and Rapid
City, South Dakota. Its principal executive offices are located at 1100
Landmark Towers, St. Paul, Minnesota 55102-1639 (telephone (651) 293-3400).
Green Tree's Annual Report on Form 10-K for the year ended December 31, 1997,
most recent Proxy Statement and, when available, subsequent quarterly and
annual reports are available from Green Tree upon written request.
PURCHASE OF CONTRACTS
Green Tree arranges to purchase certain contracts originated by dealers of
Products located throughout the United States ("Dealers"). Green Tree's
personnel contact dealers and explain Green Tree's available financing plans,
terms, prevailing rates and credit and financing policies. If the dealer
wishes to utilize Green Tree's available customer financing, the dealer must
make an application for dealer approval.
All contracts that Green Tree purchases are written on forms provided or
approved by Green Tree and are purchased on an individually approved basis in
accordance with Green Tree's guidelines. The dealer submits the customer's
credit application and purchase order to Green Tree's office where an analysis
of the creditworthiness of the proposed buyer is made. The analysis includes a
review of the applicant's paying habits, length and likelihood of continued
employment and certain other procedures. Green Tree's underwriting guidelines
for consumer products focus primarily on the obligor's ability to repay the
loan rather than the collateral value of the product financed. The maximum
loan amount for an obligor will depend on a variety of factors, including the
type of product, whether the product is new or used, the obligor's debt-to-
income ratio, and the manufacturer's invoice price of the product (plus
certain dealer-installed accessories, sales taxes, title fees, registration
fees, and certain other items). For products other than aircraft and trucks,
the maximum permissible
16
<PAGE>
debt-to-income ratio (based on the monthly loan payments) is between 55% and
65%, the maximum loan-to-invoice ratio (for new products) ranges from 100% to
125%, and the maximum loan-to-sales-price ratio (for used products) is
typically 90% (subject to further limitation based on a standard assumed value
for such a used product). Green Tree's underwriting guidelines for truck loans
(other than a small number of loans made to corporate borrowers to finance the
purchase of a fleet of trucks) emphasize the trucking experience of the
obligor and the projected operating revenues of the truck, rather than the
obligor's current income, because the obligor's income as owner-operator of
the truck is generally expected to be the source of funds to make payments on
the contract and because Green Tree believes that the obligor's past trucking
experience is the best predictor of success as an owner-operator of the truck.
With respect to some truck loans, Green Tree may allow the dealer to maintain
collection responsibility with respect to the customers' payments and to remit
such payments to Green Tree; if the customer should fail to make timely
payment on the loan, the dealer remains obligated to make payment to Green
Tree. Green Tree nevertheless requires that the customer meet Green Tree's
underwriting standards, and Green Tree's records show the customer as the
obligor on the loan. There is a risk, however, that insolvency or fraud on the
part of the dealer could result in a loss on such truck loans. A loan for the
purchase of an aircraft is generally subject to limitations of a 45% debt-to-
income ratio and generally will not exceed $1,000,000, although loans of up to
$10,000,000 may be made with senior management approval. Green Tree management
may revise these guidelines from time to time, and the underwriting guidelines
may be exceeded in certain cases with the approval of Green Tree management.
Accordingly, some of the Contracts included in a Trust may not conform in all
respects to the criteria described above. Green Tree will generally finance
premiums for the term of the contract on optional credit life, accident and
health and extended warranty insurance, up to 20% of the sales price of the
Product, and may finance premiums for required physical damage insurance on
the product. If the application meets Green Tree's guidelines and the credit
is approved, Green Tree purchases the contract when the customer accepts
delivery of the Product.
Currently, Green Tree's consumer finance and equipment finance divisions
finance the purchase of motorcycles; marine products (including boats, boat
trailers and outboard motors); pianos and organs; horse trailers; sport
vehicles (including snowmobiles, personal watercraft and all-terrain
vehicles); trucks; aircraft; and recreational vehicles. The Products financed
by Contracts included in any Trust whose Securities are offered pursuant to
this Prospectus will include only the products listed above.
LOSS AND DELINQUENCY INFORMATION
Each Prospectus Supplement will include Green Tree's loss and delinquency
experience with respect to its entire servicing portfolio of consumer product
contracts. However, there can be no assurance that such experience will be
indicative of the performance of the Contracts included in a particular
Contract Pool.
RATIO OF EARNINGS TO FIXED CHARGES FOR THE COMPANY
Set forth below are the Company's ratios of earnings to fixed charges for
the past five years. For the purposes of compiling these ratios, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense and the interest portion of rent expense.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------ JUNE 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.... 4.81 7.98 7.90 5.44 3.94 3.18
</TABLE>
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, many of the
Contracts will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment
17
<PAGE>
allocable to interest for the period will be less than if the payment had been
made on the due date, the portion of the payment applied to reduce the
principal balance will be correspondingly greater, and the principal balance
will be amortized more rapidly than scheduled. Conversely, if an Obligor pays
an installment after its due date, the portion of the payment allocable to
interest will be greater than if the payment had been made on the due date,
the portion of the payment applied to reduce the principal balance will be
correspondingly less, and the principal balance will be amortized slower than
scheduled, in which case a larger portion of the principal balance may be due
on the final scheduled payment date. Any interest shortfalls resulting from
early payment or prepayment of a Contract will be funded by collections on
other Contracts or, to the extent collections are insufficient, by payments
under the applicable form of credit enhancement, if any, described in the
related Prospectus Supplement.
The Contracts will be prepayable, without premium or penalty, by Obligors at
any time. Prepayments (or, for this purpose, equivalent payments to a Trust)
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by Green Tree due to breach of a
representation or warranty, or as a result of Green Tree or the Servicer
exercising its option to purchase the Contract Pool. See "Description of the
Trust Documents." The rate of prepayments on the Contracts may be influenced
by a variety of economic, social and other factors. No assurance can be given
that prepayments on the Contracts will conform to any estimated or actual
historical experience, and no prediction can be made as to the actual
prepayment rates which will be experienced on the Contracts.
Certificateholders and Noteholders will bear all reinvestment risk resulting
from the timing of payments of principal on the Certificates or the Notes, as
the case may be.
POOL FACTOR
The "Certificate Pool Factor" for each class of Certificates will be an
eight-digit decimal which the Servicer will compute indicating the Certificate
Balance with respect to such Certificates as of each Distribution Date (after
giving effect to all distributions of principal made on such Distribution
Date), as a fraction of the Original Principal Balance of such Certificates.
The "Note Pool Factor" for each class of Notes, if any, will be an eight-digit
decimal which the Servicer will compute indicating the remaining outstanding
principal balance with respect to such Notes as of each Distribution Date
(after giving effect to all distributions of principal on such Distribution
Date) as a fraction of the initial outstanding principal balance of such class
of Notes. Each Certificate Pool Factor and each Note Pool Factor will
initially be 1.00000000; thereafter, the Certificate Pool Factor and the Note
Pool Factor will decline to reflect reductions in the Certificate Balance of
the applicable class of Certificates or reductions in the outstanding
principal balance of the applicable class of Notes, as the case may be. The
amount of a Certificateholder's pro rata share of the Certificate Balance for
the related class of Certificates can be determined by multiplying the
original denomination of the Certificateholder's Certificate by the then
applicable Certificate Pool Factor. The amount of a Noteholder's pro rata
share of the aggregate outstanding principal balance of the applicable class
of Notes can be determined by multiplying the original denomination of such
Noteholder's Note by the then applicable Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents, on
each Distribution Date or Payment Date, as the case may be, the related
Certificateholders and Noteholders will receive periodic reports from the
Trustee stating the Certificate Pool Factor or the Note Pool Factor, as the
case may be, and containing various other items of information. Unless and
until Definitive Certificates or Definitive Notes are issued, such reports
will be sent on behalf of the Trust to the Trustee and the Indenture Trustee
(if any) and Cede & Co., as registered holder of the Certificates and the
Notes and the nominee of DTC. Certificate Owners and Note Owners may receive
such reports, upon written request, together with a certification that they
are Certificate Owners or Note Owners and payment of any expenses associated
with the distribution of such reports, from the Trustee and the Indenture
Trustee (if any) at the addresses specified in the related Prospectus
Supplement. See "Certain Information Regarding the Securities--Statements to
Securityholders."
18
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds to be received by the Trust from the sale of each series of
Securities will be used to pay to Green Tree the purchase price for the
Contracts and to make the deposit of the Pre-Funded Amount into the Pre-
Funding Account, if any, to repay warehouse lenders and/or to provide for
other forms of credit enhancement specified in the related Prospectus
Supplement. The net proceeds to be received by Green Tree will be used to pay
its warehouse loans, and any additional proceeds will be added to Green Tree's
general funds and used for its general corporate purposes.
THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to Trust Documents to be entered into between
Green Tree, as Seller and as Servicer, and the Trustee, forms of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
material provisions of the Trust Documents. Where particular provisions of or
terms used in the Trust Documents are referred to, the actual provisions
(including definitions of terms) are incorporated by reference as part of this
summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Certificates will initially be represented by a single Certificate
registered in the name of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository"). See "Certain Information
Regarding the Securities--Book-Entry Registration." Unless otherwise specified
in the related Prospectus Supplement, the Certificates evidencing interests in
a Trust will be available for purchase in denominations of $1,000 initial
principal amount and integral multiples thereof, except that one Certificate
evidencing an interest in such Trust may be issued in a denomination that is
less than $1,000 initial principal amount. Certificates may be transferred or
exchanged without the payment of any service charge other than any tax or
governmental charge payable in connection with such transfer or exchange.
Unless otherwise specified in the related Prospectus Supplement, the Trustee
will initially be designated as the registrar for the Certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The timing and priority of distributions, seniority, allocations of loss,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest (or, where applicable, with respect to
principal only or interest only) on the Certificates of any series will be
described in the related Prospectus Supplement. Distributions of interest on
the Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and, unless otherwise specified in
the related Prospectus Supplement, will be made prior to distributions with
respect to principal. A series may include one or more classes of Stripped
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distribution, or (ii) interest
distributions, with disproportionate, nominal or no distributions in respect
of principal. Each class of Certificates may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate (and
which may be zero for certain classes of Stripped Certificates), or any
combination of the foregoing. The related Prospectus Supplement will specify
the Pass-Through Rate for each class of Certificate, or the initial Pass-
Through Rate and the method for determining the Pass-Through Rate. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Unless otherwise specified in the related Prospectus
Supplement, distributions in respect of the Certificates will be subordinate
to payments in respect of the Notes, if any, as more fully described in the
related Prospectus Supplement. Distributions in respect of principal of any
class of Certificates will be made on a pro rata basis among all of the
Certificateholders of such class.
19
<PAGE>
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount
of distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall
be as set forth in the related Prospectus Supplement.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Unless otherwise specified in the related Prospectus Supplement, no Notes will
be issued as a part of any series. The following summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Notes and the Indenture, and the following
summary will be supplemented in whole or in part by the related Prospectus
Supplement. Where particular provisions of or terms used in the Indenture are
referred to, the actual provisions (including definition of terms) are
incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by a single Note registered in the name
of the nominee of the Depository. See "Certain Information Regarding the
Securities--Book-Entry Registration." Unless otherwise specified in the
related Prospectus Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof. Notes may be
transferred or exchanged without the payment of any service charge other than
any tax or governmental charge payable in connection with such transfer or
exchange. Unless otherwise provided in the related Prospectus Supplement, the
Indenture Trustee will initially be designated as the registrar for the Notes.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on the Notes will be described in the related Prospectus Supplement. The right
of holders of any class of Notes to receive payments of principal and interest
may be senior or subordinate to the rights of holders of any class or classes
of Notes of such series, or any class of Certificates, as described in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, payments of interest on the Notes will be made prior to
payments of principal thereon. A series may include one or more classes of
Stripped Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payment, or (ii) interest payments with
disproportionate, nominal or no principal payments. Each class of Notes may
have a different Interest Rate, which may be a fixed, variable or adjustable
Interest Rate (and which may be zero for certain classes of Stripped Notes),
or any combination of the foregoing. The related Prospectus Supplement will
specify the Interest Rate for each class of Notes, or the initial Interest
Rate and the method for determining the Interest Rate. One or more classes of
Notes of a series may be redeemable under the circumstances specified in the
related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement
(each, a "Payment Date"), in which case each class of Noteholders will receive
their ratable share (based upon the aggregate amount of interest due to such
class of Noteholders) of the aggregate amount available to be distributed in
respect of interest on the Notes.
In the case of a series of Securities which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal
and interest, and any schedule or formula or other provisions applicable to
the determination thereof, of each such class will be set forth in the related
Prospectus Supplement.
20
<PAGE>
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of principal and interest of any class of Notes will be made on a pro
rata basis among all of the Notes of such class.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Green Tree will provide a
copy of the applicable Indenture (without exhibits) upon request to a holder
of Notes issued thereunder.
Modification of Indenture Without Noteholder Consent. Each Trust and related
Indenture Trustee (on behalf of such Trust) may, without consent of the
related Noteholders, enter into one or more supplemental indentures for any of
the following purposes: (i) to correct or amplify the description of the
collateral or add additional collateral; (ii) to provide for the assumption of
the Note and the Indenture obligations by a permitted successor to the Trust;
(iii) to add additional covenants for the benefit of the related Noteholders;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee; (v) to cure any ambiguity or correct or supplement any
provision in the Indenture or in any supplemental indenture; (vi) to provide
for the acceptance of the appointment of a successor Indenture Trustee or to
add to or change any of the provisions of the Indenture or any supplemental
indenture which may be inconsistent with any other provision of the Indenture
as shall be necessary and permitted to facilitate the administration by more
than one trustee; (vii) to modify, eliminate or add to the provisions of the
Indenture in order to comply with the Trust Indenture Act of 1939, as amended;
and (viii) to add any provisions to, change in any manner, or eliminate any of
the provisions of, the Indenture or modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in this
clause (viii) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any related Noteholder unless
Noteholder consent is otherwise obtained as described below.
