<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 1-08916
GREEN TREE FINANCIAL CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 41-1807858
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1100 LANDMARK TOWERS, SAINT PAUL, MINNESOTA 55102-1639
------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612) 293-3400
-----------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
AS OF APRIL 30, 1998, 134,034,854 SHARES OF COMMON STOCK OF GREEN TREE FINANCIAL
CORPORATION WERE OUTSTANDING.
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of
Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
EXHIBIT INDEX 23
Certain information included in this Form 10-Q may include "forward-looking"
information, as defined in the Private Securities Litigation Reform Act of 1995
(the "Act"). Such forward-looking information may involve risks or uncertainties
which are described in the Cautionary Statements contained in the Company's Form
8-K filed with the Securities and Exchange Commission on July 12, 1996.
Investors are specifically referred to the Cautionary Statements for a
discussion of factors which could affect the Company's operations and financial
performance. Factors referenced in the Cautionary Statements include: prevailing
economic conditions; ability to access capital resources; short-term interest
rate fluctuations; the level of defaults and prepayments on loans made by the
Company; competition; and regulatory changes. Any forward looking information is
based upon management's reasonable estimate of future results or trends. The
Company does not undertake, and the Act specifically relieves the Company from,
any obligation to update any forward-looking statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 888,743,000 $ 741,398,000
Cash deposits, restricted 234,194,000 247,237,000
Other investments 19,096,000 25,294,000
Interest only securities 1,412,280,000 1,363,200,000
Finance receivables 2,154,646,000 1,971,024,000
Other receivables 228,525,000 235,705,000
Servicing rights 111,823,000 96,311,000
Property, furniture and fixtures 121,164,000 112,404,000
Goodwill 55,399,000 56,095,000
Other assets 29,372,000 18,124,000
--------------- ---------------
Total assets $ 5,255,242,000 $ 4,866,792,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $ 1,548,618,000 $ 1,355,995,000
Senior/Senior subordinated notes 510,484,000 510,316,000
Accounts payable and accrued liabilities 556,194,000 492,789,000
Investors payable 653,297,000 552,781,000
Deferred income taxes 637,430,000 622,771,000
--------------- ---------------
Total liabilities 3,906,023,000 3,534,652,000
Common stock, $.01 par; authorized 400,000,000
shares; issued 141,899,317 and
and 141,595,984 shares, respectively 1,419,000 1,416,000
Additional paid-in capital 445,190,000 435,570,000
Retained earnings 1,127,417,000 1,075,670,000
Accumulated other comprehensive income (loss):
Minimum pension liability adjustments (3,142,000) (3,142,000)
Unrealized gain on securities
available for sale, net 902,000 21,824,000
--------------- ---------------
1,571,786,000 1,531,338,000
Less treasury stock, 7,773,366 and 7,012,156
shares at cost (222,567,000) (199,198,000)
--------------- ---------------
Total stockholders' equity 1,349,219,000 1,332,140,000
--------------- ---------------
Total liabilities and stockholders' equity $ 5,255,242,000 $ 4,866,792,000
=============== ===============
</TABLE>
See notes to unaudited financial statements.
3
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended March 31,
---------------------------
1998 1997
------------ ------------
REVENUES:
Gain on sale of receivables $129,116,000 $153,367,000
Interest 100,991,000 75,429,000
Service 30,216,000 24,681,000
Commissions and other 25,431,000 13,678,000
------------ ------------
285,754,000 267,155,000
------------ ------------
EXPENSES:
Interest 48,492,000 29,818,000
Cost of servicing 26,974,000 19,379,000
General and administrative 107,912,000 69,889,000
------------ ------------
183,378,000 119,086,000
------------ ------------
EARNINGS BEFORE INCOME TAXES 102,376,000 148,069,000
INCOME TAXES 38,903,000 56,266,000
------------ ------------
NET EARNINGS $ 63,473,000 $ 91,803,000
============ ============
EARNINGS PER COMMON SHARE:
BASIC $ .47 $ .66
DILUTED $ .47 $ .65
See notes to unaudited financial statements.
4
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Treasury comprehensive Retained stockholders'
stock capital stock income (loss) earnings equity
----------- ----------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1996 $ 1,398 $ 373,573 $ (53,913) $ (2,299) $ 818,733 $ 1,137,492
Comprehensive income, net of tax:
Net earnings -- -- -- -- 91,803 91,803
Unrealized loss on securities,
net of applicable
income taxes ($17,080) -- -- -- (27,867) -- (27,867)
-----------
Total comprehensive income 63,936
Common stock issuance of
1,300,000 shares 13 51,761 -- -- -- 51,774
Cost of 1,017,000 shares of
treasury stock acquired -- -- (36,688) -- -- (36,688)
Dividends on common stock -- -- -- -- (10,430) (10,430)
----------- ----------- ----------- ----------- ----------- -----------
BALANCES, March 31, 1997 $ 1,411 $ 425,334 $ (90,601) $ (30,166) $ 900,106 $ 1,206,084
=========== =========== =========== =========== =========== ===========
BALANCES, December 31, 1997 $ 1,416 $ 435,570 $ (199,198) $ 18,682 $ 1,075,670 $ 1,332,140
Comprehensive income, net of tax:
Net earnings -- -- -- -- 63,473 63,473
Unrealized loss on securities,
net of applicable
income taxes ($12,823) -- -- -- (20,922) -- (20,922)
-----------
Total comprehensive income 42,551
Stock warrants issuance -- 7,687 -- -- -- 7,687
Common stock issuance of
303,000 shares 3 1,933 -- -- -- 1,936
Cost of 761,210 shares of
treasury stock acquired -- -- (23,369) -- -- (23,369)
Dividends on common stock -- -- -- -- (11,726) (11,726)
----------- ----------- ----------- ----------- ----------- -----------
BALANCES, March 31, 1998 $ 1,419 $ 445,190 $ (222,567) $ (2,240) $ 1,127,417 $ 1,349,219
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to unaudited financial statements.
5
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------
1998 1997
------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Servicing fees and net interest
payments collected on sold loans $ 84,070,000 $ 78,009,000
Net principal payments collected on sold loans 128,678,000 64,067,000
Interest on unsold loans 50,972,000 46,166,000
Interest on cash and investments 14,540,000 8,539,000
Commissions 19,160,000 11,501,000
Other 13,322,000 (2,523,000)
--------------- ---------------
310,742,000 205,759,000
--------------- ---------------
Cash paid to employees and suppliers (132,988,000) (126,443,000)
Interest paid on debt (40,571,000) (20,251,000)
Income taxes paid (10,114,000) (7,430,000)
--------------- ---------------
(183,673,000) (154,124,000)
--------------- ---------------
NET CASH PROVIDED BY OPERATIONS 127,069,000 51,635,000
Purchase of loans and leases (2,766,690,000) (2,087,204,000)
Proceeds from sale of loans and leases 2,607,081,000 1,809,087,000
Principal collections on unsold loans and leases 102,141,000 178,880,000
Commercial and revolving credit loans disbursed (1,692,443,000) (839,249,000)
Principal collections on commercial and revolving credit loans 1,262,226,000 757,492,000
Proceeds from sale of commercial and revolving credit loans 317,840,000 --
Net cash deposits provided as credit enhancements 13,043,000 (4,249,000)
--------------- ---------------
NET CASH USED FOR
OPERATING ACTIVITIES (29,733,000) (133,608,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, furniture and fixtures (17,846,000) (10,084,000)
Net sales (purchases) of investment securities 6,198,000 (3,839,000)
--------------- ---------------
NET CASH USED FOR INVESTING
ACTIVITIES (11,648,000) (13,923,000)
--------------- ---------------
</TABLE>
6
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued, unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------------
1998 1997
--------------- -----------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities 2,553,788,000 1,921,498,000
Repayments on credit facilities (2,353,963,000) (1,659,804,000)
Common stock issued 627,000 475,000
Common stock repurchased -- (36,688,000)
Dividends paid (11,726,000) (10,430,000)
--------------- ---------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 188,726,000 215,051,000
--------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 147,345,000 67,520,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 741,398,000 442,071,000
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 888,743,000 $ 509,591,000
=============== ===============
RECONCILIATION OF NET EARNINGS TO NET CASH
USED FOR OPERATING ACTIVITIES:
Net earnings $ 63,473,000 $ 91,803,000
Deferred income taxes 38,903,000 56,266,000
Valuation adjustments of interest only securities 47,000,000 --
Depreciation and amortization 10,669,000 7,556,000
Net loan payments collected, less interest only securities
and servicing rights recorded (11,746,000) (50,189,000)
Amortization of servicing rights 4,947,000 2,569,000
Accretion of yield on interest only securities (33,384,000) (25,257,000)
Net decrease (increase) in cash deposits 13,043,000 (4,249,000)
Purchase of loans and leases,
net of sales and principal collections (72,367,000) (99,237,000)
Commercial and revolving loans disbursed, net of
sales and principal collections (109,816,000) (81,757,000)
Net selling expenses on sale of loans 30,786,000 10,897,000
Interest payable increase 7,128,000 8,434,000
Income taxes paid (10,114,000) (7,430,000)
Decrease in amounts payable to employees and suppliers (7,977,000) (43,598,000)
Decrease (increase) in other receivables 2,570,000 (5,033,000)
Other (2,848,000) 5,617,000
--------------- ---------------
NET CASH USED FOR
OPERATING ACTIVITIES ($ 29,733,000) ($ 133,608,000)
=============== ===============
</TABLE>
See notes to unaudited financial statements.
7
<PAGE>
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The interim financial statements have been prepared by Green Tree Financial
Corporation (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission applicable to quarterly
reports on Form 10-Q. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments which are of a normal
recurring nature and are necessary for a fair presentation have been included.
However, results for interim periods are not necessarily indicative of the
results that may be expected for a full year. It is suggested that these
financial statements be read in conjunction with the consolidated financial
statements and related notes and schedules included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
includes all changes in stockholders' equity except those arising from
transactions with shareholders. The new standard requires only additional
disclosures in the consolidated financial statements; it does not affect the
Company's financial position or results of operations.
8
<PAGE>
B. INTEREST ONLY SECURITIES
The activity in interest only securities for the three months ended March 31,
1998 is summarized as follows:
Balance at beginning of period $1,363,200,000
Additions 164,349,000
Yield on interest only securities 33,384,000
Net cash collected (67,908,000)
Realized writedown of interest only
securities (47,000,000)
Unrealized writedown of interest
only securities (33,745,000)
----------------
Balance at end of period $1,412,280,000
================
In 1995 and previous years, the Company sold a substantial portion of its
interest only securities related to manufactured housing securitization
transactions between 1978 and 1995 in the form of securitized Net Interest
Margin Certificates. The Company retained a subordinated interest in the cash
flow of the interest only securities sold. These interests are included in
interest only securities and total $79,357,000 at March 31, 1998.
Generally, interest only securities relate to the sale of closed end
manufactured housing, home equity, home improvement, consumer and equipment
finance receivables. The Company's interest only securities are subject to a
substantial amount of credit loss and prepayment risk related to the receivables
sold. In connection with the valuation of interest only securities, the Company
has provided for approximately $946,060,000 of credit losses as of March 31,
1998. On a nondiscounted basis the amount of credit losses provided for in
connection with the valuation of the interest only securities is approximately
$1,399,149,000. These estimated losses if realized, would reduce the amount of
cash flows available to the interest only securities and are considered in the
Company's valuation processes.
The weighted average interest rate used to discount expected future cash flows
of the interest only securities is 11.60% as of March 31, 1998.
9
<PAGE>
The table below details information pertinent to the valuation of the interest
only securities as of March 31, 1998.
<TABLE>
<CAPTION>
Manufactured Home Equity/ Consumer/
Housing Home Improvement Equipment Total
--------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Interest only securities carrying amount $ 872,578,000 396,498,000 143,204,000 $ 1,412,280,000
Unpaid principal balance of sold receivables $18,186,731,000 5,004,964,000 2,655,252,000 $25,846,947,000
Weighted average customer interest rate on
sold receivables 10.46% 11.85% 11.12%
Approximate expected weighted average constant
prepayment rate as a percentage
of unpaid principal balance of sold
receivables (1) 9.75% 25.0% 22.0%
Approximate remaining expected non
discounted credit losses as a percentage
of unpaid principal balance of sold
receivables (1) 6.2% 4.4% 2.0%
</TABLE>
(1) Valuation of the Company's interest only securities is impacted not only
by the projected level of prepayments of principal and net credit losses,
as shown above, but also by the projected timing of such prepayments and
net credit losses. Should the timing of projected prepayments of principal
or net credit losses differ materially from the timing projected by the
Company, such timing could have a material effect on the valuation of the
interest only securities.
10
<PAGE>
C. FINANCE RECEIVABLES
Finance receivables consisted of the following:
March 31, 1998 December 31,1997
-------------- ----------------
Lease $ 267,987,000 $ 191,572,000
Commercial Finance 632,172,000 683,691,000
Revolving Credit Card 324,795,000 165,151,000
Loans Held For Sale 929,692,000 930,610,000
-------------- --------------
Total $2,154,646,000 $1,971,024,000
============== ==============
D. SERVICING RIGHTS
The activity in servicing rights for the period ended March 31, 1998 is
summarized as follows:
Balance at beginning of period $ 96,311,000
Additions 20,459,000
Amortization ( 4,947,000)
--------------
Balance at end of period $ 111,823,000
==============
E. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings by the weighted
average number of shares of Common Stock outstanding during each period. Diluted
earnings per share is computed by dividing net earnings by the weighted average
number of shares of Common Stock and potential Common Stock outstanding during
each period. The following table presents the earnings per share data. Options
to purchase 5,529,469 and 298,544 shares are excluded from the computation of
diluted earnings per common share because of their anti-dilutive effect, as the
exercise price of the option exceeds the average market price of the Common
Stock for the three months ended March 31, 1998 and 1997, respectively.
Three months ended March 31,
---------------------------
1998 1997
------------ ------------
Net Earnings $ 63,473,000 $ 91,803,000
============ ============
Weighted average Common Stock
outstanding 134,236,605 138,511,310
Effect of dilutive securities:
Options 1,463,317 3,708,253
Warrants 119,981 --
------------ ------------
Diluted Common Stock 135,819,903 142,219,563
============ ============
Earnings per common share:
Basic $ .47 $ .66
Diluted $ .47 $ .65
11
<PAGE>
F. STOCKHOLDERS' EQUITY
STOCK OPTION PLANS
The Company has three stock option plans: two employee stock option plans and an
outside director plan. In 1992, the Board of Directors approved a supplemental
stock option plan for its outside directors. In 1995, the Company's stockholders
approved an Employee Stock Incentive Plan. In 1998 the Board of Directors
approved a Company Stock Option Plan for issuances of stock options to non-
officer employees.
Options for 864,520 shares were available for future grant under these plans.
The Company's Board of Directors has reserved 11,149,252 shares for future
issuance under all plans as of March 31, 1998.
A summary of the stock option plan activity is as follows:
Number of Weighted Average
Shares Exercise Price
---------- -----------------
Outstanding at December 31, 1997 9,910,465 $25.98
Granted 835,500 23.00
Exercised (303,333) 12.87
Expired (156,900) 30.92
----------
Outstanding at March 31, 1998 10,285,732 $23.04
==========
Of the 10,285,732 options outstanding at March 31, 1998, 10,145,732 options
relate to the employee and chief executive stock option plans and 140,000
options relate to the outside director plan.
On March 1, 1998, the Company offered to reprice certain employee stock options
to the current market price on March 1, 1998. The offer was not extended to the
six most senior executive officers. Employees accepting this offer agreed to a
revised vesting schedule and an exercise price of $23.00, representing the
market price at March 1, 1998. Approximately 2.8 million options were repriced.
12
<PAGE>
A summary of stock options outstanding and exercisable at March 31, 1998 is as
follows:
Options Outstanding:
Range of Number Remaining Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price
- ----------------- ------------- ---------------- -------------------
$ 2.97-22.50 1,714,332 4.17 $ 6.46
23.00-23.00 3,639,500 9.92 23.00
23.38-30.50 2,350,300 7.68 25.52
30.88-33.38 2,323,000 7.90 31.21
33.50-47.00 258,600 9.17 37.61
----------- --------- ---- -------
$ 2.97-47.00 10,285,732 7.97 $ 23.04
Options Exercisable:
Range of Number Weighted Average
Exercise Prices Exercisable Exercise Price
- ------------------- ----------- -----------------
$ 2.97-22.50 1,563,665 $ 5.45
23.00-23.00 0 0.00
23.38-30.50 824,300 26.93
30.88-33.38 493,000 31.31
33.50-47.00 57,600 35.07
-------------- ---------- -------
$ 2.97-47.00 2,938,565 $ 15.92
WARRANTS
On February 13, 1998, the Company issued warrants to purchase 2.7 million common
shares at $22.75 per share to the provider of a credit facility secured by the
Company's interest only securities. The warrant expires on the later of February
13, 2000 or 90 days after the credit facility has been paid in full. The Company
has the option to call and repurchase the warrant for $15.00 per warrant share
regardless of the closing price of the common shares at the call date.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Green Tree Financial Corporation ("Green Tree" or the "Company") is a
diversified financial services company that provides financing for manufactured
HOUSING, home equity, home improvements, consumer products and equipment and
provides consumer and commercial revolving credit. The Company's financing
products include both fixed term and revolving loans and leases. The Company's
insurance agencies market physical damage and term mortgage life insurance and
other credit protection relating to the customers' contracts it services.
On April 6, 1998, the Company agreed to merge (the "Merger") with a subsidiary
of Conseco, Inc. ("Conseco"). In the Merger, each share of the Company's Common
Stock will be converted into 0.9165 of a share of Conseco's Common Stock. As a
result of the Merger, the Company will become a wholly owned subsidiary of
Conseco. Consummation of the Merger is subject to various conditions including
(a) receipt of approval by the stockholders of the Company and Conseco of the
Merger; (b) the expiration or termination of applicable waiting periods and the
receipt of requisite regulatory approvals from federal and state regulatory
authorities; and (c) satisfaction of certain other conditions.
Results of Operations:
The following table shows the percentage change in income, expenses and earnings
for the three-month period ended March 31, 1998 as compared to the same period
of 1997.
Three-month
period-to-period
increase (decrease)
March 31, 1998 to 1997
----------------------------
Revenues:
Gain on sale of receivables (15.8)%
Interest 33.9
Servicing 22.4
Commissions and other 85.9
Expenses:
Interest 62.6
Cost of servicing 39.2
General and administrative 54.4
Earnings before income taxes (30.9)
Net earnings (30.9)
Gain on sale of receivables decreased 15.8% in the first quarter of 1998 over
the same period in 1997. This is a result of recording a realized writedown on
the valuation of the Company's interest only securities due to higher
prepayments than expected and increasing the constant prepayment rate
assumptions used in determining the current quarter gain on sale. Partially
offsetting the decrease in gain on sale of receivables is a $830,000,000 or
45.6% increase in the volume of fixed term contracts sold over the same period
in 1997.
14
<PAGE>
The following table sets forth the Company's contract originations and sales for
the three-month periods ended March 31, 1998 and 1997. Dollar amounts are in
thousands.
Three-month period ended
March 31,
-----------------------
1998 1997
---------- ----------
Originations:
Manufactured Housing $1,204,215 $1,013,716
Home Equity/Home Improvement 1,038,212 635,957
Consumer/Retail Credit 575,209 261,668
Commercial/Equipment 1,540,112 952,835
---------- ----------
Total $4,357,748 $2,864,176
========== ==========
Sales:
Manufactured Housing $1,199,986 $1,050,000
Home Equity/Home Improvement 1,079,026 520,099
Consumer/Retail Credit 194,662 131,043
Commercial/Equipment 444,126 118,956
---------- ----------
Total $2,917,800 $1,820,098
========== ==========
The Company's dollar volume of new manufactured housing contract originations
rose 14.3% during the first quarter of 1998 over the same period in 1997. The
number of new contracts originated by the Company during the first quarter of
1998 has grown from 1997 and the average contract size has also increased due to
a shift in the Company's manufactured home financing to more land-and-home
contracts and slight price increases by the manufactured housing manufacturers.
The dollar volume of previously owned manufactured housing contract originations
rose 33.7%.
The dollar volume of home equity/home improvement contract originations rose
63.3% in the first quarter of 1998 over 1997 to $1,038,212,000. This growth is
primarily the result of the Company's continued expansion of its home equity
retail origination network. Consumer and retail credit originations rose 119.8%
to $575,209,000 in the first quarter of 1998 over 1997. This growth is the
result of several credit card portfolio purchases and overall growth in the
consumer products sector. Commercial and equipment originations increased 61.6%
in the first quarter of 1998 over 1997 to $1,540,112,000. The increase is due to
higher production in all areas.
15
<PAGE>
The following table reflects the composition of the Company's servicing
portfolio at March 31, 1998 and 1997. Dollar amounts are in thousands.
March 31,
---------------------------------
1998 1997
-------------- ---------------
Servicing Portfolio:
Fixed term contracts $27,496,000 $20,045,000
Commercial revolving credit 1,915,000 1,199,000
Consumer revolving credit 491,000 99,000
-------------- ---------------
Total $29,902,000 $21,343,000
============== ===============
Interest revenue, which represents yield on the Company's interest only
securities, interest earned on unsold finance receivables and custodial trust
cash and other investments grew 33.9% during the first quarter of 1998 compared
to the same period in 1997. The increase is primarily due to the Company's
increase in interest only securities and increased earnings on the unsold
finance receivables for the three-months ended March 31, 1998 compared to the
same period in 1997.
The increase in servicing income of 22.4% during the first quarter of 1998
compared to the first quarter of 1997 resulted from the growth in the Company's
average servicing portfolio. The Company's servicing income as a percentage of
the serviced portfolio decreased as a result of increased sales of finance
receivables having lower servicing fees.
Commissions and other income, which includes commissions earned on new insurance
policies written and renewals on existing policies as well as other income from
late fees, grew 85.9% during the first quarter of 1998 compared to the same
period in 1997. This growth is a result of the increase in net written insurance
premiums as the Company's contract originations and servicing portfolio continue
to grow. Also attributing to the increase are various fees on the credit card
portfolio.
Interest expense increased 62.6% during the first quarter of 1998 as a result of
higher interest rates on the Company's borrowings, and the Company maintaining a
higher level of borrowings to fund its loan originations, commercial finance,
revolving credit, and lease portfolio during the first quarter of 1998 compared
to 1997.
Green Tree's dollar amount of cost of servicing increased 39.2% during the first
quarter of 1998 compared to the same period in 1997 as the Company's total
average servicing portfolio grew 40.1%. The Company's cost of servicing as a
percentage of the serviced portfolio has remained relatively constant.
General and administrative expenses rose 54.4% in the first quarter of 1998. As
a percentage of contract originations, these expenses have remained relatively
constant with the first quarter of 1997. The dollar growth is due primarily to
an increase in personnel and other costs related to the expansion of the
Company's new divisions as well as the increased volume of contracts the Company
originated during the quarter.
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Capital Resources and Liquidity:
The Company's business requires continued access to the capital markets for the
purchase, warehousing and sale of contracts. To satisfy these needs, the Company
employs a variety of capital resources.
Historically, the most important liquidity source for the Company has been its
ability to sell contracts in the secondary markets through loan securitizations.
Under certain securitized sales structures, the Company has provided a variety
of credit enhancements, which generally take the form of corporate guarantees,
but have also included bank letters of credit, surety bonds, cash deposits or
other equivalent collateral. The Company analyzes the cash flows unique to each
transaction, as well as the marketability and projected economic value of such
transactions when choosing the appropriate structure for each securitized loan
sale. The structure of each securitized sale depends, to a great extent, on
conditions of the fixed income markets at the time of sale as well as cost
considerations and availability and effectiveness of the various enhancement
methods. During the first quarter of 1998, the Company used a
senior/subordinated structure for each of its two manufactured home loan sales
and enhanced a portion of the subordinated certificates sold with a corporate
guarantee. During the first quarter of 1998, the Company's home equity and home
improvement loan sales included two separate but cross-collateralized loan
pools, both of which employed a senior/subordinated structure with a limited
guarantee on a portion of the subordinate certificates.
In the first quarter of 1998, the Company's sale of consumer product, equipment
finance, certain home equity and non lien home improvement loans utilized a
multi-class credit tranched grantor trust structure issuing fixed rate
certificates with a limited corporate guarantee on the most subordinate class.
Also during the first quarter, the Company sold approximately $400 million of
floorplan receivables through a separate revolving trust.
Servicing fees and net interest payments collected on sold loans, which has been
the Company's principal source of cash, increased during the three-month period
ended March 31, 1998 compared to the same period in 1997. Contributing to this
growth is an increase in servicing revenue collected by the Company on its
growing servicing portfolio, and growth in the interest only securities from the
Company's ongoing securitizations.
Net principal payments collected on sold loans were positive for the quarters
ended March 31, 1998 and 1997 as a result of an increase in the contract
principal payments collected by the Company as of the end of each period but not
yet remitted to the investors/owners of the contracts. These increases are a
result of customer payoffs and the growth of the Company's servicing portfolio.
Interest on unsold loans increased during the first quarter of 1998 compared to
the same period in 1997 as a result of the increase in the outstanding finance
receivables.
Interest on cash and investments increased during the first quarter of 1998
compared to the same period in 1997 as higher levels of custodial trust cash and
investments were maintained primarily as a result of the growth in the managed
receivables portfolio.
Cash paid to employees and suppliers decreased $6,545,000 in the first quarter
of 1998 compared to the same period in 1997. This decrease relates primarily to
the Company's annual bonus of the chief executive officer pursuant to the terms
of an employment agreement compared to the prior year's annual bonus payout.
17
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Dividends paid by the Company increased 12.4% in the first quarter of 1998
compared to the same period in 1997 as the Company's quarterly dividend rate
increased 16.6% over the first quarter 1997 quarterly dividend rate.
As of March 31, 1998 the Company had $3.8 billion in master repurchase
agreements, subject to the availability of eligible collateral, with various
investment banking firms for the purpose of financing its contract and
commercial finance loan production, with total outstandings of approximately
$315 million. The master repurchase agreements generally provide for annual
terms which are extended each quarter by mutual agreement of the parties for an
additional annual term based upon receipt of updated quarterly financial
information from the Company. Certain of these agreements have been amended
during the first quarter of 1998 primarily to provide for the financing of a
broader range of receivables originated by the Company and to increase the
aggregate amounts available under such lines.
The Company had unsecured bank credit line commitments of $1,500,000,000 as of
December 31, 1997. Effective February 10, 1998 these bank credit lines were
substantially restructured. At March 31, 1998 the credit facility totaled
$750,000,000 including a $375,000,000 three-year committed revolving line of
credit which was scheduled to mature on April 28, 2000 and a $375,000,000
364-day committed revolving line of credit which matured on April 28, 1998. As
of March 31, 1998 outstandings under these credit facilities totaled
approximately $690 million.