Modifications of Indenture With Noteholder Consent. With respect to each
Trust, with the consent of the holders representing a majority of the
principal balance of the outstanding related Notes (a "Note Majority"), the
Owner Trustee and the Indenture Trustee may execute a supplemental indenture
to add provisions, to change in any manner or eliminate any provisions of, the
related Indenture, or modify in any manner the rights of the related
Noteholders.
Without the consent of the holder of each outstanding related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of
any installment of principal of or interest on any Note or reduce the
principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change the manner of calculating any
such payment, any place of payment where, or the coin or currency in which any
Note or any interest thereon is payable; (ii) impair the right to institute
suit for the enforcement of certain provisions of the Indenture regarding
payment; (iii) reduce the percentage of the aggregate amount of the
outstanding Notes the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture; (iv) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the related Trust, any other obligor on the Notes, the
Seller or an affiliate of any of them; (v) reduce the percentage of the
aggregate outstanding amount of the Notes the consent of the holders of which
is required to direct the Indenture Trustee to sell or liquidate the Contracts
if the proceeds of such sale would be insufficient to pay the principal amount
and accrued but unpaid interest on the outstanding Notes; (vi) decrease the
percentage of the aggregate principal amount of the Notes required to amend
the sections of the Indenture which specify the applicable percentage of
aggregate principal amount of the Notes necessary to amend the Indenture or
certain other related agreements; or (vii) permit the creation of any lien
ranking prior to or on a parity with the lien of the Indenture with respect to
any of the collateral for the Notes or, except as otherwise permitted or
contemplated in the Indenture, terminate the lien of the Indenture on any such
collateral or deprive the holder of any Note of the security afforded by the
lien of the Indenture.
21
<PAGE>
Events of Default; Rights Upon Event of Default. With respect to each Trust,
unless otherwise specified in the related Prospectus Supplement, "Events of
Default" under the Indenture will consist of: (i) a default for five days or
more in the payment of any interest on any Note; (ii) a default in the payment
of the principal of or any installment of the principal of any Note when the
same becomes due and payable; (iii) a default in the observance or performance
in any material respect of any covenant or agreement of the Trust made in the
Indenture, or any representation or warranty made by the Trust in the
Indenture or in any certificate delivered pursuant thereto or in connection
therewith having been incorrect as of the time made, and the continuation of
any such default or the failure to cure such breach of a representation or
warranty for a period of 30 days after notice thereof is given to the Trust by
the Indenture Trustee or to the Trust and the Indenture Trustee by the holders
of at least 25% in principal amount of the Notes then outstanding; or (iv)
certain events of bankruptcy, insolvency, receivership or liquidation of the
Trust. However, the amount of principal due and payable on any class of Notes
on any Payment Date (prior to the Final Scheduled Payment Date, if any, for
such class) will generally be determined by amounts available to be deposited
in the Note Distribution Account for such Payment Date. Therefore, unless
otherwise specified in the related Prospectus Supplement, the failure to pay
principal on a class of Notes generally will not result in the occurrence of
an Event of Default unless such class of Notes has a Final Scheduled Payment
Date, and then not until such Final Scheduled Payment Date for such class of
Notes.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or a Note Majority may declare the
principal of the Notes to be immediately due and payable. Such declaration
may, under certain circumstances, be rescinded by a Note Majority.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series have been declared due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust Property, exercise
remedies as a secured party, sell the related Contracts or elect to have the
Trust maintain possession of such Contracts and continue to apply collections
on such Contracts as if there had been no declaration of acceleration. Unless
otherwise specified in the related Prospectus Supplement, the Indenture
Trustee, however, will be prohibited from selling the related Contracts
following an Event of Default, unless (i) the holders of all the outstanding
related Notes consent to such sale; (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale; or (iii) the Indenture Trustee
determines that the proceeds of the Contracts would not be sufficient on an
ongoing basis to make all payments on the Notes as such payments would have
become due if such obligations had not been declared due and payable, and the
Indenture Trustee obtains the consent of the holders of 66 2/3% of the
aggregate outstanding amount of the Notes. Unless otherwise specified in the
related Prospectus Supplement, following a declaration upon an Event of
Default that the Notes are immediately due and payable, (i) Note Owners will
be entitled to ratable repayment of principal on the basis of their respective
unpaid principal balances and (ii) repayment in full of the accrued interest
on and unpaid principal balances of the Notes will be made prior to any
further payment of interest or principal on the Certificates.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with
respect to a series of Notes, the Indenture Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of such Notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying
with such request. Subject to the provisions for indemnification and certain
limitations contained in the Indenture, a Note Majority in a series will have
the right to direct the time, method and place of conducting any proceeding or
any remedy available to the Indenture Trustee, and a Note Majority may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or
consent of all of the holders of such outstanding Notes.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
22
<PAGE>
Event of Default, (ii) the holders of not less than 25% in principal amount of
the outstanding Notes of such series have made written request of the
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered the Indenture Trustee
reasonable indemnity, (iv) the Indenture Trustee has for 60 days failed to
institute such proceeding, and (v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice
of the Event of Default within 90 days after it occurs. Except in the case of
a failure to pay principal of or interest on any Note, the Indenture Trustee
may withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the Seller or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee nor the Trustee in its individual capacity,
nor any holder of a Certificate including, without limitation, the Seller, nor
any of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of an
express agreement to the contrary, be personally liable for the payment of the
related Notes or for any agreement or covenant of the related Trust contained
in the Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the
laws of the United States or any state, (ii) such entity expressly assumes the
Trust's obligation to make due and punctual payments upon the Notes and the
performance or observance of every agreement and covenant of the Trust under
the Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Trustee has been
advised that the then current rating of the related Notes or Certificates then
in effect would not be reduced or withdrawn by the Rating Agencies as a result
of such merger or consolidation, (v) the Trustee has received an opinion of
counsel to the effect that such consolidation or merger would have no material
adverse tax consequence to the Trust or to any related Note Owner or
Certificate Owner.
Each Trust will not, among other things, (i) except as expressly permitted
by the Indenture, the Trust Documents or certain related documents for such
Trust (collectively, the "Related Documents"), sell, transfer, exchange or
otherwise dispose of any of the assets of the Trust, (ii) claim any credit on
or make any deduction from the principal and interest payable in respect of
the related Notes (other than amounts withheld under the Code or applicable
state law) or assert any claim against any present or former holder of such
Notes because of the payment of taxes levied or assessed upon the Trust, (iii)
dissolve or liquidate in whole or in part, (iv) permit the validity or
effectiveness of the related Indenture to be impaired or permit any person to
be released from any covenants or obligations with respect to the related
Notes under such Indenture except as may be expressly permitted thereby, or
(v) except as expressly permitted by the Related Documents, permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance to be
created on or extend to or otherwise arise upon or burden the assets of the
Trust or any part thereof, or any interest therein or proceeds thereof.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust
will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture or otherwise
in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment
of its obligations under the Indenture.
23
<PAGE>
Indenture Trustee's Annual Report. The Indenture Trustee will be required to
mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the Trust to
the Indenture Trustee in its individual capacity, the property and funds
physically held by the Indenture Trustee as such and any action taken by it
that materially affects the Notes and that has not been previously reported.
Note Owners may receive such reports upon written request, together with a
certification that they are Note Owners and payment of reproduction and
postage expenses associated with the distribution of such reports, from the
Indenture Trustee at the address specified in the related Prospectus
Supplement.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all of such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee may resign at any time, in which
event the Seller will be obligated to appoint a successor trustee. Green Tree
may also remove the Indenture Trustee if the Indenture Trustee ceases to be
eligible to continue as such under the Indenture or if the Indenture Trustee
becomes insolvent. In such circumstances, Green Tree will be obligated to
appoint a successor trustee. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee will be subject to any
conditions or approvals, if any, specified in the related Prospectus
Supplement and will not become effective until acceptance of the appointment
by a successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise provided in the related Prospectus Supplement, the
Securities of each series will be registered in the name of Cede & Co., the
nominee of DTC. DTC is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC accepts securities for deposit from its
participating organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants").
Certificate Owners and Note Owners who are not Participants but desire to
purchase, sell or otherwise transfer ownership of Securities may do so only
through Participants (unless and until Definitive Certificates or Definitive
Notes, each as defined below, are issued). In addition, Certificate Owners and
Note Owners will receive all distributions of principal of, and interest on,
the Securities from the Trustee or the Indenture Trustee, as applicable,
through DTC and Participants. Certificate Owners and Note Owners will not
receive or be entitled to receive certificates representing their respective
interests in the Securities, except under the limited circumstances described
below and such other circumstances, if any, as may be specified in the related
Prospectus Supplement.
Unless and until Definitive Securities are issued, it is anticipated that
the only Certificateholder of the Certificates and the only Noteholder of the
Notes, if any, will be Cede & Co., as nominee of DTC. Certificate
24
<PAGE>
Owners and Note Owners will not be recognized by the Trustee as
Certificateholders or by the Indenture Trustee as Noteholders as those terms
are used in the related Trust Documents or Indenture. Certificate Owners and
Note Owners will be permitted to exercise the rights of Certificateholders or
Noteholders, as the case may be, only indirectly through Participants and DTC.
With respect to any series of Securities, while the Securities are
outstanding (except under the circumstances described below), under the rules,
regulations and procedures creating and affecting DTC and its operations (the
"Rules"), DTC is required to make book-entry transfers among Participants on
whose behalf it acts with respect to the Securities and is required to receive
and transmit distributions of principal of, and interest on, the Securities.
Participants with whom Certificate Owners or Note Owners have accounts with
respect to Securities are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Certificate Owners and Note Owners. Accordingly, although Certificate Owners
and Note Owners will not possess Securities, the Rules provide a mechanism by
which Certificate Owners and Note Owners will receive distributions and will
be able to transfer their interests.
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, Certificates and Notes (if any) will be issued
in registered form to Certificate Owners and Note Owners, or their nominees,
rather than to DTC (such Certificates and Notes being referred to herein as
"Definitive Certificates" and "Definitive Notes," respectively), only if (i)
DTC, the Seller or the Servicer advises the Trustee or the Indenture Trustee,
as the case may be, in writing that DTC is no longer willing or able to
discharge properly its responsibilities as nominee and depository with respect
to the Certificates or the Notes, and the Seller, the Servicer, the Trustee or
the Indenture Trustee, as the case may be, is unable to locate a qualified
successor, (ii) the Seller or the Administrator (if any) at its sole option
has advised the Trustee or the Indenture Trustee, as the case may be, in
writing that it elects to terminate the book-entry system through DTC and
(iii) after the occurrence of a Servicer Termination Event, the holders
representing a majority of the Certificate Balance (a "Certificate Majority")
or a Note Majority advises the Trustee or the Indenture Trustee, as the case
may be, through DTC, that continuation of a book-entry system is no longer in
their best interests. Upon issuance of Definitive Certificates or Definitive
Notes to Certificate Owners or Note Owners, such Certificates or Notes will be
transferable directly (and not exclusively on a book-entry basis) and
registered holders will deal directly with the Trustee or the Indenture
Trustee, as the case may be, with respect to transfers, notices and
distributions.
DTC has advised the Seller that, unless and until Definitive Certificates or
Definitive Notes are issued, DTC will take any action permitted to be taken by
a Certificateholder or a Noteholder under the related Trust Documents or
Indenture only at the direction of one or more Participants to whose DTC
accounts the Certificates or Notes are credited. DTC has advised the Seller
that DTC will take such action with respect to any fractional interest of the
Certificates or the Notes only at the direction of and on behalf of such
Participants beneficially owning a corresponding fractional interest of the
Certificates or the Notes. DTC may take actions, at the direction of the
related Participants, with respect to some Certificates or Notes which
conflict with actions taken with respect to other Certificates or Notes.
Issuance of Certificates and Notes in book-entry form rather than as
physical certificates or notes may adversely affect the liquidity of
Certificates or Notes in the secondary market and the ability of the
Certificate Owners or Note Owners to pledge them. In addition, since
distributions on the Certificates and the Notes will be made by the Trustee or
the Indenture Trustee to DTC and DTC will credit such distributions to the
accounts of its Participants, with the Participants further crediting such
distributions to the accounts of indirect participants or Certificate Owners
or Note Owners, Certificate Owners and Note Owners may experience delays in
the receipt of such distributions.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Trustee a statement to be delivered to the related Certificateholders
on such Distribution Date. On or prior to each Distribution Date, the Servicer
will prepare and provide to the Indenture Trustee a statement to be delivered
to the related Noteholders
25
<PAGE>
on such Distribution Date. Such statements will be based on the information in
the related Servicer's Certificate setting forth certain information required
under the Trust Documents (the "Servicer's Certificate"). Unless otherwise
specified in the related Prospectus Supplement, each such statement to be
delivered to Certificateholders will include the following information as to
the Certificates with respect to such Distribution Date or the period since
the previous Distribution Date, as applicable, and each such statement to be
delivered to Noteholders will include the following information as to the
Notes with respect to such Distribution Date or the period since the previous
Distribution Date, as applicable:
(i) the amount of the distribution allocable to interest on or with
respect to each class of Securities;
(ii) the amount of the distribution allocable to principal on or with
respect to each class of Securities;
(iii) the Certificate Balance and the Certificate Pool Factor for each
class of Certificates and the aggregate outstanding principal balance and
the Note Pool Factor for each class of Notes, after giving effect to all
payments reported under (ii) above on such date;
(iv) the amount of the Servicing Fee paid to the Servicer with respect to
the related Monthly Period or Periods, as the case may be;
(v) the Pass-Through Rate or Interest Rate for the next period for any
class of Certificates or Notes with variable or adjustable rates;
(vi) the amount of Advances made by the Servicer with respect to such
Distribution Date, and the amount paid to the Servicer on such Distribution
Date as reimbursement of Advances made on previous Distribution Dates;
(vii) the amount, if any, distributed to Certificateholders and
Noteholders applicable to payments under the related form of credit
enhancement, if any; and
(viii) such other information as may be specified in the related
Prospectus Supplement.
Each amount set forth pursuant to subclauses (i), (ii), (iv) and (vi) with
respect to Certificates or Notes will be expressed as a dollar amount per
$1,000 of the initial Certificate Balance or the initial principal balance of
the Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustee, the Indenture Trustee and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of DTC.
Certificate Owners and Note Owners may receive copies of such reports upon
written request, together with a certification that they are Certificate
Owners or Note Owners, as the case may be, and payment of reproduction and
postage expenses associated with the distribution of such reports, from the
Trustee or the Indenture Trustee, as applicable. See "Reports to
Securityholders" and "--Book-Entry Registration" above.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of a Trust, the Trustee and the
Indenture Trustee, as applicable, will mail to each holder of a class of
Securities who at any time during such calendar year has been a
Securityholder, and received any payment thereon, a statement containing
certain information for the purposes of such Securityholder's preparation of
federal income tax returns. DTC will convey such information to its
Participants, who in turn will convey such information to their related
indirect participants in accordance with arrangements among DTC and such
participants. Certificate Owners and Note Owners may receive such reports upon
written request, together with a certification that they are Certificate
Owners or Note Owners and payment of reproduction and postage expenses
associated with the distribution of such information, from the Trustee, with
respect to Certificate Owners, or from the Indenture Trustee, with respect to
Note Owners, at the addresses specified in the related Prospectus Supplement.
See "Certain Federal Income Tax Consequences."
26
<PAGE>
LISTS OF SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Certificates, at such time, if any, as Definitive
Certificates have been issued, the Trustee will, upon written request by three
or more Certificateholders or one or more holders of Certificates evidencing
not less than 25% of the Certificate Balance, within five Business Days after
provision to the Trustee of a statement of the applicants' desire to
communicate with other Certificateholders about their rights under the related
Trust Documents or the Certificates and a copy of the communication that the
applicants propose to transmit, afford such Certificateholders access during
business hours to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Trust Documents. Unless otherwise specified in the related Prospectus
Supplement, the Trust Documents will not provide for holding any annual or
other meetings of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Notes, if any, at such time, if any, as Definitive Notes
have been issued, the Indenture Trustee will, upon written request by three or
more Noteholders or one or more holders of Notes evidencing not less than 25%
of the aggregate principal balance of the related Notes, within five Business
Days after provision to the Indenture Trustee of a statement of the
applicants' desire to communicate with other Noteholders about their rights
under the related Indenture or the Notes and a copy of the communication that
the applicants propose to transmit, afford such Noteholders access during
business hours to the current list of Noteholders for purposes of
communicating with other Noteholders with respect to their rights under the
Indenture. Unless otherwise specified in the related Prospectus Supplement,
the Indenture will not provide for holding any annual or other meetings of
Noteholders.
DESCRIPTION OF THE TRUST DOCUMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of either (i) the Pooling and
Servicing Agreements or (ii) the Sale and Servicing Agreements and the Trust
Agreements (in either case collectively referred to as the "Trust Documents")
pursuant to which Green Tree will sell and assign such Contracts to a Trust
and the Servicer will agree to service such Contracts on behalf of the Trust,
and pursuant to which such Trust will be created and Certificates will be
issued. Forms of the Trust Documents have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. Green Tree will
provide a copy of such agreements (without exhibits) upon request to a holder
of Securities described therein. This summary does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of the Trust Documents. Where particular provisions or terms used
in the Trust Documents are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
SALE AND ASSIGNMENT OF THE CONTRACTS
On the Closing Date, Green Tree will sell and assign to the Trust, without
recourse, Green Tree's entire interest in the related Contracts and the
proceeds thereof, including its security interests in the related Products.
Each Contract transferred by Green Tree to the Trust will be identified in a
schedule appearing as an exhibit to the related Trust Documents (the "Schedule
of Contracts"). Concurrently with such sale and assignment, the Trustee will
execute and deliver the related certificates representing the Certificates to
or upon the order of the Seller, and the Trustee will execute and the
Indenture Trustee will authenticate and deliver the Notes, if any, to or upon
the order of the Seller.
Except as otherwise specified in the related Prospectus Supplement, Green
Tree will make certain warranties in the Trust Documents with respect to each
Contract as of the Closing Date, including that: (a) as of the Cutoff Date,
the most recent scheduled payment was made or was not delinquent more than 59
days; (b) no provision of a Contract has been waived, altered or modified in
any respect, except by instruments or documents contained in the Contract
file; (c) each Contract is a legal, valid and binding obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by laws affecting creditors' rights generally); (d) no Contract
27
<PAGE>
is subject to any right of rescission, set-off, counterclaim or defense; (e)
for Contracts with an original balance greater than $7,500, the related
Product is covered by insurance naming Green Tree as an additional insured
party; (f) each Contract has been originated by a dealer or Green Tree in the
ordinary course of such dealer's, or Green Tree's business and, if originated
by a dealer, was purchased by Green Tree in the ordinary course of business;
(g) no Contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer of the Contract or an interest
therein to the Trustee pursuant to the Trust Documents or pursuant to the
Notes or Certificates unlawful; (h) each Contract complies with all
requirements of law; (i) no Contract has been satisfied, subordinated to a
lower lien ranking than its original position in whole or in part or rescinded
and the Product has not been released from the lien of the Contract in whole
or in part; (j) each Contract creates a valid and enforceable first priority
security interest in favor of Green Tree in the Product covered thereby and
such security interest has been assigned by Green Tree to the Trustee; (k) all
parties to each Contract had capacity to execute such Contract; (l) no
Contract has been sold, assigned or pledged to any other person and prior to
the transfer of the Contracts by Green Tree to the Trustee, Green Tree had
good and marketable title to each Contract free and clear of any encumbrance,
equity, loan, pledge, charge, claim or security interest, and was the sole
owner and had full right to transfer such Contract to the Trustee; (m) as of
the Cutoff Date, there was no default, breach, violation or event permitting
acceleration under any Contract (except for payment delinquencies permitted by
clause (a) above), no event which with notice and the expiration of any grace
or cure period would constitute a default, breach, violation or event
permitting acceleration under such Contract, and Green Tree has not waived any
of the foregoing; (n) as of the Closing Date there were, to the best of Green
Tree's knowledge, no liens or claims which have been filed for work, labor or
materials affecting the Product securing a Contract, which are or may be liens
prior or equal to the lien of the Contract; (o) each Contract is a fully-
amortizing loan and provides for level payments over the term of such
Contract; (p) each Contract contains customary and enforceable provisions such
as to render the rights and remedies of the Holder thereof adequate for
realization against the collateral of the benefits of the security; (q) the
description of each Contract set forth in the Schedule of Contracts delivered
to the Trustee is true and correct; and (r) there is only one original of each
Contract (other than the copy in the possession of the Obligor).
The warranties of Green Tree will be made as of the execution and delivery
of the related Trust Documents and will survive the sale, transfer and
assignment of the related Contracts and other Trust Property to the Trust but
will speak only as of the date made.
Green Tree will be obligated to repurchase for the Repurchase Price (as
defined below) any Contract on the first business day after the first
Determination Date which is more than 90 days after Green Tree becomes aware,
or should have become aware, or Green Tree's receipt of written notice from
the Trustee or the Servicer, of a breach of any representation or warranty of
Green Tree in the Trust Documents that materially adversely affects the
Trust's interest in any Contract if such breach has not been cured. The
Repurchase Price for any Contract will be the remaining principal amount
outstanding on such Contract on the date of repurchase plus accrued and unpaid
interest thereon at its Contract Rate to the date of such repurchase. This
repurchase obligation constitutes the sole remedy available to the Trust and
the Securityholders for a breach of a representation or warranty under the
Trust Documents with respect to the Contracts (but not with respect to any
other breach by Green Tree of its obligations under the Trust Documents).
Upon the purchase by Green Tree of a Contract due to a breach of a
representation or warranty, the Trustee will convey such Contract and the
related Trust Property to Green Tree.
CUSTODY OF CONTRACT FILES
Unless otherwise specified in the related Prospectus Supplement, Green Tree
initially will be appointed to act as custodian for the Contract Files of each
Trust. Prior to the appointment of any custodian other than Green Tree, the
Trust and such institution specified in the related Prospectus Supplement
shall enter into a custodian agreement pursuant to which such institution will
agree to hold the Contract Files on behalf of the related Trust. Any such
custodian agreement may be terminated by the Trust on 30 days' notice to such
institution.
28
<PAGE>
To facilitate servicing and save administrative costs, the documents will
not be physically segregated from other similar documents that are in Green
Tree's possession. UCC financing statements will be filed in Minnesota
reflecting the sale and assignment of the Contracts to the Trustee, and Green
Tree's accounting records and computer systems will also reflect such sale and
assignment. In addition, the Contracts that are in Green Tree's possession
will be stamped or otherwise marked to indicate that such Contracts have been
sold to the related Trust. Despite these precautions, if, through inadvertence
or otherwise, any of the Contracts were sold to another party (or a security
interest therein were granted to another party) that purchased (or took such
security interest in) any of such Contracts in the ordinary course of its
business and took possession of such Contracts, the purchaser (or secured
party) would acquire an interest in the Contracts superior to the interest of
the related Trust if the purchaser (or secured party) acquired (or took a
security interest in) the Contracts for new value and without actual knowledge
of such Trust's interest. See "Certain Legal Aspects of the Contracts--Rights
in the Contracts."
COLLECTIONS
With respect to each Trust, the Servicer will establish one or more
Collection Accounts in the name of the Trustee or, in the case of any series
including one or more classes of Notes, in the name of the Indenture Trustee
for the benefit of the related Securityholders. If so specified in the related
Prospectus Supplement, the Trustee will establish and maintain for each series
an account, in the name of the Trustee on behalf of the related
Certificateholders, in which amounts released from the Collection Account and
any Pre-Funding Account and any amounts received from any source of credit
enhancement for distribution to such Certificateholders will be deposited and
from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With respect to any series including one
or more classes of Notes, the Indenture Trustee will establish and maintain
for each series an account, in the name of the Indenture Trustee on behalf of
the related Noteholders, in which amounts released from the Collection Account
and any Pre-Funding Account and any amounts received from any source of credit
enhancement for payment to such Noteholders will be deposited and from which
all distributions to such Noteholders will be made (the "Note Distribution
Account"). The Collection Account, the Certificate Distribution Account (if
any), and the Note Distribution Account (if any), are referred to herein
collectively as the "Designated Accounts." Any other accounts to be
established with respect to a Trust will be described in the related
Prospectus Supplement.
Each Designated Account will be an Eligible Account maintained with the
Trustee, the Indenture Trustee and/or other depository institutions. "Eligible
Account" means any account which is (i) an account maintained with an Eligible
Institution (as defined below); (ii) an account or accounts the deposits in
which are fully insured by either the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC; (iii) a "segregated trust account"
maintained with the corporate trust department of a federal or state chartered
depository institution or trust company with trust powers and acting in its
fiduciary capacity for the benefit of the Trustee, which depository
institution or trust company has capital and surplus (or, if such depository
institution or trust company is a subsidiary of a bank holding company system,
the capital and surplus of the bank holding company) of not less than
$50,000,000 and the securities of such depository institution (or, if such
depository institution is a subsidiary of a bank holding company system and
such depository institution's securities are not rated, the securities of the
bank holding company) has a credit rating from each rating agency rating such
series of Notes and/or Certificates (a "Rating Agency") in one of its generic
credit rating categories which signifies investment grade; or (iv) an account
that will not cause any Rating Agency to downgrade or withdraw its then-
current rating assigned to the Securities, as confirmed in writing by each
Rating Agency. "Eligible Institution" means any depository institution
organized under the laws of the United States or any state, the deposits of
which are insured to the full extent permitted by law by the Bank Insurance
Fund (currently administered by the Federal Deposit Insurance Corporation),
whose short-term deposits have been rated in one of the two highest rating
categories or such other rating category as will not adversely affect the
ratings assigned to the Securities of such series. On the Closing Date
specified in the related Prospectus Supplement, the Servicer will cause to be
deposited in the Collection Account all payments on the Contracts received by
the Servicer after the Cutoff Date and on or prior to the second Business Day
preceding the Closing Date.
29
<PAGE>
The Servicer will deposit all payments on the Contracts held by any Trust
received directly by the Servicer from Obligors and all proceeds of Contracts
collected directly by the Servicer during each Monthly Period into the
Collection Account no later than one Business Day after receipt.
Notwithstanding the foregoing and unless otherwise provided in the related
Prospectus Supplement, the Servicer may utilize an alternative remittance
schedule, if the Servicer provides to the Trustee and the Indenture Trustee
written confirmation from each Rating Agency that such alternative remittance
schedule will not result in the downgrading or withdrawal by such Rating
Agency of the rating(s) then assigned to the Securities. Green Tree will also
deposit into the Collection Account on or before the Deposit Date the Purchase
Amount of each Contract to be purchased by it for breach of a representation
or warranty.
For any series of Securities, funds in the Designated Accounts and any other
accounts identified in the related Prospectus Supplement will be invested, as
provided in the related Trust Documents, at the direction of the Servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related Trust Documents ("Eligible
Investments"). Eligible Investments shall mature no later than the Business
Day preceding the applicable Distribution Date for the Monthly Period to which
such amounts relate. Investments in Eligible Investments will be made in the
name of the Trustee or the Indenture Trustee, as the case may be, and such
investments will not be sold or disposed of prior to their maturity.