The restructuring of the bank lines included the reduction of the facility to
$750,000,000 and renegotiating significant terms and covenants in lieu of a
waiver of certain representations required of the Company for purposes of
utilizing the credit line, having been precluded from making such
representations as a result of the restatement of the Company's 1996 financial
statements. This waiver/amendment expired on April 28, 1998.
On April 28, 1998, the Company closed on a new 364-day unsecured revolving line
of credit for $225,000,000, replacing the matured 364-day facility, and extended
via approval of its bank group the expiration date on the above-referenced
waiver/amendment through April 28, 1999 on its three-year $375,000,000 unsecured
credit facility scheduled to mature on April 28, 2000.
At December 31, 1997 the Company had a commercial paper program through which it
was authorized to issue up to $2 billion in notes of varying terms (not to
exceed 270 days) to meet its warehousing liquidity needs. This program was
backed by a combination of the Company's bank credit agreements and master
repurchase agreements. During the fourth quarter of 1997 and the first quarter
of 1998 the Company's senior unsecured debt ratings were lowered by each of the
credit rating agencies which provide ratings on its debt. As a result of these
ratings actions the Company has substantially curtailed its issuance of
commercial paper in favor of its master repurchase agreements and bank credit
lines. Outstandings under the commercial paper program were reduced during the
first quarter from $1.3 billion at December 31, 1997 to under $50 million at
March 31, 1998.
An additional credit facility was closed on February 13, 1998 providing for a
$500 million line of credit secured by the Company's interest only securities.
This line of credit matures on February 12, 2000 with an optional one-year
extension, and had $500 million of outstandings as of March 31, 1998. In
addition, the Company issued warrants to purchase 2.7 million common shares at
$22.75 per share to the provider of this facility. The warrant expires on the
later of February 13, 2000 or 90 days after the credit facility has been paid in
full. The Company has the option to call and repurchase the warrant for $15.00
per warrant share regardless of the closing price of the common shares at the
call date.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk exposures that affect the
quantitative or qualitative disclosures presented in the Company's annual report
on Form 10-K for the year ended December 31, 1997.
19
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been served with various related lawsuits which were
filed against the Company in United States District Court for the
District of Minnesota. These lawsuits were filed by certain
stockholders of the Company as purported class actions on behalf of
persons or entities who purchased common stock of the Company during
the alleged class periods that generally run from February 1995 to
January 1998. One such action did not include class action claims. In
addition to the Company, certain current and former officers and
directors of the Company are named as defendants in one or more of the
lawsuits. The Company and other defendants intend to seek
consolidation in the United States District Court for the District of
Minnesota of each of the lawsuits seeking class action status.
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 the Company 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 the Company
(particularly with respect to prepayment assumptions and performance
of certain of the Company's loan portfolios) which allegedly rendered
the Company's financial statements false and misleading. The Company
believes that the lawsuits are without merit and intends to defend
such lawsuits vigorously.
In addition, the nature of the Company's business is such that it is
routinely a party or subject to items of pending or threatened
litigation. Although the ultimate outcome of certain of these matters
cannot be predicted, management believes, based upon information
currently available and the advice of counsel, that the resolution of
these routine legal matters will not result in any material adverse
effect on its consolidated financial condition.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. (a) EXHIBITS
10(e) Amendment to Master Repurchase Agreement dated as of
September 1, 1995 between Merrill Lynch Mortgage Capital,
Inc. and Green Tree Financial Corporation.
10(h) Amendment to Master Repurchase Agreement dated as of
October 15, 1992 between Green Tree Finance Corp.-Five and
Lehman Commercial Paper, Inc.
10(k) Amendment to Master Repurchase Agreement dated as of
November 9, 1995 between Salomon Brothers Holding Company
and Green Tree Financial Corporation.
10(p) Asset Assignment Agreement dated as of February 13, 1998
between Green Tree Residual Finance Corp.-I and Lehman
Commercial Paper, Inc.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Company filed a Form 8-K on January 27, 1998, reporting
under Item 5 thereof current developments related to the
Company's announcement of fourth quarter and 1997 results
and plans to restate 1996 earnings.
The Company filed a Form 8-K on February 18, 1998, reporting
under Item 5 thereof current developments related to the
Company's announcement of the closing of new committed
financing arrangements.
The Company filed a Form 8-K on April 6, 1998, reporting
under Item 5 thereof current developments relating to the
agreement to merge the Company with a subsidiary of Conseco,
Inc.
21
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN TREE FINANCIAL CORPORATION
DATE: May 15, 1998 /s/ Edward L. Finn
----------------------------
Edward L. Finn
Executive Vice President and
Chief Financial Officer
DATE: May 15, 1998 /s/ Joel H. Gottesman
----------------------------
Joel H. Gottesman
Senior Vice President and
General Counsel
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EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
10(e) Amendment to Master Repurchase Agreement dated as of September 1, 1995
between Merrill Lynch Mortgage Capital, Inc. and Green Tree Financial
Corporation.
10(h) Amendment to Master Repurchase Agreement dated as of October 15, 1992
between Green Tree Finance Corp.-Five and Lehman Commercial Paper,
Inc.
10(k) Amendment to Master Repurchase Agreement dated as of November 9, 1995
between Salomon Brothers Holding Company and Green Tree Financial
Corporation.
10(p) Asset Assignment Agreement dated as of February 13, 1998 between Green
Tree Residual Finance Corp.-One and Lehman Commercial Paper, Inc.
12. Computation of Ratio of Earnings to Fixed Charges.
27. Financial Data Schedule.
<PAGE>
EXHIBIT 10(e)
EXECUTION COPY
ANNEX I
SUPPLEMENTAL TERMS TO AMENDED AND
RESTATED MASTER REPURCHASE AGREEMENT,
DATED AS OF FEBRUARY 10, 1998, AMONG
MERRILL LYNCH MORTGAGE CAPITAL INC. AND
MERRILL LYNCH CREDIT CORPORATION AND
GREEN TREE FINANCE CORP.--THREE
1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to
Master Repurchase Agreement (the "Master Repurchase Agreement", and
collectively with these Supplemental Terms, the "Agreement") modify the
terms and conditions under which the parties hereto, from time to time,
enter into Transactions.
2. ADDITIONAL DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Master Repurchase Agreement.
(b) "Buyer" shall refer to Merrill Lynch Mortgage Capital Inc. or
Merrill Lynch Credit Corporation, as applicable.
(c) "Consumer Products" refers to consumer goods consisting of
motorcycles, marine products (including boats, boat trailers and
outboard motors), pianos and organs, horse trailers, sport vehicles
(including snowmobiles, personal watercraft and all-terrain
vehicles), trucks, personal aircraft, recreational vehicles, and any
other asset as shall be acceptable to Buyer in its sole discretion,
financed by Green Tree pursuant to a Contract.
(d) "Contract" refers to promissory notes financing home improvements
(which are not treated as Home Improvement Loans), certain
closed-end home equity loans (which are not treated as Home Equity
Loans) and any retail installment contract which finances a purchase
of a Consumer Product, all rights to receive payments which are due
pursuant thereto, and any "purchase money security interest" (as
defined in the Uniform
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Commercial Code) created in favor of Seller in the Consumer Product,
financed thereunder, the ownership of which is evidenced by a Trust
Receipt issued pursuant to the Custodial Agreement. This definition
of "Contract" shall include home improvement loans and home equity
loans that Seller believes may not respectively satisfy the
representations set forth in Exhibit B and Exhibit C and are thus
not included in the definition of "Home Improvement Loan" and "Home
Equity Loan."
(e) "Custodial Agreement" shall refer to an amended and restated
custodial agreement dated as of February 10, 1998, among the parties
having ownership interests in the related Securities and the party
named as custodian therein, providing for the maintenance of
ownership records relating to the Securities.
(f) "Custodian" refers to the party named as custodian in the Custodial
Agreement, or any permitted successor thereto.
(g) "Electronic Ledger" refers to the electronic master record of
installment sale contracts of the Seller.
(h) "FHA" shall refer to the Federal Housing Administration of HUD.
(i) "FHA/VA MH Contracts" shall refer to MH Contracts that are insured
by the FHA or guaranteed by the Department of Veterans Affairs.
(j) "Home Equity Loans" shall refer to the home equity loans other than
such home equity loans included in the definition of "Contract"
secured by first, second or third liens on single family residential
real property (including, without limitation, condominiums and
planned unit developments) certain documents relating to which have
been delivered to the Custodian pursuant to the Custodial Agreement
and the ownership of which is evidenced by a Trust Receipt issued
pursuant to the Custodial Agreement.
(k) "Home Improvement Loans" refers to home improvement installment loan
contracts and promissory notes other than such home improvement
loans included in the definition of "Contract", the ownership of
which is evidenced by a Trust Receipt issued pursuant to the
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Custodial Agreement.
(l) "HUD" shall refer to the Department of Housing and Urban
Development.
(m) "Land-and-Home Contract" refers to a MH Contract that is secured by
a mortgage or deed of trust on real estate on which the related
manufactured home is situated, and which manufactured home is
considered or classified as part of the real estate under the laws
of the jurisdiction in which it is located.
(n) "Market Value" shall, in addition to the definition set forth in the
Master Repurchase Agreement, provide that:
(i) the Market Value of any Security shall be determined solely by
Buyer;
(ii) the Market Value of a Security shall be determined by valuing
such Security net of any applicable servicing fee;
(iii) a value of zero shall be assigned to (x) any Security which
has been delinquent for thirty (30) days or more or (y) any
Wet Contract, Wet Home Equity Loan or Wet MH Contract with
respect to which the related Loan File has not been delivered
to the Custodian within ten (10) days of the Purchase Date
hereunder; and
(iv) in no event shall the Market Value of a Security exceed the
outstanding principal amount thereof.
(o) "MH Contract" refers to a manufactured housing conditional sales
contract, including any Land-and-Home Contract, the ownership of
which is evidenced by a Trust Receipt issued pursuant to the
Custodial Agreement.
(p) "Owner" shall have the meaning set forth in the Custodial Agreement.
(q) "Secured Home Improvement Loans" refers to Home Improvement Loans
which are secured by first, second or third mortgages on property,
whether conventional or insured by the FHA.
(r) "Securities" shall refer to MH Contracts, Home
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Improvement Loans, Home Equity Loans and Contracts; provided,
however, that such MH Contracts, Home Improvement Loans, Home Equity
Loans and Contracts shall not be deemed to be securities for any
federal securities law or state blue sky law purposes; provided,
further, that in the extent Merrill Lynch Capital Markets is not
selected to be, or has resigned as, the lead manager or a co-manager
for the securitization of any of the MH Contracts, Home Improvement
Loans, Home Equity Loans or Contracts, such MH Contracts, Home
Improvement Loans, Home Equity Loans or Contracts shall, at the
election of Buyer in its discretion, be deemed not to be
"Securities" hereunder.
(s) "Seller" shall refer to Green Tree Finance Corp.--Three.
(t) "Step-Up Rate Contract" shall refer to any Contract bearing interest
during an initial period at a fixed rate that is lower than the
fixed rate borne thereafter.
(u) "Title I Loan" shall refer to a Home Improvement Loan insured under
the FHA's Title I Program.
(v) "Transaction" shall, in addition to the definition set forth in the
Master Repurchase Agreement, refer to deliveries of Securities or
cash pursuant to Paragraph 4(a) of the Master Repurchase Agreement
and substitutions pursuant to Paragraph 9 of the Master Repurchase
Agreement.
(w) "UCC" refers to the Uniform Commercial Code as in effect in the
applicable jurisdiction.
(x) "Unsecured Home Improvement Loans" refers to Home Improvement Loans
which are not secured by mortgaged property.
(y) "Wet Contracts" means those Contracts that do not constitute
"chattel paper" under the UCC for which the related Loan Files have
not been delivered to the Custodian as of the Purchase Date.
(z) "Wet Home Equity Loans" means those Home Equity Loans for which the
related Loan Files have not been delivered to the Custodian as of
the Purchase Date.
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(aa) "Wet MH Contracts" means those MH Contracts that do not constitute
"chattel paper" under the UCC for which the related Loan Files have
not been delivered to the Custodian as of the Purchase Date.
3. CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto
unless written notice of objection is given by the objecting party to the
other party within two (2) business days after the objecting party's
receipt of such Confirmation. In the case of Transactions involving MH
Contracts, Home Improvement Loans, Home Equity Loans or Contracts, the
Purchased Securities shall be identified on a detailed listing to be
provided by Seller to Buyer (a "List of MH Contracts" for MH Contracts, a
"List of Home Improvement Loans" for Home Improvement Loans, a "List of
Home Equity Loans" for Home Equity Loans and a "List of Contracts" for
Contracts) and may be identified in the related Confirmation by reference
to such lists.
4. INCOME PAYMENTS. So long as no Event of Default shall have occurred and be
continuing, Seller shall be entitled to all payments of principal and
interest and principal prepayments payable to the holder of the Purchased
Securities.
5. SECURITY INTEREST.
(a) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the parties
intend that Buyer shall have a perfected first priority security
interest in all of the Purchased Securities.
(b) Seller shall pay all fees and expenses associated with perfecting
such security interest including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code.