Unless otherwise specified in the related Prospectus Supplement, collections
or recoveries on a Contract (other than late fees or certain other similar
fees or charges) received during a Monthly Period and Purchase Amounts
deposited with the Trustee prior to a Distribution Date will be applied first
to any outstanding Monthly Advances made by the Servicer with respect to such
Contract, and then to interest and principal on the Contract in accordance
with the terms of the Contract.
SERVICING PROCEDURES
The Servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the Servicer with respect to Contracts owned
or serviced by it, to collect all payments due with respect to the Contracts
held by any Trust and, in a manner consistent with the Trust Documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the Trust Documents, the Servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
Product securing a Contract, with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on such Contract. The Servicer is authorized to follow such of
its normal collection practices and procedures as it deems necessary or
advisable to realize upon any Contract. The Servicer may repossess and sell
the Product securing such Contract at judicial sale, or take any other action
permitted by applicable law. See "Certain Legal Aspects of the Contracts." The
Servicer will be entitled to recover all reasonable expenses incurred by it in
connection therewith. The proceeds of such realization (net of such expenses)
will be deposited in the Collection Account at the time and in the manner
described above under "--Collections."
The Trust Documents will provide that the Servicer will indemnify and defend
the Trustee, the Indenture Trustee, the Trust and the Securityholders against,
among other things, any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, or in respect of any action taken or failed to be taken by the
Servicer with respect to any portion of the Trust Property in violation of the
provisions of the Trust Documents. The Servicer's obligations to indemnify the
Trustee, the Indenture Trustee, the Trust and the Securityholders for the
Servicer's actions or omissions will survive the removal of the Servicer but
will not apply to any action or omission of a successor Servicer.
SERVICING COMPENSATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Servicer will be entitled to receive
the Servicing Fee for each Monthly Period in an amount equal to the
30
<PAGE>
product of one-twelfth of the Servicing Rate and the Aggregate Principal
Balance as of the first day of such Monthly Period. The Servicer also will be
entitled to collect and retain any late fees or other administrative fees or
similar charges allowed by the terms of the Contracts or applicable law.
Unless otherwise provided in the related Prospectus Supplement, the "Servicing
Rate" will equal .75% per annum calculated on the basis of a 360-day year
consisting of twelve 30-day months. As long as Green Tree is the Servicer, the
Servicing Fee and any additional servicing compensation will be paid out of
collections on or with respect to the Contracts after the required
distributions to Noteholders and Certificateholders. If Green Tree is no
longer the Servicer, the Servicing Fee and any additional servicing
compensation will be paid out of collections on or with respect to the
Contracts prior to distributions to Certificateholders and Noteholders. Unless
otherwise specified in the related Prospectus Supplement, a "Monthly Period"
with respect to any Distribution Date is the calendar month immediately
preceding the month in which the Distribution Date occurs.
Green Tree, as Servicer, will be required to pay all expenses incurred by it
in connection with its servicing activities (including fees, expenses and
disbursements of the Trustee, the Indenture Trustee, the Custodian and
independent accountants, taxes imposed on the Servicer and expenses incurred
in connection with distributions and reports to Certificateholders and
Noteholders), except certain expenses incurred in connection with realizing
upon the Contracts.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest
(or, where applicable, of principal or interest only) on each class of
Securities entitled thereto will be made by the Trustee or the Indenture
Trustee, as applicable, to the Certificateholders and the Noteholders. The
timing, calculation, allocation, order, source, priorities of and requirements
for all distributions to each class of Certificateholders and all payments to
each class of Noteholders will be set forth in the related Prospectus
Supplement.
Except as otherwise specified in the related Prospectus Supplement, on the
third Business Day prior to each Distribution Date (the "Determination Date"),
the Servicer will determine the Amount Available and the amounts to be
distributed on the Notes and Certificates for such Distribution Date. Except
as otherwise specified in the related Prospectus Supplement, the "Amount
Available" for any Distribution Date will be equal to (i) the funds on deposit
in the Collection Account at the close of business on the last day of the
related Monthly Period, plus (ii) any Advances to be made by the Servicer with
respect to delinquent payments, plus (iii) any Repurchase Amounts to be
deposited by Green Tree with respect to Contracts to be repurchased due to a
breach of a representation or warranty, minus (iv) any amounts paid by
Obligors in the related Monthly Period, but to be applied in respect of a
regular monthly payment due in a subsequent Monthly Period (an "Advance
Payment"), minus (v) any amounts incorrectly deposited in the Collection
Account.
Except as otherwise specified in the related Prospectus Supplement, on each
Distribution Date, prior to making distributions in respect of the Notes and
Certificates, the Amount Available will be applied, first, if Green Tree is no
longer the Servicer, to pay the servicing fee to the successor Servicer, and
second, to reimburse the Servicer (including Green Tree) for any Advances made
with respect to a prior Monthly Period and subsequently recovered and for any
Advances previously made that the Servicer has determined are Uncollectible
Advances.
ENHANCEMENT
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, with respect to each class of Securities will be set forth in
the related Prospectus Supplement. If and to the extent provided in the
related Prospectus Supplement, enhancement may be in the form of a financial
guaranty insurance policy, letter of credit, Green Tree guaranty, cash reserve
fund, derivative product, or other form of enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If
specified in the applicable Prospectus Supplement, enhancement for a class of
Securities of a Series may cover one or more other classes of Securities in
such Series, and accordingly may be exhausted for the benefit of a particular
class and thereafter be
31
<PAGE>
unavailable to such other classes. Further information regarding any provider
of enhancement, including financial information when material, will be
included in the related Prospectus Supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the Certificateholders and the Noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
Certificateholders and the Noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the enhancement for a class of Securities will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal and interest thereon. If losses occur which exceed the amount
covered by any enhancement or which are not covered by any enhancement,
Securityholders will bear their allocable share of deficiencies. In addition,
if a form of enhancement covers more than one class of Securities of a Series,
Securityholders of any such class will be subject to the risk that such
enhancement will be exhausted by the claims of Securityholders of other
classes.
ADVANCES
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be obligated to make Advances each month of any scheduled
payments on the Contracts included in a Trust that were due but not received
during the prior Monthly Period. The Servicer will be entitled to
reimbursement of an Advance from Available Funds in the Collection Account for
the related Trust (i) when the delinquent payment is recovered by the Trust,
or (ii) when the Servicer has determined that such Advance has become an
Uncollectible Advance. The Servicer will be obligated to make an Advance only
to the extent that it determines that such Advance will be recoverable from
subsequent funds available therefor in the Collection Account for the related
Trust.
EVIDENCE AS TO COMPLIANCE
On or before March 31 of each year the Servicer will deliver to each Trustee
and each Indenture Trustee a report of a nationally recognized accounting firm
stating that such firm has examined certain documents and records relating to
the servicing of Contracts serviced by the Servicer under pooling and
servicing agreements or sale and servicing agreements similar to the Trust
Documents and stating that, on the basis of such procedures, such servicing
has been conducted in compliance with the applicable Trust Documents, except
for any exceptions set forth in such report. A copy of such statement may be
obtained by any Certificate Owner or Note Owner upon compliance with the
requirements described above. See "Certain Information Regarding the
Securities--Statements to Securityholders" above.
CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise provided in the related Prospectus Supplement, Green Tree's
appointment as Servicer under the related Trust Documents will continue until
such time as it resigns or is terminated as Servicer, or until such time, if
any, as a Servicer Termination Event shall have occurred under the related
Trust Documents. The related Trust Documents will provide that the Servicer
may not resign from its obligations and duties as Servicer thereunder, except
upon a determination (as evidenced by an opinion of independent counsel,
delivered and acceptable to the Trustee and the Indenture Trustee), that by
reason of a change in legal requirements its performance of such duties would
cause it to be in violation of such legal requirements in a manner which would
result in a material adverse effect on the Servicer. No such resignation will
become effective until a successor Servicer has assumed the servicing
obligations and duties under the related Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, resulting from any merger or consolidation to which the Servicer
is a party, which acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer or succeeds to all or substantially all the
business of the Servicer, where the Servicer is not the surviving entity,
which corporation or other entity assumes every obligation of the Servicer
under each Trust Document, will be the
32
<PAGE>
successor to the Servicer under the related Trust Documents; provided,
however, that (i) such entity is an Eligible Servicer, and (ii) immediately
after giving effect to such transaction, no Servicer Termination Event and no
event which, after notice or lapse of time, or both, would become a Servicer
Termination Event shall have occurred and be continuing.
INDEMNIFICATION AND LIMITS ON LIABILITY
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will be liable only to the extent of
the obligations specifically undertaken by it under the Trust Documents and
will have no other obligations or liabilities thereunder. The Trust Documents
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will have any liability to the Trust, the
Certificateholders or the Noteholders, except as provided in the Trust
Documents, for any action taken or for refraining from taking any action
pursuant to the Trust Documents, other than any liability that would otherwise
be imposed by reason of the Servicer's breach of the Trust Documents or
willful misfeasance, bad faith or negligence (including errors in judgment) in
the performance of its duties, or by reason of reckless disregard of
obligations and duties under the Trust Documents or any violation of law.
The Servicer may, with the prior consent of the Trustee and the Indenture
Trustee, if any, delegate duties under the related Trust Documents to any of
its affiliates. In addition, the Servicer may at any time perform the specific
duty of repossessing Products through subcontractors who are in the business
of servicing consumer receivables. The Servicer may also perform other
specific duties through subcontractors; provided, however, that no such
delegation of such duties by the Servicer shall relieve the Servicer of its
responsibility with respect thereto.
SERVICER TERMINATION EVENTS
Except as otherwise specified in the related Prospectus Supplement, Servicer
Termination Events under the Trust Documents will include (i) any failure by
the Servicer to deliver to the Indenture Trustee for distribution to the
Noteholders or to the Trustee for distribution to the Certificateholders any
required payment which continues unremedied for 5 days (or such other period
specified in the related Prospectus Supplement) after the giving of written
notice; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the Trust
Documents that materially and adversely affects the interests of
Securityholders, which, in either case, continues unremedied for 30 days after
the giving of written notice of such failure of breach; (iii) any assignment
or delegation by the Servicer of its duties or rights under the Trust
Documents, except as specifically permitted under the Trust Documents, or any
attempt to make such an assignment or delegation; (iv) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings regarding the Servicer; and (v) the Servicer is no longer
an Eligible Servicer (as defined in the Trust Documents). Notice as used
herein shall mean notice to the Servicer by the Trustee, the Indenture
Trustee, if any, or Green Tree, or to Green Tree, the Servicer, the Indenture
Trustee, if any, and the Trustee by the holders of Securities representing
interests aggregating not less than 25% of the outstanding principal balance
of the Securities issued by such Trust.
Unless otherwise specified in the related Prospectus Supplement, if a
Servicer Termination Event occurs and is continuing, the Trustee, the
Indenture Trustee (if any), or the holders of at least 25% in aggregate
principal balance of the outstanding Securities issued by such Trust, by
notice then given in writing to the Servicer (and to the Trustee and the
Indenture Trustee if given by the Securityholders) may terminate all of the
rights and obligations of the Servicer under the Trust Documents. Immediately
upon the giving of such notice, and, in the case of a successor Servicer other
than the Trustee, the acceptance by such successor Servicer of its
appointment, all authority of the Servicer will pass to the Trustee or other
successor Servicer. The Trustee, the Indenture Trustee and the successor
Servicer may set off and deduct any amounts owed by the Servicer from any
amounts payable to the outgoing Servicer.
33
<PAGE>
On and after the time the Servicer receives a notice of termination, the
Trustee or other successor Servicer specified in the related Prospectus
Supplement (the "Backup Servicer") will be the successor in all respects to
the Servicer and will be subject to all the responsibilities, restrictions,
duties and liabilities of the Servicer under the related Trust Documents;
provided, however, that the successor Servicer shall have no liability with
respect to any obligation which was required to be performed by the prior
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party (including a Securityholder) based on any alleged
action or inaction of the prior Servicer. Notwithstanding such termination,
the Servicer shall be entitled to payment of certain amounts payable to it
prior to such termination, for services rendered prior to such termination. No
such termination will affect in any manner Green Tree's obligation to
repurchase certain Contracts for breaches of representations or warranties
under the Trust Documents. In the event that the Trustee would be obligated to
succeed the Servicer but is unwilling or unable so to act, it may appoint, or
petition to a court of competent jurisdiction for the appointment of a
Servicer. Pending such appointment, the Trustee is obligated to act in such
capacity. The Trustee and such successor Servicer may agree upon the servicing
compensation to be paid, which in no event may be greater than the
compensation to the Servicer under the Trust Documents.
Upon any termination of, or appointment of a successor to, the Servicer, the
Trustee and the Indenture Trustee (if any) will each give prompt written
notice thereof to Certificateholders and Noteholders, respectively, at their
respective addresses appearing in the Certificate Register or the Note
Register and to each Rating Agency.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, the Trust
Documents may be amended by the Seller, the Servicer, the Trustee and the
Indenture Trustee, if any, but without the consent of any of the
Securityholders, to cure any ambiguity or to correct or supplement any
provision therein, provided that such action will not, in the opinion of
counsel (which may be internal counsel to Green Tree or the Servicer)
reasonably satisfactory to the Trustee and the Indenture Trustee, materially
and adversely affect the interests of the Securityholders. The Trust Documents
may also be amended by Green Tree, the Servicer and the Trustee and the
Indenture Trustee (if any), and a Certificate Majority and a Note Majority (if
applicable), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Trust Documents or of
modifying, in any manner, the rights of the Certificateholders or the
Noteholders. No such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
the related Contracts or distributions that are required to be made on any
related Certificate or Note or the related Pass-Through Rate or Interest Rate
or (ii) reduce the percentage of the Certificate Balance evidenced by
Certificates or of the aggregate principal amount of Notes then outstanding
required to consent to any such amendment, without the consent of the holders
of all Certificates or all Notes, as the case may be, then outstanding.