(c) In the event that Buyer elects to engage in repurchase transactions
with the Purchased Securities or otherwise elects to pledge or
hypothecate the Purchased Securities, Seller shall, at the request
of Buyer and at the expense of Seller, provide Buyer's counterparty
in such repurchase transaction with an opinion of counsel to the
effect that such counterparty has either an ownership interest or a
perfected first priority security interest in such Purchased
Securities.
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6. REPRESENTATIONS.
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the execution, delivery and performance of the Agreement and
the performance of each Transaction do not and will not result
in or require the creation of any lien, security interest or
other charge or encumbrance (other than pursuant hereto) upon
or with respect to any of its properties; and
(ii) the Agreement is, and each Transaction when entered into under
the Agreement will be, a legal, valid and binding obligation
of it enforceable against it in accordance with the terms of
the Agreement.
(b) Seller represents and warrants to Buyer, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the documents disclosed by Seller to Buyer pursuant to these
Supplemental Terms are either original documents or genuine
and true copies thereof;
(ii) Seller is a separate and independent corporate entity from the
custodian named in the Custodial Agreement, Seller does not
own a controlling interest in such custodian either directly
or through affiliates and no director or officer of Seller is
also a director or officer of such custodian;
(iii) Seller shall be at the time it delivers any Purchased
Securities for any Transaction, and shall continue to be,
through the Purchase Date relating to each such Transaction,
the legal and beneficial owner of such Purchased Securities
free and clear of any lien, security interest, option or
encumbrance except for the security interest created by the
Agreement;
(iv) each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract was originated by Green Tree directly or through its
correspondent network
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in its ordinary course of business and has not been purchased in any
bulk transaction, unless otherwise expressly approved by Buyer in
writing;
(v) each MH Contract, Home Improvement Loan, Home Equity Loan and
Contract was underwritten in accordance with the written
underwriting standards of Green Tree furnished by Seller to
Buyer, and no material change to such underwriting standards
has occurred since the date of the last written revision to
such standards was furnished to Buyer by Seller;
(vi) since the date of the most recent financial statement of
Seller, delivered by it pursuant to Paragraph 9 hereof, there
has been no material adverse change in the financial condition
or results or operations of Seller;
(vii) Seller has capital in an amount at least equal to $1,000,000
in the form of cash or U.S. Treasury bills; and
(viii) Seller is in possession of a note of Green Tree Financial
Corporation ("Green Tree"), made payable to Seller in the
amount of at least $1,000,000, which note is subordinated to
all outstanding debt of Green Tree.
(c) Seller makes the representations and warranties to Buyer concerning
the MH Contracts, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties,
as are set forth at Exhibit A-1 hereto, with respect to those MH
Contracts relating to manufactured housing that is not considered to
be real property under applicable state law, and Exhibit A-2 hereto,
with respect to those MH Contracts relating to manufactured housing
that is considered to be real property under applicable state law.
Seller further represents and warrants to Buyer that the Exhibit A-1
and A-2 representations and warranties, as applicable, shall
continue to be true for all MH Contracts through the Repurchase Date
of the related Transaction. The representations and warranties set
forth at Exhibits A-1 and A-2 hereto are incorporated herein in
their entirety.
(d) Seller makes the representations and warranties to
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Buyer concerning the Home Equity Loans, and shall as of the Purchase
Date of any Transaction be deemed to make such representations and
warranties, as are set forth at Exhibit B hereto. Seller further
represents and warrants to Buyer that the Exhibit B representations
and warranties shall continue to be true for all Home Equity Loans
through the Repurchase Date of the related Transactions. The
representations and warranties set forth at Exhibit B hereto are
incorporated herein in their entirety.
(e) Seller makes the representations and warranties to Buyer concerning
the Contracts, and shall as of the Purchase Date of any Transaction
be deemed to make such representations and warranties, as are set
forth at Exhibit C hereto. Seller further represents and warrants to
Buyer that the Exhibit C representations and warranties shall
continue to be true for all Contracts through the Repurchase Date of
the related Transactions. The representations and warranties set
forth at Exhibit C hereto are incorporated herein in their entirety.
(f) Seller makes the representations and warranties to Buyer concerning
the Home Improvement Loans, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties,
as are set forth at Exhibit D hereto. Seller further represents and
warrants to Buyer that the Exhibit D representations and warranties
shall continue to be true for all Home Improvement Loans through the
Repurchase Date of the related Transactions. The representations and
warranties set forth at Exhibit D hereto are incorporated herein in
their entirety.
7. EVENTS OF DEFAULT.
(a) The term "Event of Default" shall, in addition to the definition set
forth in the Master Repurchase Agreement, include the following
events:
(i) any governmental or self-regulatory authority shall take
possession of Buyer or Seller or its property or appoint any
receiver, conservator or other official, or such party shall
take any action to authorize any of the actions set forth in
this clause (i);
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(ii) Buyer shall have reasonably determined that Seller is or will
be unable to meet its commitments under the Agreement, shall
have notified Seller of such determination and Seller shall
not have responded with appropriate information to the
contrary to the satisfaction of Buyer within twenty-four (24)
hours;
(iii) the Agreement shall for any reason cease to create either an
ownership interest (which ownership interest shall be
confirmed upon request of Buyer in an opinion of counsel
provided by Seller) or a valid, first priority security
interest in any of the Purchased Securities purported to be
covered thereby;
(iv) a final judgment by any competent court in the United States
of America for the payment of money in an amount of at least
$100,000 is rendered against the defaulting party, and the
same remains undischarged for a period of 60 days during which
execution of such judgment is not effectively stayed;
(v) any representation or warranty made by Seller in the Agreement
or the Custodial Agreement shall have been incorrect or untrue
when made or repeated or when deemed to have been made or
repeated or, in the case of continuing representations, shall
be untrue in any material respect during the term of any
Transaction under the Agreement;
(vi) HUD or the Federal Housing Administration shall have withdrawn
or adversely modified its approval of Green Tree to act as an
FHA-approved mortgagee and servicer (including an FHA-approved
mortgagee and servicer under Title I); and
(vii) The capitalization of Seller shall at any time fail to comply
with the structure set forth in Paragraphs 6(b)(vii) and
(viii).
(b) Upon the occurrence and during the continuance of an Event of
Default by Seller:
(i) all rights of Seller to receive payments which it would
otherwise be authorized to receive pursuant
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to Paragraph 4 of these Supplemental Terms shall cease, and
all such rights shall thereupon become vested in Buyer, which
shall thereupon have the sole right to receive such payments
and apply them to the aggregate unpaid Repurchase Prices owed
by Seller; and
(ii) all payments which are received by Seller contrary to the
provisions of the preceding clause (i) shall be received in
trust for the benefit of Buyer and shall be segregated from
other funds of Seller.
(c) Any sale of Purchased Securities under Section 11 of the Master
Repurchase Agreement shall be conducted in a commercially reasonable
manner.
8. ADDITIONAL EVENTS OF TERMINATION.
(a) At the option of Buyer, exercised by written notice to Seller and
Green Tree, the Repurchase Date for each Transaction under the
Agreement shall be deemed to immediately occur in the event that:
(i) in the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Green Tree or Seller;
(ii) Buyer shall request written assurances as to the financial
well-being of Green Tree or Seller and such assurances shall
not have been provided within twenty-four (24) hours of such
request;
(iii) Green Tree or Seller shall be in default with respect to any
normal and customary covenants under any contract or agreement
to which it is a party (which covenants include, but are not
limited to, an Act of Insolvency of Green Tree or Seller or
the failure of Green Tree or Seller to make required payments
of at least $100,000 and remains unpaid under such contract or
agreement as they become due); or
(iv) The senior debt obligations or short-term debt obligations of
Merrill Lynch & Co., Inc. shall be rated below the four
highest grades by any nationally recognized statistical rating
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organization.
(b) The events specified in Paragraph 8(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for each Transaction shall be in addition to any
other rights of Buyer to cause such an acceleration under the
Agreement.
9. FINANCIAL STATEMENTS. As of the date hereof, the parties hereto shall each
provide the other with its audited year-end financial statements and its
most recent publicly available interim financial statement. The parties
hereto shall from time to time each provide the other with audited
year-end financial statements and additional publicly available interim
financial statements upon the other's reasonable request. The financial
statements of Seller required pursuant to this Section 9 may be
consolidated with those of Green Tree. Each delivery of Purchased
Securities by Seller to Buyer hereunder will constitute a representation
by Seller that there has been no material adverse change in Seller's
financial condition not disclosed to Buyer since the date of Seller's most
recent financial statement delivered to Buyer. Seller shall provide Buyer,
from time to time at Seller's expense, with such information of a
financial or operational nature as Buyer may reasonably request promptly
upon receipt of such request.
10. USE OF PROCEEDS. Seller represents, warrants and covenants that none of
the Purchase Price for any Purchased Securities will be used either
directly or indirectly to acquire any security, as that term is defined in
Regulation G or Regulation T of the Board of Governors of the Federal
Reserve System, and that Seller has not taken any action that might cause
any Transaction to violate any regulation of the Federal Reserve Board.
11. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. The parties hereto agree
and acknowledge that Transactions hereunder will be entered into by Buyer
in its sole discretion and that Buyer is under no obligation to enter into
any Transaction with Seller. With respect to any Transaction and without
limiting the discretion of Buyer referred to in the foregoing sentence and
in Paragraph 16 of these Supplemental Terms:
(a) the minimum amount of any Transaction under this Agreement shall
have a Purchase Price of $5,000,000;
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(b) the aggregate outstanding Purchase Price for all Purchased
Securities shall not exceed $1,000,000,000 at any one time;
(c) the aggregate outstanding Purchase Price for Purchased Securities
other than MH Contracts shall not exceed $750,000,000 at any one
time; and
(d) the percentage used to determine Buyer's Margin Amount shall be as
mutually agreed upon by Buyer and Seller but in no event less than
110%.
12. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date
shall include that portion of the Price Differential that has accrued but
has not been paid. The Price Differential shall accrue and be calculated
on a daily basis for each MH Contract, Home Improvement Loan, Home Equity
Loan and Contract (such calculation to be made on the basis of a 360-day
year and the actual number of days elapsed). The Price Differential shall
be payable weekly in arrears to Buyer with respect to each MH Contract,
Home Improvement Loan, Home Equity Loan and Contract on the earlier of
Friday of each week or the termination date for the related Transaction.
The Price Differential for any MH Contract, Home Improvement Loan, Home
Equity Loan and Contract shall be equal to the product of (i) the Purchase
Price and (ii) a per annum percentage 50 basis points (or such other
number of basis points as Buyer and Seller may mutually agree) in excess
of the prevailing overnight rate on Federal funds (as reported on Page 5
of Telerate) existing at the opening of business on the date of
calculation. Payment of the Price Differential to Buyer shall be made by
wire transfer in immediately available funds.
13. ADDITIONAL INFORMATION.
(a) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in
their possession pertaining to each Purchased Security that is the
subject of such Transaction. Such inspection shall occur upon the
request of Buyer at a mutually agreeable location during regular
business hours and on a date not more than two (2) business days
after the date of such request.
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(b) Seller agrees to provide Buyer from time to time with such
information concerning Seller of a financial or operational nature
as Buyer may request.
(c) Seller shall provide Buyer with copies of all filings made by or on
behalf of Seller or its parent with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as
amended, promptly upon making such filings.
14. TERMINATION Notwithstanding Paragraph 15 of the Master Repurchase
Agreement, this Agreement and all Transactions outstanding hereunder shall
terminate automatically without any requirement for notice on the date
occurring six calendar months after the date as of which this Agreement is
entered into; provided, however, that this Agreement and any Transaction
outstanding hereunder may be extended by mutual agreement of Buyer, Seller
and Green Tree; and provided further, however, that no such party shall be
obligated to agree to such an extension.
15. MARGIN MAINTENANCE.
(a) Paragraph 4(a) of the Master Repurchase Agreement is hereby modified
to provide that if the notice to be given by Buyer to Seller under
such paragraph is given at or prior to 10:00 a.m. New York City
time, Seller shall transfer the Additional Purchased Securities or
cash to Buyer prior to the close of business in New York City on the
date of such notice, and if such notice is given after 10:00 a.m.
New York City time, Seller shall transfer the Additional Purchased
Securities or cash prior to the close of business in New York City
on the business day following the date of such notice.
(b) Additional Purchased Securities that are MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts that are
transferred by Seller to Buyer pursuant to Paragraph 4(a) of the
Master Repurchase Agreement shall be transferred to the Custodian
for the benefit of Buyer pursuant to the provisions of the Custodial
Agreement. Any cash transferred by Seller to Buyer shall be sent via
wire transfer in immediately available funds to the account
designated by Buyer.
16. TRANSACTIONS OPTIONAL; NO COMMITMENT. Notwithstanding any other provision
of the Agreement or the Custodial Agreement
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to the contrary, Buyer shall be under no obligation to enter into
Transactions with Seller and the initiation of each Transaction is subject
to the approval of Buyer in its sole discretion.
17. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction
under this Agreement, Seller shall cause each of the following conditions
to occur:
(a) A Custodial Agreement relating to the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts, in form and substance
satisfactory to Buyer, shall have been executed and delivered by the
parties thereto;
(b) Seller shall have disclosed information satisfactory to Buyer with
respect to the scheduled maturities and termination provisions of
all outstanding credit facilities and debt of Seller; and
(c) Seller shall, on the Purchase Date of the first Transaction
hereunder and, upon the request of Buyer, on the Purchase Date of
any subsequent Transaction, cause to be delivered to Buyer, with
reliance thereon permitted as to any person or entity that purchases
the Securities from Buyer in a repurchase transaction, an opinion of
counsel, in form and substance satisfactory to Buyer and its
counsel, concerning (i) the authorization and authority of Seller to
enter into the Agreement and the Custodial Agreement and
Transactions thereunder, (ii) the ownership interest or perfected
security interest of Buyer or its agent in the Purchased Securities
and (iii) such other matters as Buyer may reasonably require.