TERMINATION
The obligations created by the Trust Documents will terminate upon the date
calculated as specified in the Trust Documents, generally upon (i) the later
of the final payment or other liquidation of the last Contract subject thereto
and the disposition of all property acquired upon repossession of any Product
and (ii) the payment to the Securityholders of all amounts held by the
Servicer or the Trustee and required to be paid to the Securityholders
pursuant to the Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Securities, in order to avoid excessive administrative
expense, Green Tree and the Servicer each will be permitted, at its option, to
purchase from the Trust, on any Distribution Date immediately following any
Monthly Period as of the last day of which the Aggregate Principal Balance is
equal to or less than 10% (or such other percentage as may be specified in the
related Prospectus Supplement) of the Cutoff Date Principal Balance, all
remaining Contracts in the related Trust and the other remaining Trust
Property at a price equal to the aggregate of the
34
<PAGE>
Purchase Amounts therefor and the appraised value of any other remaining Trust
Property. The exercise of this right will effect an early retirement of the
related Certificates and Notes.
If a General Partner is named in the related Prospectus Supplement, unless
otherwise specified in the related Prospectus Supplement, the Trust Agreement
will provide that, in the event that the General Partner becomes insolvent,
withdraws or is expelled as a General Partner or is terminated or dissolved,
the Trust will terminate in 90 days and effect redemption of the Notes (if
any) and prepayment of the Certificates following the winding-up of the
affairs of the related Trust, unless within such 90 days the remaining General
Partner, if any, and holders of a majority of the Certificates of such series
agree in writing to the continuation of the business of the Trust and to the
appointment of a successor to the former General Partner, and the Owner
Trustee is able to obtain an opinion of counsel to the effect that the Trust
will not thereafter be an association (or publicly traded partnership) taxable
as a corporation for federal income tax purposes.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Trustee will give written notice of
the final distribution with respect to the Certificates to each
Certificateholder of record and the Indenture Trustee will give written notice
of the final payment with respect to the Notes (if any), to each Noteholder of
record. The final distribution to any Certificateholder and the final payment
to any Noteholder will be made only upon surrender and cancellation of such
holder's Certificate or Note at the office or agency of the Trustee, with
respect to Certificates, or of the Indenture Trustee, with respect to Notes,
specified in the notice of termination. Any funds remaining in the Trust,
after the Trustee or the Indenture Trustee has taken certain measures to
locate a Certificateholder or Noteholder, as the case may be, and such
measures have failed, will be distributed to The United Way, and the
Certificateholders and Noteholders, by acceptance of their Certificates and
Notes, will waive any rights with respect to such funds.
THE TRUSTEE
The Trustee or Owner Trustee, as applicable, for each Trust will be
specified in the related Prospectus Supplement. The Trustee, in its individual
capacity or otherwise, and any of its affiliates may hold Certificates or
Notes in their own names or as pledgee. In addition, for the purpose of
meeting the legal requirements of certain jurisdictions, the Trustee, with the
consent of the Servicer, shall have the power to appoint co-trustees or
separate trustees of all or any part of the related Trust. In the event of
such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Trustee by the related Trust Documents will be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, or,
in any jurisdiction where the Trustee is incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee of any Trust may resign at any time, in which event the General
Partner, if any, specified in the related Prospectus Supplement or, if no such
General Partner is specified, the Servicer or its successor will be obligated
to appoint a successor trustee. The General Partner, if any, specified in the
related Prospectus Supplement (or, if no such General Partner is specified,
the Servicer) may also remove the Trustee, if the Trustee ceases to be
eligible to serve, becomes legally unable to act, is adjudged insolvent or is
placed in receivership or similar proceedings. In such circumstances, the
General Partner, if any, specified in the related Prospectus Supplement or, if
no such General Partner is specified, the Servicer will be obligated to
appoint a successor trustee. Any resignation or removal of the Trustee and
appointment of a successor trustee will not become effective until acceptance
of the appointment by the successor trustee.
DUTIES OF THE TRUSTEE
The Trustee will make no representation as to the validity or sufficiency of
any Trust Document, the Certificates or the Notes (other than its execution of
the Certificates and the Notes), the Contracts or any related documents, and
will not be accountable for the use or application by the Servicer of any
funds paid to the Servicer in respect of the Certificates, the Notes or the
Contracts prior to deposit in the related Collection Account.
35
<PAGE>
The Trustee will be required to perform only those duties specifically
required of it under the Trust Documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the Servicer to the Trustee under the
Trust Documents, in which case it will only be required to examine such
certificates, reports or instruments to determine whether they conform
substantially to the requirements of the Trust Documents.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Trust Documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders or Noteholders, unless such
Certificateholders or Noteholders have offered the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No Certificateholder nor any Noteholder will have any
right under the Trust Documents to institute any proceeding with respect to
such Trust Documents, unless such holder has given the Trustee written notice
of default and unless the holders of Certificates evidencing not less than 25%
of the Certificate Balance or the holders of Notes evidencing not less than
25% of the aggregate principal balance of the Notes then outstanding, as the
case may be, have made written request to the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity, and the Trustee for 30 days after the receipt of
such notice, request and offer to indemnify has neglected or refused to
institute any such proceedings.
ADMINISTRATOR
If an Administrator is specified in the related Prospectus Supplement, such
Administrator will enter into an agreement (the "Administration Agreement")
pursuant to which such Administrator will agree, to the extent provided in
such Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture and the Trust
Agreement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
RIGHTS IN THE CONTRACTS
The Contracts are "chattel paper" as defined in the UCC as in effect in the
State of Minnesota. Pursuant to the UCC, an ownership interest in chattel
paper may be perfected by possession or by filing a UCC-1 financing statement
in the state where the seller's principal executive office is located.
Accordingly, financing statements covering the Contracts will be filed by
Green Tree in Minnesota.
The Servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each Trust's interest in the related
Contracts and the proceeds thereof. Green Tree will warrant in the Trust
Documents with respect to the Contracts held by the related Trust and the
Trustee will pledge the right to enforce such warranty to the Indenture
Trustee as collateral for the Notes, if any, that, as of the Closing Date,
such Contracts have not been sold, pledged or assigned by Green Tree to any
other person, and that it has good and indefeasible title thereto and is the
sole owner thereof free of any Liens and that, immediately upon the transfer
of the Contracts to such Trust pursuant to the related Trust Document, the
Trust will have good and indefeasible title to and will be the sole owner of
the Contracts, free of any Liens. In the event of an uncured breach of any of
such warranties in the Trust Documents that materially and adversely affects
the related Trust's, Certificateholders' or Noteholders' interest in any
Contract (a "Repurchase Event"), Green Tree will be obligated to repurchase
such Contract.
Unless otherwise provided in the related Prospectus Supplement, Green Tree
will hold the Contract Files on behalf of each Trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in Green Tree's possession. UCC
financing statements will be filed in Minnesota reflecting the sale and
assignment of the Contracts to the Trustee, and Green Tree's accounting
records and computer systems will also reflect such sale and assignment. In
addition, the Contracts will be stamped or otherwise marked to indicate that
such Contracts have been sold to the related Trust. Despite these precautions,
if, through inadvertence or otherwise, any of the Contracts were sold to
another party (or a security
36
<PAGE>
interest therein were granted to another party) that purchased (or took such
security interest in) any of such Contracts in the ordinary course of its
business and took possession of such Contracts, the purchaser (or secured
party) would acquire an interest in the Contracts superior to the interest of
the related Trust if the purchaser (or secured party) acquired (or took a
security interest in) the Contracts for new value and without actual knowledge
of such Trust's interest. See "Description of the Trust Documents--Custody of
Contract Files."
SECURITY INTERESTS IN THE PRODUCTS (OTHER THAN AIRCRAFT)
Security interests in some Products must be perfected by notation of the
secured party's lien on the certificate of title or by actual possession of
the certificate of title, depending on the law of the state wherein the
purchaser resides. Security interests in certain other Products must be
perfected by the filing of a UCC financing statement, naming the Obligor as
debtor and Green Tree as secured party. Purchase money security interests in
Products that are "consumer goods" (as defined in the UCC) are deemed
perfected under some states' laws when the contract is executed and Green Tree
has advanced the purchase price of the goods. The practice of Green Tree is to
take such action as is required to perfect its security interest under the
laws of the state in which the Product is located. In the event of clerical
errors, administrative delays or otherwise, such actions may not have been
taken with respect to a Product and such security interest may be subordinate
to the interests of, among others, subsequent purchasers of the Products,
holders of perfected security interests in the Product, and the trustee in
bankruptcy of the Obligor. Likewise, where Green Tree did not file a UCC
financing statement because its security interest was perfected as a purchase
money security interest in "consumer goods," (i) such security interest may be
deemed not to be perfected if the Product were ultimately determined not to be
"consumer goods," and (ii) a subsequent purchaser of the Product may acquire
the Product free of Green Tree's security interest. Such events would,
however, give rise to a Repurchase Event and obligate Green Tree to repurchase
the affected Contract if the interests of the related Certificateholders,
Noteholders or Trust were materially and adversely affected.
Pursuant to the related Trust Document, Green Tree will assign the security
interests in the Products to the Owner Trustee on behalf of the related Trust.
However, because of the administrative burden and expense that would be
entailed in doing so, none of Green Tree, the Seller, the Trustee or the
Servicer will be required, except to the extent provided below, to amend the
certificates of title or UCC financing statements to identify the Trustee as
the new secured party and, accordingly, Green Tree will continue to be named
as the secured party on the certificates of title or UCC financing statements
relating to the Products. The Servicer will be required to note the interest
of the related Trust on the certificates of title for the Products or to amend
the UCC financing statements only upon a Servicer Termination Event. In most
states, an assignment such as that under the related Trust Documents should be
an effective transfer of a security interest without amendment of any lien
noted on the related certificate of title or financing statement, and the
assignee should succeed to the assignor's status as the secured party. In the
absence of fraud or forgery by the Obligor or administrative error by state
recording officials, the notation of the lien of Green Tree on the certificate
of title or the UCC financing statement should be sufficient to protect the
related Trust against the rights of subsequent purchasers of a Product or
subsequent lenders who take a security interest in the related Product.
However, in the absence of such an amendment, the security interest of the
related Trust in the related Products might be defeated by, among others, the
trustee in bankruptcy of Green Tree or the Obligor. However, such failure
would give rise to a Repurchase Event and obligate Green Tree to repurchase
the affected Contract if the interests of the related Certificateholders,
Noteholders or Trust were materially and adversely affected.
In most states, a perfected security interest in a Product subject to
certificate of title or a financing statement continues for four months after
the Product is moved to a different state and thereafter until the owner re-
registers the Product in the new state, but in no event beyond the surrender
of the certificate of title. A majority of states require surrender of a
certificate of title to re-register a Product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to such
Product. In the case of Products registered in states which provide for
notation of a lien but not possession of the certificate of title by the
holder of the security interest in the related Product, the secured party
should receive notice of surrender if the security interest in the Product is
noted on the certificate of title. Accordingly, the secured party should have
the opportunity to re-perfect its
37
<PAGE>
security interest in the Product in the state of relocation. In states that do
not require a certificate of title for registration of a Product, re-
registration could defeat perfection.
In the ordinary course of servicing its secured consumer contract portfolio,
it is the practice of Green Tree to effect such re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Product subject to a certificate of title,
Green Tree must surrender possession of the certificate of title or receive
notice as a result of its lien noted thereon and accordingly should have an
opportunity to require satisfaction of the related Contract before release of
the lien.
Under the laws of most states, liens for repairs performed on a Product and
liens for unpaid taxes take priority over even a perfected security interest
in a Product. Green Tree in the related Trust Document will represent that,
immediately prior to the sale, assignment and transfer thereof to the related
Trust, each Contract held by such Trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in favor of Green Tree,
as secured party. However, liens for taxes, judicial liens or liens arising by
operation of law could arise at any time during the term of a Contract. In
addition, the laws of certain states and federal law permit the confiscation
of motor vehicles and certain other consumer products by governmental
authorities under certain circumstances if used in unlawful activities, which
may result in the loss of a secured party's perfected security interest in the
confiscated product. No notice will be given to the Owner Trustee, Indenture
Trustee, Certificateholders or Noteholders in the event such a lien or
confiscation arises, and if such lien arises or confiscation occurs after the
date of issuance of any series of Certificates and Notes, neither Green Tree
nor the Servicer will be required to repurchase or purchase the related
Contract.
SECURITY INTERESTS IN AIRCRAFT
In order for a valid security interest in a United States-registered
aircraft to be perfected against third parties, including a trustee in
bankruptcy of the borrower, it must be perfected in accordance with the
Federal Aviation Act. The UCC has been preempted by the Federal Aviation Act
with respect to the method and location of filing against goods such as
aircraft, engines, propellers, appliances and certain spare parts to the
extent that it is possible to record against them at the Federal Aviation
Administration ("FAA") Aircraft Registry located in Oklahoma City, Oklahoma
(the "Registry").
Security interests perfected by filing with the Registry may nevertheless be
subject to (1) purchase money security interests which may be filed up to ten
days (21 days in some states) after a debtor receives possession and which
will then have, in most states, priority in the aircraft (unless it is
property held as inventory) over a conflicting security interest in the same
aircraft and (2) the rights of buyers in the ordinary course of business from
persons in the business of selling goods of that kind.
Exceptions also include possessory mechanic's and storage liens, which may
or may not need to be filed and which usually have priority over a mortgage,
whether or not such liens are incurred before or after the mortgage is
recorded. Non-possessory mechanic's liens, which exist under many state laws,
probably do not take priority over mortgages previously filed with the
Registry. If provided for by state law, a non-possessory mechanic's lien on an
aircraft may be filed at the Registry.