18. SERVICING ARRANGEMENTS.
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts contemplated hereby, Seller shall cause
Green Tree to continue to service the MH Contracts, Home Improvement
Loans, Home Equity Loans and Contracts for the benefit of Buyer and,
if Buyer shall exercise its rights to sell the MH Contracts, Home
Improvement Loans, Home Equity Loans and Contracts pursuant to this
Agreement prior to the related Repurchase Date, Buyer's assigns;
PROVIDED, HOWEVER, that the obligation of
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Green Tree to service the MH Contracts, Home Improvement Loans, Home
Equity Loans and Contracts for the benefit of Buyer as aforesaid
shall cease upon the payment to Buyer of the Repurchase Price
therefor.
(b) Green Tree shall service the MH Contracts, Home Improvement Loans,
Home Equity Loans and Contracts and shall enforce its rights and the
rights of the beneficial owner thereunder in accordance with the
standards of a prudent lender in the manufactured housing industry,
the home equity loan industry and the consumer finance industry, as
applicable.
(c) Green Tree shall service all FHA/VA MH Contracts and all FHA/VA Home
Equity and Home Improvement Loans in a manner such that such
insurance or guarantee will not be impaired and will remain in full
force and effect.
(d) Buyer may, in its sole discretion if an Event of Default shall have
occurred and be continuing, without payment of any termination fee
or any other amount to Seller, (i) sell its right to the MH
Contracts, Home Improvement Loans, Home Equity Loans and Contracts
on a servicing released basis or (ii) terminate Green Tree as
servicer of the MH Contracts, Home Improvement Loans, Home Equity
Loans and Contracts with or without cause.
19. TRANSFERS TO THIRD PARTIES. Buyer and Seller agree that, notwithstanding
any provision of the Agreement or the Custodial Agreement to the contrary,
Buyer may engage in repurchase transactions with the Purchased Securities
and may otherwise pledge or hypothecate the Purchased Securities, provided
that no such transaction shall relieve Buyer of its obligations under the
Agreement.
20. SINGLE AGREEMENT. Paragraph 12 of the Master Repurchase Agreement is
amended by adding at the end thereof the following:
"Buyer and Seller agree that, upon an Act of Insolvency by Buyer, on
the one hand, or Seller or any of its affiliates, on the other hand,
or the default by Buyer, on the one hand, or Seller or any of its
affiliates, on the other hand, under any transaction with the other
party hereto (the party to which such Act of Insolvency or default
relates being herein referred to as "Party A" and the other party
being referred to herein as
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"Party B"), Party B may: (a) liquidate any transaction between Party
A and Party B, (b) reduce any amounts due and owing to Party A under
this or any other transactions between Party A and Party B by
setting off against such amounts any amounts due and owing to Party
B by Party A, and (c) treat all security for any transactions
between Party A and Party B as security for all transactions between
Party A and Party B.
21. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Buyer and Seller hereby agree
to submit to the courts of the State of New York in any action or
proceeding arising out of this Agreement. Buyer and Seller each hereby
waives the right of trial by jury in any litigation arising hereunder.
22. BINDING TERMS. All of the covenants, stipulations, promises and agreements
in the Agreement shall bind the successors and assigns of the parties
hereto, whether expressed or not.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same
instrument.
24. INCORPORATION OF TERMS. The Master Repurchase Agreement as supplemented by
this Annex I and by Exhibits A-1, A-2, B, C and D shall be read, taken and
construed as one and the same instrument.
25. OPINIONS OF COUNSEL. Seller shall, on the date of the first Transaction
hereunder and, upon the request of Buyer, on the date on any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon
permitted as to any person or entity that purchases the Contracts from
Buyer in a repurchase transaction, opinions of counsel reasonably
satisfactory to Buyer.
26. APPOINTMENT OF AGENT. Merrill Lynch Credit Corporation ("MLCC") hereby
appoints Merrill Lynch Mortgage Capital Inc. ("MLMCI") as its agent for
purposes of reviewing and executing Confirmations, determining Market
Value, exercising any termination option provided for in Paragraph 14
hereof, exercising MLCC's rights under any margin maintenance provision of
the Agreement, exercising MLCC's rights under the default provisions of
the Agreement and such other purposes as MLCC may direct. The appointment
of such agent shall not relieve MLCC of its obligations as Buyer
hereunder.
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EXHIBIT A-1
REPRESENTATIONS WITH RESPECT TO MH CONTRACTS
(NOT RELATING TO REAL PROPERTY)
1. PAYMENTS. The scheduled payment of principal and interest for the most
recent Due Date was made by or on behalf of the obligor (without any advance
from Green Tree or any Person acting at the request of Green Tree) or was not
delinquent for more than 30 days.
B. NO WAIVERS. The terms of the MH Contract have not been waived, altered
or modified in any respect, except by instruments or documents identified in the
MH Contract file.
C. BINDING OBLIGATION. The MH Contract is the legal, valid and binding
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. NO DEFENSES. The MH Contract is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the MH Contract or the exercise of any right
thereunder will not render the MH Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
E. INSURANCE. Green Tree or its agent has monitored the existence of a
hazard insurance policy with respect to the manufactured home securing a MH
Contract and if the Green Tree has determined that no such policy exists, Green
Tree has arranged for such insurance and has billed the related obligor through
its loan account.
F. ORIGINATION. The MH Contract was originated by a manufactured housing
dealer or Green Tree in the regular course of its business and, if originated by
a manufactured housing dealer, was purchased by Green Tree in the regular course
of its business.
G. LAWFUL ASSIGNMENT. The MH Contract was not originated in and is not
subject to the laws of any jurisdiction whose laws
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would make the transfer of the MH Contract to the Custodian or the ownership of
the MH Contracts by the Owner unlawful.
H. COMPLIANCE WITH LAW. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by the Custodian
or the Owner's ownership of the MH Contracts, and Green Tree shall maintain in
its possession, available for the Buyer's inspection, and shall deliver to the
Buyer upon demand, evidence of compliance with all such requirements.
I. MH CONTRACT IN FORCE. The MH Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. VALID SECURITY INTEREST. The MH Contract creates a valid and
enforceable perfected first priority security interest in favor of Green Tree in
the manufactured home covered thereby as security for payment of the outstanding
principal balance of such MH Contract and all other obligations of the obligor
under such MH Contract; such security interest has been assigned by Green Tree
to the Custodian, and the Custodian has and will, on behalf of the Owners of the
MH Contracts, have a valid and perfected and enforceable first priority security
interest in such manufactured home.
K. CAPACITY OF PARTIES. All parties to the MH Contract had capacity to
execute the MH Contract.
L. GOOD TITLE. In the case of a MH Contract purchased from a manufactured
housing dealer, Green Tree purchased the MH Contract for fair value and took
possession thereof in the ordinary course of its business, without knowledge
that the MH Contract was subject to a security interest. Green Tree has not
sold, assigned or pledged the MH Contract to any Person other than the
Custodian.
M. NO DEFAULTS. There was no default, breach, violation or event
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Green Tree has not waived any such default, breach, violation or event
permitting acceleration.
A-1-2
<PAGE>
N. NO LIENS. There are, to the best of Green Tree's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
O. EQUAL INSTALLMENTS. The MH Contract either has a fixed rate or is a
Step-Up Rate Contract and provides for level monthly payments which fully
amortize the loan over its term.
P. ENFORCEABILITY. The MH Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. ONE ORIGINAL. There is only one original executed MH Contract, which is
held by Green Tree.
R. LOAN-TO-VALUE RATIO. At the time of its origination each MH Contract
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Green Tree's
underwriting guidelines in effect at the time the MH Contract was originated.
S. PRIMARY RESIDENT. At the time of origination of the MH Contract the
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
T. NOT REAL ESTATE. The related manufactured home is not considered or
classified as part of the real estate on which it is located under the laws of
the jurisdiction in which it is located and such manufactured home is, to the
best of Green Tree's knowledge, free of damage and in good repair.
U. NOTATION OF SECURITY INTEREST. If the related manufactured home is
located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the title
document shows, or if a new or replacement title document with respect to such
manufactured home is being applied for such title document will be issued within
180 days and will show, Green Tree as the holder of a first priority security
interest in such manufactured home. If the related manufactured home is located
in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in manufactured housing, such filings
A-1-3
<PAGE>
or recordings have been duly made and show Green Tree as secured party. In
either case, the Custodian has the same rights as the secured party of record
would have (if such secured party were still the owner of the MH Contract)
against all Persons claiming an interest in such manufactured home.
V. QUALIFIED MORTGAGE FOR REMIC. Each MH Contract is a "qualified
mortgage" under Section 860G(a)(3) of the Code, and the related manufactured
home is "manufactured housing" within the meaning of Section 25(e)(10) of the
Code.
W. FHA/VA MH CONTRACTS. If the MH Contract is a FHA/VA MH Contract, the MH
Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
X. NO ADVERSE SELECTION. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the MH Contracts.
A-1-4
<PAGE>
EXHIBIT A-2
REPRESENTATIONS WITH RESPECT TO MH CONTRACTS
(RELATING TO REAL PROPERTY)
A. PAYMENTS. The scheduled payment of principal and interest for the most
recent Due Date was made by or on behalf of the obligor (without any advance
from Green Tree or any Person acting at the request of Green Tree) or was not
delinquent for more than 30 days.
B. NO WAIVERS. The terms of the MH Contract have not been waived, altered
or modified in any respect, except by instruments or documents identified in the
MH Contract file.
C. BINDING OBLIGATION. The MH Contract is the legal, valid and binding
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. NO DEFENSES. The MH Contract is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the MH Contract or the exercise of any right
thereunder will not render the MH Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
E. INSURANCE. Green Tree or its agent has monitored the existence of a
hazard insurance policy with respect to the manufactured home securing a MH
Contract and if the Green Tree has determined that no such policy exists, Green
Tree has arranged for such insurance and has billed the related obligor through
its loan account
F. ORIGINATION. The MH Contract was originated by a manufactured housing
dealer or Green Tree in the regular course of its business and, if originated by
a manufactured housing dealer, was purchased by Green Tree in the regular course
of its business.
G. LAWFUL ASSIGNMENT. The MH Contract was not originated in and is not
subject to the laws of any jurisdiction whose laws
A-2-1
<PAGE>
would make the transfer of the MH Contract to the Custodian or the ownership of
the MH Contracts by the Owner unlawful.
H. COMPLIANCE WITH LAW. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by the Custodian
or the Owner's ownership of the MH Contracts, and Green Tree shall maintain in
its possession, available for the Buyer's inspection, and shall deliver to the
Buyer upon demand, evidence of compliance with all such requirements.
I. MH CONTRACT IN FORCE. The MH Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. INTEREST IN REAL PROPERTY. Each mortgage is a valid first lien in favor
of Green Tree on real property securing the amount owed by the obligor under the
related MH Contract subject only to (a) the lien of current real property taxes
and assessments, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally in the area wherein the property subject to the
mortgage is located or specifically reflected in the appraisal obtained in
connection with the origination of the related MH Contract obtained by Green
Tree and (c) other matters to which like properties are commonly subject which
do not materially interfere with the benefits of the security intended to be
provided by such Mortgage. Green Tree has assigned all of its right, title and
interest in such MH Contract and related mortgage, including the security
interest in the manufactured home covered thereby, to the Custodian. The
Custodian has and will have a valid and perfected and enforceable first priority
security interest in such MH Contract. The MH Contract creates a valid and
enforceable perfected first priority security interest in favor of Green Tree in
the manufactured home covered thereby (to the extent such manufactured home is
not considered real property) as security for payment of the outstanding
principal balance of such MH Contract and all other obligations of the obligor
under such MH Contract; such security interest has been assigned by Green Tree
to the Custodian, and the Custodian has and will, on behalf of the Owners of the
MH Contracts, have a valid and perfected and enforceable first priority security
interest in such manufactured home.
A-2-2
<PAGE>
K. CAPACITY OF PARTIES. All parties to the MH Contract had capacity to
execute the MH Contract.
L. GOOD TITLE. In the case of a MH Contract purchased from a manufactured
housing dealer, Green Tree purchased the MH Contract for fair value and took
possession thereof in the ordinary course of its business, without knowledge
that the MH Contract was subject to a security interest. Green Tree has not
sold, assigned or pledged the MH Contract to any Person other than the
Custodian.
M. NO DEFAULTS. There was no default, breach, violation or event
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Green Tree has not waived any such default, breach, violation or event
permitting acceleration.
N. NO LIENS. There are, to the best of Green Tree's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
O. EQUAL INSTALLMENTS. The MH Contract either has a fixed rate or is a
Step-Up Rate Contract and provides for level monthly payments which fully
amortize the loan over its term.
P. ENFORCEABILITY. The MH Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. ONE ORIGINAL. There is only one original executed MH Contract, which is
held by Green Tree.
R. LOAN-TO-VALUE RATIO. At the time of its origination each MH Contract
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Green Tree's
underwriting guidelines in effect at the time the MH Contract was originated.
S. PRIMARY RESIDENT. At the time of origination of the MH Contract the
obligor was the primary resident of the related
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<PAGE>
manufactured home or the primary resident was the child of the obligor.
T. GOOD REPAIR. The related manufactured home is, to the best of Green
Tree's knowledge, free of damage and in good repair.
U. QUALIFIED MORTGAGE FOR REMIC. Each MH Contract is a "qualified
mortgage" under Section 860G(a)(3) of the Code, and the related manufactured
home is "manufactured housing" within the meaning of Section 25(e)(10) of the
Code.
V. FHA/VA MH CONTRACTS. If the MH Contract is a FHA/VA MH Contract, the MH
Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
W. NO ADVERSE SELECTION. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the MH Contracts.
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<PAGE>
EXHIBIT B
REPRESENTATIONS WITH RESPECT
TO HOME EQUITY LOANS
A. PAYMENTS. The scheduled payment of principal and interest due under the
Home Equity Loan with respect to the prior Due Date was made on or before such
Due Date by or on behalf of the obligor (without any advance from Green Tree or
any Person acting at the request of Green Tree) or was not delinquent for more
than 30 days after such Due Date.
B. NO WAIVERS. The terms of the Home Equity Loan have not been waived,
altered or modified in any respect, except by instruments or documents
identified in the Home Equity Loan File. All costs, fees and expenses incurred
in making, closing and perfecting the lien and/or security interest, as
applicable, of the Home Equity Loan have been paid.
C. BINDING OBLIGATION. The Home Equity Loan is the legal, valid and
binding obligation of the obligor thereunder and is enforceable in accordance
with its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally. Green Tree has delivered, or
caused to be delivered, to the Custodian the original Mortgage, with evidence of
recording thereon, or if the original Mortgage has not yet been returned from
the recording office, a true copy of the Mortgage which has been delivered for
recording in the appropriate recording office of the jurisdiction in which the
Real Property is located.
D. NO DEFENSES. The Home Equity Loan is not subject to any right of
rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Equity Loan or the exercise of
any right thereunder will not render the Home Equity Loan unenforceable in whole
or in part or subject to any right of rescission, set off, counterclaim or
defense, including the defense of usury, and no such right of rescission, set
off, counterclaim or defense has been asserted with respect thereto.
E. INSURANCE. All improvements on the related real property are covered by
a hazard insurance policy. All premiums due on such insurance have been paid in
full.
F. ORIGINATION. The Home Equity Loan was originated by a
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<PAGE>
home equity lender or Green Tree in the regular course of its business and, if
originated by a home equity lender, was purchased by Green Tree in the regular
course of its business.
G. LAWFUL ASSIGNMENT. The Home Equity Loan was not originated in and is
not subject to the laws of any jurisdiction whose laws would make the transfer
of the Home Equity Loan to Custodian or the ownership of the Home Equity Loans
by the Owner thereof unlawful or make the Home Equity Loan unenforceable.
H. COMPLIANCE WITH LAW. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the Home Equity Loan have been complied with and
such compliance is not affected by the holding of the Home Equity Loans by
Custodian or the Owners' ownership of the Home Equity Loans, and Green Tree
shall for at least the period of this Agreement, maintain in its possession,
available for Custodian's inspection, and shall deliver to Custodian upon
demand, evidence of compliance with all such requirements.
I. HOME EQUITY LOAN IN FORCE. The Home Equity Loan has not been satisfied
or subordinated in whole or in part or rescinded, and the real property securing
the Home Equity Loan has not been released from the lien of the Home Equity Loan
in whole or in part.
J. VALID LIEN. The Home Equity Loan has been duly executed and delivered
by the obligor and the related Mortgage is a valid and subsisting first, second
or third lien on the property therein described; any related Mortgage has been
assigned by Green Tree to Custodian, and Custodian has and will have, on behalf
of the Owners of the Home Equity Loans, a valid and subsisting lien on the
property therein described. Green Tree has full right to sell and assign the
Home Equity Loans to Custodian.
K. CAPACITY OF PARTIES. All parties to the Home Equity Loan had capacity
to execute the Home Equity Loan.
L. GOOD TITLE. Prior to transfer to Custodian, Green Tree is the sole
owner of the Home Equity Loan and has the authority to sell, transfer and assign
the Home Equity Loan. Green Tree has not sold, assigned or pledged the Home
Equity Loan to any Person other than the Custodian.
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M. NO DEFAULTS. There was no default, breach, violation or event
permitting acceleration existing under the Home Equity Loan and no event which,
with notice and the expiration of any grace or cure period, would constitute
such a default, breach, violation or event permitting acceleration under such
Home Equity Loan. Green Tree has not waived any such default, breach, violation
or event permitting acceleration.
(_) N. NO LIENS. There are, to the best of Green Tree's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the real
property securing the Home Equity Loan which are or may be liens prior to, or
equal or coordinate with, the lien of the Home Equity Loan.
O. EQUAL INSTALLMENTS. The Home Equity Loan has a fixed rate and provides
for level monthly payments which fully amortize the loan over its term.
P. ENFORCEABILITY. The Home Equity Loan contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security provided thereby.
Q. ONE ORIGINAL. There is only one original executed Home Equity Loan
note, and it has been delivered to the Custodian.
R. PRIMARY RESIDENT. At the time of origination of the Home Equity Loan,
the obligor was the primary resident of the related real property.
S. QUALIFIED MORTGAGE FOR REMIC. Each Home Equity Loan that is secured by
a Mortgage on the property described therein is a "qualified mortgage" under
Section 860G(a)(3) of the Code.
T. PROCEEDINGS. There is no proceeding pending or, to Green Tree's
knowledge, threatened for the total or partial condemnation of collateral
securing a Home Equity Loan.
U. MARKING RECORDS. Green Tree has caused the portions of the Electronic
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Equity Loans are owned by Custodian in accordance with
the terms of the related Custodial Agreement.
V. NO ADVERSE SELECTION. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the Home
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Equity Loans.
W. REAL PROPERTY. Each mortgaged property is improved by a single family
dwelling which constitutes real property under state law and is the principal
residence of the obligor.
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EXHIBIT C
REPRESENTATIONS WITH RESPECT TO CONTRACTS
A. LIST OF CONTRACTS. The information set forth in the List of Contracts
is true and correct as of its date.
B. PAYMENTS. The most recent scheduled payment was made by or on behalf of
the obligor (without any advance from Green Tree or any Person acting at the
request of Green Tree) or was not delinquent for more than 59 days.
C. NO WAIVERS. The terms of the Contract have not been waived, altered or
modified in any respect, except by instruments or documents identified in the
Contract File.
D. BINDING OBLIGATION. The Contract is the legal, valid and binding
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally.
E. NO DEFENSES. The Contract is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Contract or the exercise of any right
thereunder will not render the Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
F. ORIGINATION. Each Contract other than a Home Improvement Contract or a
Home Equity Contract was originated by a dealer of goods of a class including
the Consumer Product subject to the Contract, or by Green Tree, in the regular
course of its business and, if originated by a dealer, was purchased by Green
Tree in the regular course of its business. Each Home Improvement Contract was
originated by a home improvement contractor, or by Green Tree, in the ordinary
course of its business and, if originated by a contractor, was purchased by
Green Tree, in the ordinary course of its business. Each Home Equity Contract
was originated by a home equity lender, or by Green Tree, in the ordinary course
of its business and, if originated by a lender, was purchased by Green Tree in
the ordinary course of its business.
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G. LAWFUL ASSIGNMENT. The Contract was not originated in and is not
subject to the laws of any jurisdiction whose laws would make the transfer of
the Contract to the Custodian unlawful or render the Contract unenforceable.
H. COMPLIANCE WITH LAW. At the date of origination of the Contract, all
requirements of any federal and state laws, rules and regulations applicable to
the Contract, including, without limitation, usury, truth in lending and equal
credit opportunity laws, have been complied with, and (if such Contract is an
FHA-Insured Contract) the FHA Regulations have been complied with, and Green
Tree shall for at least the period of this Agreement, maintain its possession,
available for the Custodian's inspection, and shall deliver to the Custodian
upon demand, evidence of compliance with all such requirements. Such compliance
is not affected by the Custodian's ownership of the Contract.
I. CONTRACT IN FORCE. The Contract has not been satisfied or subordinated
in whole or in part or rescinded, and the Consumer Product or real property, if
any, securing the Contract has not been released in whole or in part.
J. VALID SECURITY INTEREST OR LIEN. As to each Contract other than a Home
Improvement Contract or a Home Equity Contract: (a) the Contract creates a valid
and enforceable perfected first priority security interest in favor of Green
Tree in the Consumer Product covered thereby as security for payment of the
outstanding principal balance of such Contract; (b) the Company has assigned all
of its right, title and interest in such Contract, including the security
interest in the Consumer Product covered thereby to the Custodian; and (c) the
Custodian has and will have a valid and perfected and enforceable first priority
security interest in such Consumer Product. As to each Home Equity Contract, the
Contract has been duly executed and delivered by the obligor, and the lien
created thereby has been duly recorded, or has been delivered to the appropriate
governmental authority for recording and will be duly recorded within 30 days
and constitutes a valid and perfected first, second or third priority lien on
the real estate described in such Contract.
K. CAPACITY OF PARTIES. The signature(s) of the obligor(s) on the Contract
are genuine and all parties to the Contract had full legal capacity to execute
the Contract.
L. GOOD TITLE. In the case of a Contract purchased from a dealer, home
improvement contractor or home equity lender, Green
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Tree purchased the Contract for fair value and took possession thereof in the
ordinary course of its business, without knowledge that the Contract was subject
to a security interest. Green Tree has not sold, assigned or pledged the
Contract to any Person and prior to the transfer of the Contract by Green Tree
to the Custodian, Green Tree had good and marketable title thereto free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest and was the sole owner thereof with full right to transfer the Contract
to the Custodian. If such Contract is an FHA-Insured Contract, because the
Custodian is a lender approved by HUD to originate and purchase Title I loans
under a valid Title I contract of insurance, Green Tree has the authority to
sell, transfer and assign such Contract to the Custodian. No financing statement
describing or referring to any Contract (other than any financing statement
naming the Custodian as secured party, or filed by Green Tree as secured party
to perfect its interest in a Contract purchased from a dealer) is on file in any
public office.
M. NO DEFAULTS. There was no default, breach, violation or event
permitting acceleration existing under the Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such Contract
(except payment delinquencies permitted by clause (b) above). Green Tree has not
waived any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (b) above. The related Consumer
Product is, to the best of Green Tree's knowledge, free of damage and in good
repair.
N. NO LIENS. As to each Contract other than a Home Improvement Contract or
a Home Equity Contract, there are, to the best of Green Tree's knowledge, no
liens or claims which have been filed for work, labor or materials affecting the
Consumer Product securing the Contract which are or may be liens prior to, or
equal or coordinate with, the lien of the Contract.
O. EQUAL INSTALLMENTS. Each Contract has a fixed Contract Rate and
provides for level monthly payments (except, in the case of a Balloon Loan, for
the final monthly payment of such loan) which fully amortize the loan over its
term.
P. ENFORCEABILITY. The Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. ONE ORIGINAL. There is only one original executed
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Contract (other than an original in the possession of the relevant obligor),
which Contract has been delivered to the Custodian on or before the date hereof.
Each Contract other than a Home Improvement Contract or a Home Equity Contract
has been stamped to reflect the assignment of such Contract to the Custodian.
Each Home Equity Contract and Home Improvement Contract has been delivered to
the Custodian on or before the date hereof.
R. NOTATION OF SECURITY INTEREST. With respect to each Contract other than
a Home Improvement Contract or a Home Equity Contract, if the related Consumer
Product is located in a state in which notation of a security interest on the
title document is required or permitted to perfect such security interest, the
title document shows, or if a new or replacement title document with respect to
such Consumer Product is being applied for such title document will be issued
within 180 days and will show, Green Tree as the holder of a first priority
security interest in such Consumer Product; if the related Consumer Product is
located in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in goods of the type including the
Consumer Product, such filings or recordings have been duly made and show Green
Tree as secured party; and if the related Consumer Product is an aircraft
subject to registration with the Federal Aviation Administration's Aircraft
Registry, and the recordation of a mortgage, security agreement or similar
conveyance with such Registry is required to perfect the lien created thereby,
such recordation has been duly made and shows Green Tree as secured party or
mortgagee. In any case, the Custodian has the same rights as the secured party
of record would have (if such secured party were still the owner of the
Contract) against all Persons (including Green Tree and any trustee in
bankruptcy of Green Tree) claiming an interest in such Consumer Product.
S. NO GOVERNMENT CONTRACTS. No obligor is the United States government or
an agency, authority, instrumentality or other political subdivision of the
United States government.
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<PAGE>
EXHIBIT D
REPRESENTATIONS WITH RESPECT
TO HOME IMPROVEMENT LOANS
A. PAYMENTS. The scheduled payment of principal and interest due under the
Home Improvement Loan with respect to the prior Due Date was made on or before
such Due Date by or on behalf of the obligor (without any advance from Seller or
any Person acting at the request of Seller) or was not delinquent for more than
30 days after such Due Date.
B. NO WAIVERS. The terms of the Home Improvement Loan have not been
waived, altered or modified in any respect, except by instruments or documents
identified in the Home Improvement Loan File (as defined in the Custodial
Agreement). All costs, fees and expenses incurred in making, closing and
perfecting the lien and/or security interest, as applicable, of the Home
Improvement Loan have been paid.