Federal tax liens are filed according to Federal law in the appropriate
location in each state and cannot be filed at the Registry. When so filed,
Federal tax liens can have priority over subsequent FAA recorded mortgages in
aircraft with many exceptions, including the exception of a purchase money
security interest. It is an open issue whether unrecorded liens arising out of
FAA penalties have priority over filed security interests in a registered
aircraft.
The principal effect of recordation is that each mortgage or other
conveyance that is filed with the Registry for recordation affecting the
applicable aircraft, engine, propeller, appliance or spare parts (so long as
they are maintained at any designated locations) is valid and perfected from
the time of filing as to all persons with whatever priority is given by state
law. If not filed for recordation, such a mortgage or other conveyance will
not
38
<PAGE>
be valid against third persons except persons having actual notice thereof.
The date of filing for recordation at the Registry is the date of perfection
of the mortgage or other conveyance, even though recordation by the Registry
may not occur for several weeks or months after delivery to the Registry. The
case law is not clear as to the effect of a rejection of the documents when
they are examined by the Registry several weeks after filing. The usual
practice is to retain expert FAA counsel to ensure, among other things, that
the documents are in due form for recording, that the record is free and clear
of liens and that the documents are filed correctly. Title companies are also
available to check the FAA records and file documents.
If the aircraft is not registered with the Registry, under the UCC, the
perfection and effect of perfection of the mortgage or any security interest
in other collateral would be governed by the law (including the conflict of
laws rules) of the jurisdiction in which the debtor is located.
REPOSSESSION
In the event of default by an Obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. The
remedies of a secured party under the UCC include the right to repossession by
self-help means, unless such means would constitute a breach of the peace.
Self-help repossession is the method employed by Green Tree in most cases and
is accomplished simply by taking possession of the Product. In the event of
default by the Obligor, some jurisdictions require that the Obligor be
notified of the default and be given a time period within which the Obligor
may cure the default prior to repossession. In cases where the Obligor objects
or raises a defense to repossession, or if otherwise required by applicable
state law, a court order must be obtained from the appropriate state court,
and the Product must then be repossessed in accordance with that order. If a
breach of the peace cannot be avoided, judicial action is required. A secured
party may be held responsible for damages caused by a wrongful repossession of
a Product, including a wrongful repossession conducted by an agent of the
secured party. In many states, a Product may be repossessed without notice to
the Obligor, but only if the repossession can be accomplished without a breach
of the peace.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
has the right to redeem the collateral prior to actual sale by paying the
secured party the entire unpaid time balance of the obligation (less any
unaccrued finance charges) plus accrued default charges, reasonable expenses
for repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, to the extent provided in the financing
documents, reasonable attorneys' fees, or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the
related Contract. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in other
states that do not prohibit or limit such judgments, subject to satisfaction
of statutory procedural requirements by the holder of the obligation. However,
any deficiency judgment would be a personal judgment against the Obligor for
the shortfall, and a defaulting Obligor can be expected to have very little
capital or sources of income available following repossession. Therefore, in
many cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or not paid at all.
Green Tree generally seeks to recover any deficiency existing after
repossession and sale of a Product.
Occasionally, after resale of a repossessed Products, and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the law
of most states requires the secured party to remit the surplus to any
39
<PAGE>
holder of another lien with respect to the Product, if proper notification of
demand for proceeds is received prior to distribution, or, if no such
lienholder exists, to remit the surplus to the former owner of the Product.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
The Relief Act imposes certain limitations upon the actions of creditors
with respect to persons serving in the Armed Forces of the United States and,
to a more limited extent, their dependents and guarantors and sureties of debt
incurred by such persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her
ability to pay interest at a higher rate. Further, a secured party may not
repossess during a person's military service a Product subject to an
installment sales contract or a promissory note entered into prior to the
person's entering military service, for a loan default which occurred prior to
or during such service, without court action. The Relief Act imposes penalties
for knowingly repossessing property in contravention of its provisions.
Additionally, dependents of military personnel are entitled to the protection
of the Relief Act, upon application to a court, if such court determines the
obligation of such dependent has been materially impaired by reason of the
military service. To the extent an obligation is unenforceable against the
person in military service or a dependent, any guarantor or surety of such
obligation will not be liable for performance.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts
and promissory notes pursuant to which purchasers finance the acquisition of
consumer products. These laws place finance charge ceilings on the amount that
a creditor may charge in connection with financing the purchase of a consumer
product. These laws also impose other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply. In some cases, this liability could affect the ability of
an assignee, such as the related Trust, to enforce consumer finance contracts
such as the Contracts. The "Credit Practices" Rule of the Federal Trade
Commission (the "FTC") imposes additional restrictions on contract provisions
and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions (and certain related lenders
and their assignees) to all claims and defenses which the purchaser could
assert against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the event of a
successful claim is limited to amounts paid by the purchaser under the
consumer credit contract. However, the assignee's ability to collect any
balance remaining due thereunder is subject to these claims and defenses.
Accordingly, each Trust, as assignee of the related Contracts, will be subject
to claims or defenses, if any, that the purchaser of the related Product may
assert against the seller of such Product.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
Green Tree will warrant in the related Trust Document that as of the date of
origination each Contract held by the related Trust complied with all
requirements of applicable law in all material respects. Accordingly, if such
Trust's interest in a Contract were materially and adversely affected by a
violation of any such law, such
40
<PAGE>
violation would constitute a Repurchase Event and would obligate Green Tree to
repurchase the Contract unless the breach were cured. See "Description of the
Trust Documents--Sale and Assignment of the Contracts."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the collateral at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing such
indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the
Securities. The discussion is based upon the current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated thereunder and judicial or ruling authority, all of
which are subject to change, which change may be retroactive. The discussion
does not deal with federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules.
Investors are encouraged to consult their own tax advisors with respect to the
federal, state, local, and any other tax consequences of the purchase,
ownership, and disposition of the Securities.
Dorsey & Whitney LLP, counsel to the Seller, has delivered an opinion
regarding certain federal income tax matters discussed below. Counsel to the
Seller identified in the related Prospectus Supplement ("Counsel") will
deliver an opinion regarding tax matters applicable to each Series of
Securities. Such an opinion, however, is not binding on the Internal Revenue
Service (the "Service") or the courts. The opinion of Counsel will
specifically address only those issues specifically identified below as being
covered by such opinion; however, the opinion of Counsel also will state that
the additional discussion set forth below accurately sets forth Counsel's
advice with respect to material tax issues. No ruling on any of the issues
discussed below will be sought from the Service.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the Securities of any series will depend upon whether the Trust
created with respect to such series is structured as an owner trust (treated
as a partnership for federal income tax purposes) or as a grantor trust. The
Prospectus Supplement for each series of Securities will indicate whether the
Trust created for such series will be treated as a partnership or as a grantor
trust. The following discussion deals first with series with respect to which
the Trust has been structured as an owner trust (treated as a partnership),
and then with series with respect to which the Trust has been structured as a
grantor trust.
OWNER TRUST SERIES
TAX STATUS OF THE TRUST
With respect to each series of Securities which includes both Notes and
Certificates, Counsel will deliver its opinion that the Trust will not be an
association or publicly traded partnership taxable as a corporation for
federal income tax purposes. As a result, in the opinion of Counsel, the Trust
itself will not be subject to federal income tax but, instead, each
Certificateholder will be required to take into account its distributive share
of items of income and deduction (including deductions for distributions of
interest to the Noteholders) of the Trust as though such items had been
realized directly by the Certificateholder. This opinion will be based on the
41
<PAGE>
assumption that the terms of the Trust Agreement and related documents will be
complied with, and on counsel's conclusion that the nature of the income of
the Trust will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations. There are, however, no cases or
Service rulings on transactions involving a trust issuing both debt and equity
interests with terms similar to those of the Notes and the Certificates. As a
result, the Service may disagree with all or a part of this discussion.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Contracts, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates.
TAX CONSEQUENCES TO NOTEHOLDERS
Treatment of the Notes as Indebtedness. The Owner Trustee, on behalf of the
Trust, will agree, and the Noteholders will agree by their purchase of Notes,
to treat the Notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the Notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
Notes is correct.
Interest Income on the Notes. Interest on the Notes will be taxable as
ordinary interest income when received by Noteholders utilizing the cash-basis
method of accounting and when accrued by Noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the Notes would be
considered issued with original issue discount ("OID") if the "stated
redemption price at maturity" of a Note (generally equal to its principal
amount as of the date of issuance plus all interest other than "qualified
stated interest" payable prior to or at maturity) exceeds the original issue
price (in this case, the initial offering price at which a substantial amount
of the Notes are sold to the public). Any OID would be considered de minimis
under the OID regulations if it does not exceed 1/4% of the stated redemption
price at maturity of a Note multiplied by the number of full years until its
maturity date. It is anticipated that the Notes will not be considered issued
with more than de minimis OID. Under the OID regulations, an owner of a Note
issued with a de minimis amount of OID must include such OID in income, on a
pro rata basis, as principal payments are made on the Note.
While it is not anticipated that the Notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to
be issued with OID. This deemed OID could arise, for example, if interest
payments on the Notes are not deemed to be "qualified stated interest" because
the Notes do not provide for default remedies ordinarily available to holders
of debt instruments or do not contain terms and conditions that make the
likelihood of late payment or nonpayment a remote contingency. Based upon
existing authority, however, the Trust will treat interest payments on the
Notes as qualified stated interest under the OID regulations. If the Notes are
issued or are deemed to be issued with OID, all or a portion of the taxable
income to be recognized with respect to the Notes would be includible in the
income of Noteholders as OID. Any amount treated as OID would not, however, be
includible again when the amount is actually received. If the yield on a class
of Notes were not materially different from its coupon, this treatment would
have no significant effect on Noteholders using the accrual method of
accounting. However, cash method Noteholders may be required to report income
with respect to the Notes in advance of the receipt of cash attributable to
such income.
A Noteholder must include OID in income as interest over the term of the
Notes under a constant yield method. In general, OID must be included in
income in advance of the receipt of cash representing that income. Each
Noteholder is encouraged to consult its own tax advisor regarding the impact
of the OID rules if the Notes are issued with OID.
Market Discount. The Notes, whether or not issued with original issue
discount, will be subject to the "market discount rules" of Section 1276 of
the Code. In general, these rules provide that if a Noteholder purchases the
Note at a market discount (i.e., a discount from its original issue price plus
any accrued original issue discount) that exceeds a de minimis amount
specified in the Code, and thereafter recognizes gain upon a disposition, the
lesser of (i) such gain or (ii) the accrued market discount will be taxed as
ordinary interest
42
<PAGE>
income. Market discount also will be recognized and taxable as ordinary
interest income as payments of principal are received on the Notes to the
extent that the amount of such payments does not exceed the accrued market
discount. Generally, the accrued market discount will be the total market
discount on the Note multiplied by a fraction, the numerator of which is the
number of days the Noteholder held the Note and the denominator of which is
the number of days after the date the Noteholder acquired the Note until and
including its maturity date. The Noteholder may elect, however, to determine
accrued market discount under the constant-yield method, which election shall
not be revoked without the consent of the Service.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder may elect to include market
discount in gross income as it accrues and, if such Noteholder makes such an
election, is exempt from this rule. The adjusted basis of a Note subject to
such election will be increased to reflect market discount included in gross
income, thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any such election to include market discount in gross income as
it accrues shall apply to all debt instruments held by the Noteholder at the
beginning of the first taxable year to which the election applies or
thereafter acquired and is irrevocable without the consent of the Service.
Amortizable Bond Premium. In general, if a Noteholder purchases a Note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), such Noteholder will be considered to have purchased such Note with
"amortizable bond premium" equal to the amount of such excess. Such Noteholder
may elect to deduct the amortizable bond premium as it accrues under a
constant-yield method over the remaining term of the Note. Such Noteholder's
tax basis in the Note will be reduced by the amount of the amortizable bond
premium deducted. Amortizable bond premium with respect to a Note will be
treated as an offset to interest income on such Note, and a Noteholder's
deduction for amortizable bond premium with respect to a Note will be limited
in each year to the amount of interest income derived with respect to such
Note for such year. Any election to deduct amortizable bond premium shall
apply to all debt instruments (other than instruments the interest on which is
excludible from gross income) held by the Noteholder at the beginning of the
first taxable year to which the election applies or thereafter acquired and is
irrevocable without the consent of the Service. Bond premium on a Note held by
a Noteholder who does not elect to deduct the premium will decrease the gain
or increase the loss otherwise recognized on the disposition of the Note.
Disposition of Notes. If a Noteholder sells a Note, the Noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the Noteholder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder generally will equal
the Noteholder's cost for the Note, increased by any market discount, OID and
gain previously included by such Noteholder in income with respect to the Note
and decreased by principal payments previously received by such Noteholder and
the amount of bond premium previously amortized with respect to the Note. Any
such gain or loss will be capital gain or loss if the Note was held as a
capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income, and will be short-term,
mid-term or long-term capital gain or loss depending upon whether the Note was
held for more or less than one year or for more than eighteen months. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Generally, interest paid to a Noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold
the Note in connection with a United States trade or business will be treated
as "portfolio interest" and therefore will be exempt from the 30% withholding
tax. Such a Noteholder will be entitled to receive interest payments on the
Notes free of United States federal income tax provided that such Noteholder
periodically provides the Indenture Trustee (or other person who would
otherwise be required to withhold tax) with a statement certifying under
penalty of perjury that such Noteholder is not a United States person and
providing the name and address of such Noteholder and will not be subject to
federal income tax on gain from the disposition of a Note unless the
Noteholder is an individual who is present in the United States for 183 days
or more during the taxable year in which the disposition takes place and
certain other requirements are met.