C. BINDING OBLIGATION. The Home Improvement Loan is the legal, valid and
binding obligation of the obligor thereunder and is enforceable in accordance
with its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally. In the case of Home Improvement
Loans other than Unsecured Home Improvement Loans, Seller has delivered, or
caused to be delivered, to the Custodian the original Mortgage, with evidence of
recording thereon, or if the original Mortgage has not yet been returned from
the recording office, a true copy of the Mortgage which has been delivered for
recording in the appropriate recording office of the jurisdiction in which the
Real Property is located.
D. NO DEFENSES. The Home Improvement Loan is not subject to any right of
rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Improvement Loan or the
exercise of any right thereunder will not render the Home Improvement Loan
unenforceable in whole or in part or subject to any right of rescission, set
off, counterclaim or defense, including the defense of usury, and no such right
of rescission, set off, counterclaim or defense has been asserted with respect
thereto.
E. INSURANCE. In the case of Home Improvement Loans other than Unsecured
Home Improvement Loans, all improvements on the related real property are
covered by a hazard insurance policy.
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All premiums due on such insurance have been paid in full.
Each Title I Loan was originated in compliance with FHA regulations and is
insured, without set-off, surcharge or defense, by FHA insurance. Seller has, in
conformity with FHA regulations, filed all reports necessary for the Title I
Loan to be registered for FHA insurance. Following assignment of the Title I
Loan to Custodian, on behalf of the Owners, Custodian will be entitled to the
full benefits of the FHA insurance.
F. ORIGINATION. The Home Improvement Loan was originated by a home
improvement contractor or Seller in the regular course of its business and, if
originated by a home improvement contractor, was purchased by Seller in the
regular course of its business.
G. LAWFUL ASSIGNMENT. The Home Improvement Loan was not originated in and
is not subject to the laws of any jurisdiction whose laws would make the
transfer of the Home Improvement Loan to Custodian or the ownership of the Home
Improvement Loans by the Owner thereof unlawful or make the Home Improvement
Loan unenforceable.
H. COMPLIANCE WITH LAW. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws and the FHA regulations, applicable to the Home Improvement
Loan have been complied with and such compliance is not affected by the holding
of the Home Improvement Loans by Custodian or the Owner's ownership of the Home
Improvement Loans, and Seller shall for at least the period of this Agreement,
maintain in its possession, available for Custodian's inspection, and shall
deliver to Custodian upon demand, evidence of compliance with all such
requirements.
I. HOME IMPROVEMENT LOAN IN FORCE. The Home Improvement Loan has not been
satisfied or subordinated (except for such subordination as may be allowed under
FHA regulations) in whole or in part or rescinded, and, in the case of Home
Improvement Loans other than Unsecured Home Improvement Loans, the real property
securing the Home Improvement Loan, as applicable, has not been released from
the lien of the Home Improvement Loan in whole or in part.
J. VALID LIEN. The Home Improvement Loan has been duly executed and
delivered by the obligor and either the related Mortgage is a valid and
subsisting first, second or third lien on the property therein described or the
Home Improvement Loan is an
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<PAGE>
unsecured borrowing of the obligor; any related Mortgage has been assigned by
Seller to Custodian, and Custodian has and will have, on behalf of the Owners of
the Home Improvement Loans, a valid and subsisting lien on the property therein
described. Seller has full right to sell and assign the Home Improvement Loans
to Custodian.
K. CAPACITY OF PARTIES. All parties to the Home Improvement Loan had
capacity to execute the Home Improvement Loan.
L. GOOD TITLE. Prior to transfer to Custodian, Seller is the sole owner of
the Home Improvement Loan and has the authority to sell, transfer and assign the
Home Improvement Loan. Seller has not sold, assigned or pledged the Home
Improvement Loan to any Person other than the Custodian.
M. NO DEFAULTS. There was no default, breach, violation or event
permitting acceleration existing under the Home Improvement Loan and no event
which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Home Improvement Loan. Seller has not waived any such default,
breach, violation or event permitting acceleration.
(_) N. NO LIENS. In the case of Home Improvement Loans other than Unsecured
Home Improvement Loans, there are, to the best of Seller's knowledge, no liens
or claims which have been filed for work, labor or materials affecting the real
property securing the Home Improvement Loan which are or may be liens prior to,
or equal or coordinate with, the lien of the Home Improvement Loan.
O. EQUAL INSTALLMENTS. The Home Improvement Loan has a fixed rate and
provides for level monthly payments which fully amortize the loan over its term.
P. ENFORCEABILITY. The Home Improvement Loan contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security provided thereby.
Q. ONE ORIGINAL. There is only one original executed Home Improvement Loan
contract and note, each of which has been delivered to the Custodian.
R. PRIMARY RESIDENT. At the time of origination of the Home Improvement
Loan, the obligor was the primary resident of
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the related real property.
S. QUALIFIED MORTGAGE FOR REMIC. Each Home Improvement Loan that is
secured by a Mortgage on the property described therein is a "qualified
mortgage" under Section 860G(a)(3) of the Code.
T. PROCEEDINGS. There is no proceeding pending or, to Seller's knowledge,
threatened for the total or partial condemnation of collateral securing a Home
Improvement Loan.
U. MARKING RECORDS. Seller has caused the portions of the Electronic
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Improvement Loans are owned by Custodian in accordance
with the terms of the related Custodial Agreement.
V. NO ADVERSE SELECTION. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the Home Improvement Loans.
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<PAGE>
Execution Copy
Exhibit 10(h)
AMENDED AND RESTATED
MASTER REPURCHASE AGREEMENT
Dated February 4, 1998
Between
LEHMAN COMMERCIAL PAPER INC.,
as Buyer
and
GREEN TREE FINANCE CORP.--FIVE,
as Seller
1. APPLICABILITY
From time to time for a period of 180 days from the date hereof, the
parties hereto may, subject to the terms hereof, enter into transactions in
which Green Tree Finance Corp.--Five ("Seller") agrees to transfer to Lehman
Commercial Paper Inc. ("Buyer") certain Eligible Assets against the transfer of
funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Eligible Assets at a date certain not later than 180 days after the date of
transfer, as specified in the Confirmation, against the transfer of funds by
Seller. Each such transaction shall be referred to herein as a "Transaction" and
shall be governed by this Agreement and the related Confirmation, unless
otherwise agreed in writing. Each Transaction shall be limited to a maximum of
30 days, after which, subject to Section 20, the Buyer and Seller may agree to
roll such Transaction for a period of up to 30 days.
2. DEFINITIONS
"Act of Insolvency" means, with respect to any party and its Affiliates, (i) the
filing of a petition, commencing, or authorizing the commencement of any case or
proceeding under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law relating to the protection of creditors, or suffering
any such petition or proceeding to be commenced by another which is consented
to, not timely contested or results in entry of an order for relief; (ii) the
seeking the appointment of
<PAGE>
a receiver, trustee, custodian or similar official for such party or an
Affiliate or any substantial part of the property of either, (iii) the
appointment of a receiver, conservator, or manager for such party or an
Affiliate by any governmental agency or authority having the jurisdiction to do
so; (iv) the making or offering by such party or an Affiliate of a composition
with its creditors or a general assignment for the benefit of creditors; (v) the
admission by such party or an Affiliate of such party of its inability to pay
its debts or discharge its obligations as they become due or mature; or (vi)
that any governmental authority or agency or any person, agency or entity acting
or purporting to act under governmental authority shall have taken any action to
condemn, seize or appropriate, or to assume custody or control of, all or any
substantial part of the property of such party or of any of its Affiliates, or
shall have taken any action to displace the management of such party or of any
of its Affiliates or to curtail its authority in the conduct of the business of
such party or of any of its Affiliates.
"Additional Eligible Assets" means Eligible Assets or cash provided by Seller to
Buyer or its designee pursuant to Section 4(a).
"Affiliate" means an affiliate of a party as such term is defined in the United
States Bankruptcy Code in effect from time to time.
"Agreement" means this Amended and Restated Master Repurchase Agreement between
Buyer and Seller, as amended from time to time.
"Business Day" means a day other than (i) a Saturday or Sunday, or (ii) a day on
which the Buyer or the New York Stock Exchange is authorized or obligated by law
or executive order to be closed.
"Buyer" has the meaning specified in Section 1.
"Collateral Amount" means, with respect to any Transaction, the amount obtained
by application of the applicable Collateral Amount Percentage to the Repurchase
Price for such Transaction.
"Collateral Amount Percentage" means the amount set forth in the Confirmation
which, in any event, (i) shall not be less than 103% with respect to Home Equity
Loans in determining whether a Collateral Deficit exists pursuant to the first
sentence of Section 4(a) hereof, (ii) (a) shall not be less than 110% with
respect to Insured Home Improvement Loans in determining whether a Collateral
Deficit exists pursuant to the first sentence of Section 4(a) hereof, (b) shall
not be less than 115% with respect to Uninsured Home Improvement Loans in
determining whether a Collateral Deficit exists pursuant to the first sentence
of Section 4(a) hereof, (iii) shall not be less than 110% with respect to loans
arising under Retail Installment Contracts in
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determining whether a Collateral Deficit exists pursuant to the first sentence
of Section 4(a) hereof, (iv) shall not be less than 110% with respect to
Equipment Leases in determining whether a Collateral Deficit exists pursuant to
the first sentence of Section 4(a) hereof and (v) shall not be less than 115%
with respect to High LTV Home Equity Loans in determining whether a Collateral
Deficit exists pursuant to the first sentence of Section 4(a) hereof.
"Collateral Deficit" has the meaning specified in Section 4(a).
"Confirmation" has the meaning specified in Section 3(a).
"Consumer Products" refers to consumer goods consisting of motorcycles, marine
products (including boats, boat trailers and outboard motors), pianos and
organs, horse trailers, sport vehicles (including snowmobiles, personal
watercraft and all-terrain vehicles), trucks, personal aircraft, recreational
vehicles and any other asset as shall be acceptable to Buyer in its sole
discretion, financed by Seller pursuant to a Retail Installment Contract.
"Custodial Agreement" means that amended and restated custodial agreement, dated
as of February 4, 1998, by and among Buyer, Seller and the Custodian.
"Custodial Delivery" means the form executed by the Seller in order to deliver
the Loan File to Buyer or its designee (including the Custodian) pursuant to
Section 7, a form of which is attached hereto as Exhibit II.
"Custodian" means the custodian under the Custodial Agreement. The initial
custodian is U.S. Bank National Association.
"Discount Rate" means a rate equal to the Prime Rate.
"Discounted Present Value" means, for any Equipment Lease as of any date of
determination, the present value of the then remaining payments under such
Equipment Lease, discounted at the Discount Rate.
"Electronic Ledger" means the electronic master record of loans of the Seller.
"Eligible Assets" means Retail Installment Contracts, Home Improvement Loans,
Home Equity Loans and Equipment Leases subject to the Agreement.
"Equipment" means the equipment that is the subject of the related Equipment
Lease.
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<PAGE>
"Equipment Lease" means a lease of Equipment to an Obligor originated by Green
Tree in accordance with its underwriting guidelines.
"Event of Default" has the meaning specified in Section 13.
"FHA" means the Federal Housing Administration, an agency within HUD.
"FHA Insurance" means the credit insurance provided by FHA pursuant to Title I
of the National Housing Act, as evidenced by the Company's FHA contract of
insurance.
"Green Tree" refers to Green Tree Financial Corporation, formerly known as Green
Tree Acceptance, Inc.
"Hedge" means, with respect to any or all of the Eligible Assets, any interest
rate swap, cap or collar agreement or similar arrangements providing for
protection against fluctuations in interest rates or the exchange of nominal
interest obligations, either generally or under specific contingencies, entered
into by Seller, and reasonably acceptable to the Buyer.
"High LTV Home Equity Loans" means the fixed rate mortgage loans secured by
first or second liens on single family residential real property (including,
without limitation, condominiums and planned unit developments), certain
documents relating to which have been delivered to the Custodian pursuant to the
Custodial Agreement that upon origination have a Loan-to-Value ratio greater
than [95]%, but not exceeding 125%.
"Home Equity Loan File" refers to the Loan File described in the Custodial
Agreement.
"Home Equity Loans" refers to the fixed rate mortgage loans secured by first or
second liens on single family residential real property (including, without
limitation, condominiums and planned unit developments), certain documents
relating to which have been delivered to the Custodian pursuant to the Custodial
Agreement.
"Home Improvement Loan File" refers to the Loan File described in the Custodial
Agreement.
"Home Improvement Loans" refers to both Insured Home Improvement Loans and
Uninsured Home Improvement Loans.
"HUD" means the United States Department of Housing and Urban Development.
"Income" means, with respect to any Eligible Asset at any time, any principal
thereof then payable and all interest, dividends or
4
<PAGE>
other distributions payable thereon less any related servicing fee(s) charged by
the Servicer.
"Insured Home Improvement Loans" means first, second and third lien or, to the
extent permitted hereby, unsecured home improvement retail installment
contracts, and related promissory notes, insured under the FHA's Title I
Program, and including without limitation, all rights to receive payments which
are due pursuant thereto and all other proceeds thereof (including any recourse
rights against third persons) from and after the related Purchase Date, but
excluding any rights to receive payments which are due prior to the related
Purchase Date.
"Lease File" refers to the Loan File described in Section 7(d) hereof.
"Limited Guaranty" refers to the Limited Guaranty provided in accordance with
Section 15 and substantially in the form attached hereto as Exhibit VIII.
"List of Contracts" means the list identifying each Purchased Eligible Asset
sold hereunder, which list (a) identifies each Home Equity Loan, Home
Improvement Loan, Retail Installment Contract and Equipment Lease and (b) sets
forth as to each Purchased Eligible Asset (i) the principal balance, (ii) the
amount of monthly payments due from the Obligor, (iii) the contract rate and
(iv) the maturity date.