43
<PAGE>
Tax Administration and Reporting. The Indenture Trustee will furnish to each
Noteholder with each distribution a statement setting forth the amount of such
distribution allocable to principal and to interest. Reports will be made
annually to the Service and to holders of record that are not excepted from
the reporting requirements regarding such information as may be required with
respect to interest and original issue discount, if any, with respect to the
Notes.
Backup Withholding. Under certain circumstances, a Noteholder may be subject
to "backup withholding" at a 31% rate. Backup withholding may apply to a
Noteholder who is a United States person if the holder, among other
circumstances, fails to furnish his Social Security number or other taxpayer
identification number to the Indenture Trustee. Backup withholding may apply,
under certain circumstances, to a Noteholder who is a foreign person if the
Noteholder fails to provide the Indenture Trustee or the Noteholder's
securities broker with the statement necessary to establish the exemption from
federal income and withholding tax on interest on the Note. Backup
withholding, however, does not apply to payments on a Note made to certain
exempt recipients, such as corporations and tax-exempt organizations, and to
certain foreign persons. Noteholders should consult their tax advisors for
additional information concerning the potential application of backup
withholding to payments received by them with respect to a Note.
On October 6, 1997, the Treasury Department issued new regulations which
make certain modifications to the withholding, backup withholding and
information reporting rules described above. The new regulations attempt to
unify certification requirements and modify reliance standards, and will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. Prospective investors are urged to consult their own
tax advisors regarding the new regulations.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
Counsel, the Service successfully asserted that the Notes did not represent
debt for federal income tax purposes, the Notes might be treated as equity
interests in the Trust. If so treated, the Trust would be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of the
Notes as equity interests in such a partnership could have adverse tax
consequences to certain holders. For example, income to foreign holders
generally would be subject to federal tax and federal tax return filing and
withholding requirements, income to certain tax-exempt entities (including
pension funds) would be "unrelated business taxable income", and individual
holders might be subject to certain limitations on their ability to deduct
their share of Trust expenses.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Treatment of the Trust as a Partnership. The Seller, the General Partner and
the Owner Trustee will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in
whole or in part by income, with the assets of the partnership being the
assets held by the Trust, the partners of the partnership being the
Certificateholders and the General Partner, and the Notes being debt of the
partnership. The proper characterization of the arrangement involving the
Trust, the Certificates, the Notes, the General Partner, the Seller and the
Servicer, however, is not certain because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust. Any such characterization
would not result in materially adverse tax consequences to Certificateholders
as compared to the consequences from treatment of the Certificates as equity
in a partnership, described below. The following discussion assumes that the
Certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance
44
<PAGE>
charges earned on the Contracts (including appropriate adjustments for market
discount, OID and bond premium) and any gain upon collection or disposition of
the Contracts. The Trust's deductions will consist primarily of interest
accruing with respect to the Notes, servicing and other fees, and losses or
deductions upon collection or disposition of the Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass-Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Contracts that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) Prepayment Premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Although it is not anticipated that the Certificates will be
issued at a price which exceeds their principal amount, such allocations of
Trust income to the Certificateholders will be reduced by any amortization by
the Trust of premium on Contracts that corresponds to any such excess of the
issue price of Certificates over their principal amount. All remaining taxable
income of the Trust will be allocated to the General Partner. Based on the
economic arrangement of the parties, this approach for allocating Trust income
should be permissible under applicable Treasury regulations, although no
assurance can be given that the Service would not require a greater amount of
income to be allocated to Certificateholders. Moreover, even under the
foregoing method of allocation, Certificateholders may be allocated income
equal to the entire Pass-Through Rate plus the other items described above
even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis, and
Certificateholders may become liable for taxes on Trust income even if they
have not received cash from the Trust to pay such taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
A Certificateholder's share of expenses of the Trust (including fees to the
Servicer but not interest expense) will be miscellaneous itemized deductions.
An individual, an estate, or a trust that holds a Certificate either directly
or through a pass-through entity will be allowed to deduct such expenses under
Section 212 of the Code only to the extent that, in the aggregate and combined
with certain other itemized deductions, they exceed 2% of the adjusted gross
income of the Certificateholder. In addition, Section 68 of the Code provides
that the amount of itemized deductions (including those provided for in
Section 212 of the Code) otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds a threshold amount determined
under the Code ($121,000 in 1997, in the case of a joint return) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over
the specified threshold amount or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year. To the extent that a
Certificateholder is not permitted to deduct servicing fees allocable to a
Certificate, the taxable income of the Certificateholder attributable to that
Certificate will exceed the net cash distributions related to such income.
Certificateholders may deduct any loss on disposition of the Contracts to the
extent permitted under the Code.
Discount and Premium. It is believed that the Contracts were not issued with
OID, and, therefore, the Trust should not have OID income. The purchase price
paid by the Trust for the Contracts may exceed the remaining principal balance
of the Contracts at the time of purchase. If the Trust is deemed to acquire
the Contracts at such a premium or at a market discount, the Trust will elect
to offset any such premium against interest income on the Contracts or to
include any such discount in income currently as it accrues over the life of
the Contracts. The Trust will make this premium or market discount calculation
on an aggregate basis but may be required to
45
<PAGE>
recompute it on a Contract-by-Contract basis. As indicated above, a portion of
such premium deduction or market discount income may be allocated to
Certificateholders.
Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss with respect to distributions from the Trust. A
Certificateholder will recognize gain, however, to the extent that any money
distributed exceeds the Certificateholder's adjusted basis in its Certificates
(as described below under "Disposition of Certificates") immediately before
the distribution. A Certificateholder will recognize loss upon termination of
the Trust or termination of the Certificateholder's interest in the Trust if
the Trust only distributes money to the Certificateholder and the amount
distributed is less than the Certificateholder's adjusted basis in the
Certificates. Any such gain or loss generally will be capital gain or loss if
the Certificates are held as capital assets and will be long-term gain or loss
if the holding period of the Certificates is more than one year.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. Under Treasury regulations, if such a termination occurs, the
Trust will be considered to have contributed the assets of the Trust (the "Old
Partnership") to a new partnership (the "New Partnership") in exchange for
interests in the New Partnership. Such interests would be deemed distributed
to the partners of the Old Partnership in liquidation thereof, which would not
constitute a sale or exchange for United States federal income tax purposes.
Disposition of Certificates. If a Certificateholder sells a Certificate, the
Certificateholder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized on the sale and the
seller's tax basis in the Certificate. A Certificateholder's tax basis in a
Certificate generally will equal the Certificateholder's cost increased by the
Certificateholder's share of Trust income and decreased by any distributions
received with respect to such Certificate. In addition, both the tax basis in
the Certificate and the amount realized on a sale of a Certificate would
include the Certificateholder's share of the Notes and other liabilities of
the Trust. A Certificateholder acquiring Certificates at different prices may
be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a portion of such aggregate tax basis to the Certificates sold
(rather than maintain a separate tax basis in each Certificate for purposes of
computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the
Certificateholder's share of unrecognized accrued market discount on the
Contracts would generally be treated as ordinary income to the
Certificateholder and would give rise to special tax reporting requirements.
The Trust does not expect to have any other assets that would give rise to
such special reporting requirements. Thus, to avoid those special reporting
requirements, the Trust will elect to include market discount in income as it
accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess generally will give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly, and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the
close of the related Record Date. As a result, a Certificateholder purchasing
a Certificate may be allocated tax items (which will affect the
Certificateholder's tax liability and tax basis) attributable to periods
before the Certificateholder actually owns the Certificate. The use of such a
convention may not be permitted by existing regulations. If a monthly
convention is not permitted (or only applies to transfers of less than all of
the Certificateholder's interest), taxable income or losses of the Trust may
be reallocated among the Certificateholders. The General Partner is authorized
to revise the Trust's method of allocation between transferors and transferees
to conform to a method permitted by future regulations.
46
<PAGE>
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit or loss, the purchasing Certificateholder will have a
higher or lower basis in the Certificate than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher or lower basis unless the Trust files an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust will not make such
election. As a result, Certificateholders may be allocated a greater or lesser
amount of Trust income than would be appropriate based on their own purchase
price for Certificates.
Administrative Matters. Pursuant to an administration agreement (the
"Administration Agreement"), the Trustee will monitor the performance of the
following responsibilities of the Trust by other service providers. The Trust
is required to keep or have kept complete and accurate books of the Trust.
Such books will be maintained for financial reporting and tax purposes on an
accrual basis and the fiscal year of the Trust will be the calendar year. The
Trust will file a partnership information return (IRS Form 1065) with the
Service for each taxable year of the Trust and will report each
Certificateholder's allocable share of items of Trust income and expense to
Certificateholders and the Service on Schedule K-1. The Trust will provide the
Schedule K-1 information to nominees that fail to provide the Trust with
certain required information statements relating to identification of
beneficial owners of Certificates and such nominees will be required to
forward such information to such beneficial owners. Generally,
Certificateholders must file tax returns that are consistent with the
information return filed by the Trust or be subject to penalties unless the
Certificateholder notifies the Service of all such inconsistencies.
Green Tree or a subsidiary identified in the related Prospectus Supplement
will be designated as the tax matters partner in the Trust Agreement and, as
such, will be responsible for representing the Certificateholders in any
dispute with the Service. The Code provides for administrative examination of
a partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return
is filed. Any adverse determination following an audit of the return of the
Trust by the appropriate taxing authorities could result in an adjustment of
the returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust will be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under
facts substantially similar to those described herein. Although it is not
expected that the Trust will be engaged in a trade or business in the United
States for such purposes, the Trust will withhold as if it were so engaged in
order to protect the Trust from possible adverse consequences of a failure to
withhold. It is expected that the Trust will withhold on the portion of its
taxable income that is allocable to foreign Certificateholders pursuant to
Section 1446 of the Code, as if such income were effectively connected to a
U.S. trade or business, at a rate of 35% for foreign holders that are taxable
as corporations and 39.6% for all other foreign Certificateholders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a Certificateholder's nonforeign status, the Trust may rely on
Form W-8, Form W-9 or the Certificateholder's certification of nonforeign
status signed under penalties of perjury.
Each foreign Certificateholder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign
Certificateholder must obtain a taxpayer identification number from the
Service and submit that number to the Trust on Form W-8 in order to assure
appropriate crediting of the taxes withheld. A foreign Certificateholder
generally will be entitled to file with the Service a claim for refund with
respect to taxes withheld by the Trust, taking the position that no taxes are
due because the Trust is not engaged in a U.S. trade or business. However, the
Service may assert that additional taxes are due, and no assurance can be
given as to the appropriate amount of tax liability.
47
<PAGE>
Backup Withholding. Under certain circumstances, a Certificateholder may be
subject to "backup withholding" at a 31% rate. See the discussion above under
"Tax Consequences to Noteholders--Backup Withholding."
GRANTOR TRUST SERIES
TAX STATUS OF THE TRUST
With respect to each series of Securities which includes only Certificates,
unless otherwise specified in the related Prospectus Supplement, Counsel will
deliver its opinion that the Trust will be classified as a grantor trust for
federal income tax purposes and not as an association which is taxable as a
corporation. The Trust will be classified as a trust regardless of whether the
Seller is considered to retain an interest in the Contracts, as discussed
below. While such a retained interest might be viewed as a second class of
beneficial interest in the Trust and Treasury Regulations Section 301.7701-
4(c) generally provides that an investment trust with more than one class of
ownership interest will be classified as an association taxable as a
corporation or a partnership, that regulation would treat the Trust as a
grantor trust because there will be no power under the Pooling and Servicing
Agreement to vary the investment of the Certificateholders, the purpose of the
Trust will be to facilitate direct investment in the Contracts, and the
existence of multiple classes of ownership interests in the Trust will be
incidental to that purpose.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Because the Trust will be classified as a grantor trust, each
Certificateholder (including any holder of a subordinated Certificate) will,
in the opinion of Counsel, be treated for federal income tax purposes as the
owner of an undivided interest in the Contracts and other Trust Property.
Accordingly, subject to the discussion below of certain limitations on
deductions and the "stripped bond" rules of the Code, each Certificateholder
must report on its federal income tax return its pro rata share of the entire
income from the Contracts and other Trust Property, and may deduct its pro
rata share of the fees paid by the Trust, at the same time as such items would
be reported under the Certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the Trust and received and paid
directly the amounts received and paid by the Trust. A Certificateholder's
share of expenses of the Trust will be miscellaneous itemized deductions
subject to certain limits on deductibility. See the discussion above under
"OWNER TRUST SERIES--Tax Consequences to Certificateholders--Partnership
Taxation."
A purchaser of a Certificate will be treated as purchasing an interest in
each Contract in the Trust at a price determined by allocating the purchase
price paid for the Certificate among all Contracts in proportion to their fair
market values at the time of purchase of the Certificate. To the extent that
the portion of the purchase price of a Certificate allocated to a Contract is
greater than or less than the portion of the principal balance of the Contract
allocable to the Certificate, that interest in the Contract will be deemed to
have been acquired with premium or discount, respectively. See the discussions
above under "OWNER TRUST SERIES--Tax Consequences to Noteholders--Market
Discount" and "--Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. It is not anticipated that the
Contracts will have original issue discount, unless they are subject to the
"stripped bond" rules of the Code described below. If the Contracts are
subject to the stripped bond rules of the Code, the market discount rules
discussed above may not apply.
Subordinated Certificates. If the subordinated Certificateholders receive
distributions of less than their share of the Trust's receipts of principal or
interest (the "Shortfall Amount") because of the subordination of the
subordinated Certificates, holders of subordinated Certificates would probably
be treated for federal income tax purposes as if they had (i) received as
distributions their full share of such receipts, (ii) paid over to the senior
Certificateholders an amount equal to such Shortfall Amount, and (iii)
retained the right to reimbursement of such amounts to the extent available
from future collections on the Contracts.
48
<PAGE>
Under this analysis, (a) subordinated Certificateholders would be required
to accrue as current income any interest or OID income of the Trust that was a
component of the Shortfall Amount, even though such amount was in fact paid to
the senior Certificateholders, (b) a loss would only be allowed to the
subordinated Certificateholders when their right to receive reimbursement of
such Shortfall Amount became worthless (i.e., when it becomes clear that
amount will not be available from any source to reimburse such loss), and (c)
reimbursement of such Shortfall Amount prior to such a claim of worthlessness
would not be taxable income to subordinated Certificateholders because such
amount was previously included in income. Those results should not
significantly affect the inclusion of income for subordinated
Certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to subordinated Certificateholders on the cash method of
accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear.
Under current Service interpretations of applicable Treasury Regulations,
the Seller would be able to sell or otherwise dispose of any subordinated
Certificates. Accordingly, the Seller may offer subordinated Certificates for
sale to investors.
Stripped Certificates. Certain classes of Certificates may be subject to the
stripped bond rules of Section 1286 of the Code and for purposes of this
discussion will be referred to as "Stripped Certificates." In general, a
Stripped Certificate will be subject to the stripped bond rules where there
has been a separation of ownership of the right to receive some or all of the
principal payments on a Contract from ownership of the right to receive some
or all of the related interest payments. Certificates will constitute Stripped
Certificates and will be subject to these rules under various circumstances,
including the following: (i) if any servicing compensation is deemed to exceed
a reasonable amount; (ii) if two or more classes of Certificates are issued
representing the right to non-pro rata percentages of the interest or
principal payments on the Contracts; or (iii) if Certificates are issued which
represent the right to interest only payments or principal only payments.
Although not entirely clear, each Stripped Certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original issue discount. Original issue discount with
respect to a Stripped Certificate, if any, must be included in ordinary gross
income for federal income tax purposes as it accrues in accordance with the
constant-yield method that takes into account the compounding of interest and
such accrual of income may be in advance of the receipt of any cash
attributable to such income. See "OWNER TRUST SERIES--Tax Consequences to
Noteholders--Interest Income on the Notes" above. For purposes of applying the
original issue discount provisions of the Code, the issue price of a Stripped
Certificate will be the purchase price paid by the holder thereof and the
stated redemption price at maturity may include the aggregate amount of all
payments to be made with respect to the Stripped Certificate whether or not
denominated as interest. The amount of original issue discount with respect to
a Stripped Certificate may be treated as zero under the original issue
discount de minimis rules described above. Under rules similar to those
provided in Rev. Proc. 91-49, applicable only to mortgages secured by real
property, a Certificateholder may be required to account for any discount on a
Stripped Certificate as market discount rather than original issue discount if
either (i) the amount of original issue discount with respect to the
Certificate was treated as zero under the original issue discount de minimis
rule when the Certificate was stripped or (ii) no more than 100 basis points
(including any amount of servicing in excess of reasonable servicing) is
stripped off of the Contracts.
When an investor purchases more than one class of Stripped Certificates, it
is currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the Service may take a contrary position with respect to
some or all of the foregoing tax consequences. For example, a holder of a
Stripped Certificate may be treated as the owner of (i) as many stripped bonds
or stripped coupons as there are scheduled payments of principal and/or
interest on each Contract or (ii) a separate installment obligation for each
Contract representing the Stripped Certificate's pro rata share of principal
and/or interest payments to be made with respect thereto. In addition, if a
Trust issues more than one class of Certificates with different Pass-Through
Rates, a holder of such a Certificate may be treated as the owner of a
49
<PAGE>
stripped bond with a rate equal to the lowest such Pass-Through Rate and a
stripped coupon representing the excess, if any, of the Pass-Through Rate on
such Certificate over the lowest Pass-Through Rate. As a result of these
possible alternative characterizations, investors should consult their own tax
advisors regarding the proper treatment of Stripped Certificates for federal
income tax purposes.
The Servicing Fee to be received by the Servicer and the fee for the
enhancement, if any, provided with respect to a series of Certificates may be
questioned by the Service with respect to certain Certificates or Contracts as
exceeding a reasonable fee for the services being performed in exchange
therefor, and a portion of such servicing compensation could be
recharacterized as an ownership interest retained by the Servicer or other
party in a portion of the interest payments to be made pursuant to the
Contracts. In this event, a Certificate might be treated as a Stripped
Certificate subject to the stripped bond rules of Section 1286 of the Code and
the original issue discount provisions rather than to the market discount and
premium rules.
Disposition of Certificates. If a Certificate is sold, gain or loss will be
recognized equal to the difference between the amount realized on the sale and
the Certificateholder's adjusted tax basis in the Certificate. See the
discussion above under "OWNER TRUST SERIES--Tax Consequences to Noteholders--
Disposition of Notes."
Foreign Holders. Generally, interest paid to a Certificateholder who is a
nonresident alien individual or a foreign corporation and who does not hold
the Certificates in connection with a United States trade or business will be
treated as "portfolio interest." See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Foreign Holders."
TAX ADMINISTRATION AND REPORTING
The Trustee will furnish to each Certificateholder with each distribution a
statement setting forth the amount of such distribution allocable to principal
and to interest. In addition, the Trustee will furnish, within a reasonable
time after the end of each calendar year, to each Certificateholder who was a
Certificateholder at any time during such year, information regarding the
amount of servicing compensation received by the Servicer and such other
factual information as the Seller deems necessary to enable Certificateholders
to prepare their tax returns. Reports will be made annually to the Internal
Revenue Service and to holders of record that are not excepted from the
reporting requirements regarding information as may be required with respect
to interest and original issue discount, if any, with respect to the
Certificates.
BACKUP WITHHOLDING
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Backup Withholding."
CERTAIN STATE INCOME TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Contracts will take place in Minnesota. The State of Minnesota imposes an
income tax on individuals, trusts and estates and a franchise tax measured by
net income on corporations. This discussion of Minnesota taxation is based
upon current statutory provisions and the regulations promulgated thereunder,
and applicable judicial or ruling authority, all of which are subject to
change (which may be retroactive). No ruling on any of the issues discussed
below will be sought from the Minnesota Department of Revenue.
OWNER TRUST SERIES
If the Notes are treated as debt for federal income tax purposes, in the
opinion of Counsel this treatment will also apply for Minnesota tax purposes.
Noteholders not otherwise subject to Minnesota income or franchise
50
<PAGE>
taxation would not become subject to such a tax solely because of their
ownership of the Notes. Noteholders already subject to income or franchise
taxation in Minnesota could, however, be required to pay such a tax on all or
a portion of the income generated from ownership of the Notes.
If the Trust is treated as a partnership (not taxable as a corporation) for
federal income tax purposes, in the opinion of Counsel the Trust would also be
treated as a partnership for Minnesota income tax purposes. The partnership
therefore would not be subject to Minnesota taxation. Certificateholders that
are not otherwise subject to Minnesota income or franchise taxation would not
become subject to such a tax solely because of their interests in the
partnership. Certificateholders already subject to income or franchise
taxation in Minnesota could, however, be required to pay such a tax on all or
a portion of the income from the partnership.
If the Certificates are treated as ownership interests in an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes, in the opinion of Counsel this treatment would also apply for
Minnesota income and franchise tax purposes. Pursuant to this treatment, the
Trust would be subject to the Minnesota franchise tax measured by net income
(which could result in reduced distributions to Certificateholders).
Certificateholders that are not otherwise subject to Minnesota income or
franchise taxation would not become subject to such a tax solely because of
their interests in the constructive corporation. Certificateholders already
subject to income or franchise taxation in Minnesota could, however, be
required to pay such a tax on all or a portion of the income from the
constructive corporation.
GRANTOR TRUST SERIES
If the Trust is treated as a grantor trust for federal income tax purposes,
in the opinion of Counsel the Trust would also be treated as a grantor trust
for Minnesota income tax purposes. The Trust therefore would not be subject to
Minnesota taxation. Certificateholders that are not otherwise subject to
Minnesota income or franchise taxation would not become subject to such a tax
solely because of their interests in the Trust. Certificateholders already
subject to income or franchise taxation in Minnesota could, however, be
required to pay such a tax on all or a portion of the income from the Trust.
Because state tax laws vary, it is not possible to describe the tax
consequences to the Noteholders and Certificateholders in all of the states.
Noteholders and Certificateholders are therefore urged to consult their own
tax advisors with respect to the state tax treatment of the Notes and
Certificates and income derived therefrom.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan (a "Benefit Plan") from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the Benefit Plan. ERISA also imposes certain duties and certain prohibitions
on persons who are fiduciaries of plans subject to ERISA. Under ERISA,
generally any person who exercises any authority or control with respect to
the management or disposition of the assets of a Benefit Plan is considered to
be a fiduciary of such plan. A violation of these "prohibited transaction"
rules may generate excise tax and other liabilities under ERISA and the Code
for such persons.
Certain transactions involving the related Trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Benefit Plan that purchased Securities if assets of the related Trust were
deemed to be assets of the Benefit Plan. Under a regulation issued by the
United States Department of Labor (the "Plan Assets Regulation"), the assets
of a Trust would be treated as plan assets of a Benefit Plan for the purposes
of ERISA and the Code only if the Benefit Plan acquired an "equity interest"
in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable
51
<PAGE>
local law and which has no substantial equity features. The likely treatment
of Notes and Certificates will be discussed in the related Prospectus
Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements.
A Benefit Plan fiduciary considering the purchase of Securities should
consult its tax and/or legal advisors regarding whether the assets of the
Trust would be considered plan assets, the possibility of exemptive relief
from the prohibited transaction rules and other issues and their potential
consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase
from the Seller, the principal amount of each class of Securities of the
related series set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default
by any such underwriter, each Underwriting Agreement will provide that, in
certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the underwriters in negotiated transactions at varying prices to
be determined at the time of such sale. After the initial public offering of
any Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that Green Tree will indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.
The Indenture Trustee, if any, may, from time to time, invest the funds in
the Designated Accounts in Eligible Investments acquired from the
underwriters.
Under each Underwriting Agreement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of
all other such classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL MATTERS
Certain matters with respect to the validity of the Certificates and the
Notes will be passed upon for the Seller by the counsel for the Seller
identified in the applicable Prospectus Supplement. The validity of the
Certificates and the Notes will be passed upon for the underwriters named in
the related Prospectus Supplement by Brown & Wood LLP, New York, New York.
52
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31, 1997
and 1996 and for each of the years in the three-year period ended December 31,
1997 incorporated by reference herein have been audited by KPMG Peat Marwick
LLP, independent accountants, as stated in their opinion given upon their
authority as experts in accounting and auditing.
53
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND ANY INFOR-
MATION OR REPRESENTATION NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY GREEN TREE OR ANY UNDERWRITER. THIS PROSPEC-
TUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH THE PROSPECTUS SUPPLEMENT RE-
LATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GREEN TREE OR
THE TRUST SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Reports to Securityholders................................................. S-2
Summary of Terms........................................................... S-3
Risk Factors............................................................... S-19
The Trust.................................................................. S-19
The Trust Property......................................................... S-20
The Contract Pool.......................................................... S-21
Green Tree Financial Corporation........................................... S-26
Yield and Prepayment Considerations........................................ S-28
Description of the Notes................................................... S-34
Description of the Certificates............................................ S-40
Description of the Trust Documents and Indenture........................... S-43
Certain Federal and State Income Tax Consequences.......................... S-46
ERISA Considerations....................................................... S-46
Underwriting............................................................... S-48
Legal Matters.............................................................. S-49
Annex I.................................................................... A-1
PROSPECTUS
Available Information...................................................... 3
Reports to Securityholders................................................. 3
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 4
Risk Factors............................................................... 13
The Trusts................................................................. 15
The Contracts.............................................................. 16
Green Tree Financial Corporation........................................... 16
Yield and Prepayment Considerations........................................ 17
Pool Factor................................................................ 18
Use of Proceeds............................................................ 19
The Certificates........................................................... 19
The Notes.................................................................. 20
Certain Information Regarding the Securities............................... 24
Description of the Trust Documents......................................... 27
Certain Legal Aspects of the Contracts..................................... 36
Certain Federal Income Tax Consequences.................................... 41
Certain State Income Tax Consequences...................................... 50
ERISA Considerations....................................................... 51
Plan of Distribution....................................................... 52
Legal Matters.............................................................. 52
Experts.................................................................... 53
</TABLE>
---------------
FOR 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT ALL DEALERS EFFECT-
ING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DIS-
TRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------------------------
----------------------------------
$764,000,000 (APPROXIMATE)
LOGO
SELLER AND SERVICER
GREEN TREE RECREATIONAL,
EQUIPMENT & CONSUMER
TRUST 1998-C
$122,000,0000 (APPROXIMATE) 5.55375% ASSET-BACKED NOTES, CLASS A-1
$193,000,000 (APPROXIMATE) FLOATING RATE ASSET-BACKED NOTES, CLASS A-2
$150,000,000 (APPROXIMATE) 5.92% ASSET-BACKED NOTES, CLASS A-3
$111,000,000 (APPROXIMATE) 6.17% ASSET-BACKED NOTES, CLASS A-4
$104,000,000 (APPROXIMATE) 6.28% ASSET-BACKED NOTES, CLASS A-5
$36,000,000 (APPROXIMATE) 6.70% ASSET-BACKED NOTES, CLASS A-6
$32,000,000 (APPROXIMATE) 7.00% ASSET-BACKED NOTES, CLASS A-7
$16,000,000 (APPROXIMATE) 8.07% ASSET-BACKED CERTIFICATES, CLASS B-1
---------------
PROSPECTUS SUPPLEMENT
---------------
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
LEHMAN BROTHERS
NATIONSBANC MONTGOMERY SECURITIES LLC
SEPTEMBER 4, 1998
----------------------------------
----------------------------------