"Loan Files" means the Home Equity Loan File, the Home Improvement Loan File,
the Retail Installment Loan File and the Lease File.
"Market Value" means as of any date with respect to any Eligible Assets, the
price at which such Eligible Assets could readily be sold as determined by Buyer
in its sole discretion pursuant to Section 4; PROVIDED, HOWEVER, that Buyer
shall not take into account, for purposes of calculating Market Value, any
Eligible Asset (i) which has been subject to Transactions for more than 180
days, (ii) which fails to meet the Seller's underwriting guidelines or with
respect to which there is a breach of a representation, warranty or covenant
made by Seller in this Agreement and which breach has not been cured and (iii)
which is a Wet Home Equity Loan with respect to which the related Loan File has
not been delivered to the Custodian within 10 days of the Purchase Date
hereunder.
"Mortgage" means a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first or second lien on or a first
or second priority ownership interest in an estate in fee simple in real
property and the improvements thereon, securing a mortgage note or similar
evidence of indebtedness.
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"Mortgage Note" means a note or other evidence of indebtedness of a mortgagor
secured by a Mortgage.
"Obligor" means a buyer of a Consumer Product or a home improvement or a
borrower on a Home Equity Loan or a lessee and any other party obligated under
the related Equipment Lease or any other Person who is indebted under the
related Eligible Asset.
"Periodic Payment" has the meaning specified in Section 5(b).
"Person" means an individual, partnership, corporation, joint stock company,
trust or unincorporated organization or a governmental agency or political
subdivision thereof.
"Price Differential" means, with respect to any Transaction hereunder as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the Repurchase Date (reduced by any amount of such Price Differential previously
paid by Seller to Buyer with respect to such Transaction).
"Pricing Rate" means the per annum percentage rate specified in the Confirmation
for determination of the Price Differential.
"Prime Rate" means, as of any date, the rate of interest published by THE WALL
STREET JOURNAL, northeast edition, as the "prime rate" of Citibank, N.A.
"Purchase Date" means the date on which Purchased Eligible Assets are
transferred by Seller to Buyer or its designee (including the Custodian) as
specified in the Confirmation.
"Purchased Eligible Assets" means the Eligible Assets (including any Additional
Eligible Assets) sold by Seller to Buyer in a Transaction, any Additional
Eligible Assets and any Substituted Eligible Assets.
"Purchased Equipment Leases" means the Equipment Leases sold by Seller to Buyer
in a Transaction.
"Purchase Price" means on each Purchase Date, the price at which Purchased
Eligible Assets are transferred by Seller to Buyer or its designee (including
the Custodian); PROVIDED, HOWEVER, that (i) the Purchase Price of any Home
Equity Loan shall not in any event exceed __% of the Market Value thereof, (ii)
the Purchase Price of any Insured Home Improvement Loan shall not in any event
exceed __% of the Market Value thereof, (iii) the Purchase Price
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of any Uninsured Home Improvement Loan shall not in any event exceed ___% of the
Market Value thereof, (iv) the Purchase Price of any Retail Installment Contract
shall not in any event exceed __% of the Market Value thereof and (v) the
Purchase Price of any Equipment Lease shall not in any event exceed ____% of the
Market Value thereof. With respect to Purchased Equipment Leases, the Purchase
Price on each Purchase Date shall equal the lesser of (x) the Discounted Present
Value of such Purchased Equipment Lease or (y) the Market Value of such
Purchased Equipment Lease.
"Replacement Eligible Assets" has the meaning specified in Section 14(b)(ii).
"Repurchase Date" means the date on which Seller is to repurchase the Purchased
Eligible Assets from Buyer which initially will be the first Business Day of the
next succeeding month, including any date determined by application of the
provisions of Sections 3 or 13, as specified in the Confirmation; provided that
in no event shall such date be more than 30 days after the Purchase Date.
"Repurchase Price" means the price at which Purchased Eligible Assets are to be
transferred from Buyer or its designee (including the Custodian) to Seller upon
termination of a Transaction, which will be determined in each case (including
Transactions terminable upon demand) as the sum of the Purchase Price and the
Price Differential as of the date of such determination decreased by all cash,
Income and Periodic Payments actually received by Buyer pursuant to Sections
4(a), 5(a) and 5(b), respectively.
"Retail Installment Contract" means any retail installment contract which
finances a purchase of a Consumer Product, all rights to receive payments which
are due pursuant thereto, and any "purchase money security interest" (as defined
in the Uniform Commercial Code) created in favor of Seller in the Consumer
Product financed thereunder, the ownership of which is evidenced by a Trust
Receipt issued pursuant to the Custodial Agreement.
"Retail Installment Loan File" refers to the Loan File described in section 7(d)
hereof.
"Seller" has the meaning specified in Section 1.
"Servicing Agreement" has the meaning specified in Section 25.
"Servicing Records" has the meaning specified in Section 25.
"Substituted Eligible Assets" means any Eligible Assets substituted for
Purchased Eligible Assets in accordance with Section 9 hereof.
"Title I Program" means the Title I insurance program of the FHA.
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"Transaction" has the meaning specified in Section 1.
"Trust Receipt" means a trust receipt issued by Custodian to Buyer confirming
the Custodian's possession of certain asset files which are the property of and
held by Custodian for the benefit of the Buyer or the registered holder of such
trust receipt.
"UCC" means the Uniform Commercial Code, as in effect from time to time in the
relevant jurisdiction.
"Uninsured Home Improvement Loans" means first, second and third lien home
improvement retail installment contracts, and related promissory notes (none of
which are insured under the FHA's Title I Program) and including without
limitation, all rights to receive payments which are due pursuant thereto and
all other proceeds thereof (including any recourse rights against third persons)
from and after the related Purchase Date, but excluding any rights to receive
payments which are due prior to the related Purchase Date.
"Wet Home Equity Loans" means those Home Equity Loans for which the related Loan
Files have not been delivered to the Custodian as of the Purchase Date.
3. INITIATION; CONFIRMATION; TERMINATION;
MAXIMUM TRANSACTION AMOUNTS
a. An agreement to enter into a Transaction may be entered into orally or in
writing at the initiation of either Buyer or Seller. In any event, Buyer shall
confirm the terms of each Transaction by issuing a written confirmation to
Seller promptly after the parties enter into such Transaction in the form of
Exhibit I attached hereto (a "Confirmation"). Such Confirmation shall describe
the Purchased Eligible Assets, identify Buyer and Seller and set forth (i) the
Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing Rate applicable to
the Transaction, (v) the applicable Collateral Amount Percentages with respect
to such Eligible Assets and (vi) additional terms or conditions not inconsistent
with this Agreement. After receipt of the Confirmation, Seller shall, subject to
the provisions of subsection (c) below, sign the Confirmation and promptly
return it to Buyer. The Purchase Price for any Transaction shall exceed
$1,000,000.
b. Any Confirmation by Buyer shall be deemed to have been received by Seller on
the date actually received by Seller.
c. Each Confirmation, together with this Agreement, shall be conclusive evidence
of the terms of the Transaction(s) covered thereby unless objected to in writing
by Seller no more than two
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(2) Business Days after the date the Confirmation was received by Seller or
unless a corrected Confirmation is sent by Buyer. An objection sent by Seller
must state specifically that such writing is an objection, must specify the
provision(s) being objected to by Seller, must set forth such provision(s) in
the manner that the Seller believes they should be stated, and must be received
by Buyer no more than two (2) Business Days after the Confirmation was received
by Seller.
d. In the case of Transactions terminable upon demand, such demand shall be made
by Buyer or Seller by telephone or otherwise (confirmed by fax), no later than
1:00 p.m. (New York City time) on the Business Day prior to the day on which
such termination will be effective.
e. On the Repurchase Date, termination of the Transaction will be effected by
transfer to Seller or its designee of the Purchased Eligible Assets (and any
Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price to an account of
Buyer. Seller is obligated to obtain the Home Improvement Loan Files and the
Home Equity Loan Files from Buyer or its designee at Seller's expense on the
Repurchase Date.
f. With respect to all Transactions hereunder the aggregate Purchase Price for
all Purchased Eligible Assets at any one time subject to then outstanding
Transactions shall not exceed $1,500,000,000; provided that the aggregate
Purchase Price for all Home Equity Loans subject to Transactions hereunder and
under that certain Master Repurchase Agreement dated October 15, 1992 between
Buyer and Seller shall not exceed $750,000,000, the aggregate Purchase Price for
all Wet Home Equity Loans subject to Transactions hereunder shall not exceed
$150,000,000, the aggregate Purchase Price for all Insured Home Improvement
Loans subject to Transactions hereunder shall not exceed $750,000,000, the
aggregate Purchase Price for all Uninsured Home Improvement Loans subject to
Transactions hereunder shall not exceed $300,000,000, the aggregate Purchase
Price for Retail Installment Contracts subject to Transactions hereunder shall
not exceed $400,000,000, the aggregate Purchase Price for Equipment Leases
subject to Transactions hereunder shall not exceed $500,000,000 and the
aggregate Purchase Price for High LTV Home Equity Loans shall not exceed
$150,000,000.
g. At least two Business Days prior to any Purchase Date or any substitution of
Eligible Assets pursuant to Section 9, the Seller shall deliver to Buyer via
electronic modem or computer tape the information related to the Eligible Assets
to be so purchased or substituted.
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h. With respect to Wet Home Equity Loans, Seller shall deliver the related Loan
Files to the Custodian within 10 days of the Purchase Date.
4. COLLATERAL AMOUNT MAINTENANCE
a. If at any time either (x) the aggregate Market Value of all Purchased
Eligible Assets subject to all Transactions is less than the aggregate
Collateral Amount for all such Transactions or (y) the aggregate Discounted
Present Value of all Purchased Equipment Leases subject to all Transactions is
less than the Collateral Amount for all such Transactions (in either case, a
"Collateral Deficit"), then Buyer may by notice to Seller require Seller to
transfer to Buyer or its designee (including the Custodian) Eligible Assets
("Additional Eligible Assets") or cash, so that the cash and aggregate Market
Value of the Purchased Eligible Assets, including any such Additional Eligible
Assets, will thereupon equal or exceed the aggregate Collateral Amount.
b. Notice required pursuant to subsection (a) above may be given by any means of
telecopier or telegraphic transmission. A notice for the payment or delivery in
respect of a Collateral Deficit received before 9:00 a.m. on a Business Day,
local time of the party receiving the notice, must be met not later than 5:00
p.m. on the same Business Day, local time of the party receiving the notice. Any
notice given on a Business Day after 9:00 a.m., local time of the party
receiving the notice, shall be met not later than 2:00 p.m. (New York time) on
the next Business Day. The failure of Buyer, on any one or more occasions, to
exercise its rights under subsection (a) of this Section shall not change or
alter the terms and conditions to which this Agreement is subject or limit the
right of the Buyer to do so at a later date. Buyer and Seller agree that a
failure or delay to exercise its rights under subsection (a) of this Section
shall not limit Buyer's rights under this Agreement or otherwise existing by law
or in any way create additional rights for Seller.
c. In the event that Seller fails to comply with the provisions of this Section
4, Buyer shall not enter into any additional Transactions hereunder after the
date of such failure.
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5. INCOME PAYMENTS
a. Where a particular Transaction's term extends over an Income payment date on
the Purchased Eligible Assets subject to that Transaction such Income shall be
the property of Buyer. Notwithstanding the foregoing, so long as no Event of
Default shall have occurred and be continuing, Seller shall be entitled to all
Income with respect to Purchased Eligible Assets subject to Transactions. Upon
the occurrence and continuance of an Event of Default, all Income with respect
to Purchased Eligible Assets subject to Transactions shall be held in a
segregated account established by the Custodian for the benefit of Buyer and
distributed under the Custodial Agreement.
b. Notwithstanding that Buyer and Seller intend that the Transactions hereunder
be sales to Buyer of the Purchased Eligible Assets, Seller shall pay by wire
transfer to Buyer the accreted value of the Price Differential (less any amount
of such Price Differential previously paid by Seller to Buyer)(each such
payment, a "Periodic Payment") on the Repurchase Date. The Price Differential
shall accrue, be calculated and be compounded on a daily basis for each
Purchased Eligible Asset.
c. Buyer shall offset against the Repurchase Price of each such Transaction all
Income and Periodic Payments actually received by Buyer pursuant to Sections
5(a) and (b), respectively.
6. SECURITY INTEREST
a. Buyer and the Seller intend that the Transactions hereunder be sales to Buyer
of the Purchased Eligible Assets and not loans from Buyer to Seller secured by
the Purchased Eligible Assets. However, in order to preserve Buyer's rights
under this Agreement in the event that a court or other forum recharacterizes
the Transactions hereunder as loans and as security for the performance by
Seller of all of Seller's obligations to Buyer under this Agreement and the
Transactions entered into pursuant to this Agreement, Seller grants Buyer a
first priority security interest in the Purchased Eligible Assets.
b. Seller shall pay all fees and expenses associated with perfecting Buyer's
security interest in the Purchased Eligible Assets, including, without
limitation, the cost of filing financing statements under the UCC and recording
assignments of mortgage, as and when required by Buyer in its sole discretion.
c. At the time Seller purchases a Hedge, Seller and Buyer shall enter into a
mutually acceptable agreement, which provides for the pledge and collateral
assignment of such Hedge to Buyer and provides for the netting of obligations of
Seller by Buyer under
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the Hedge and this Agreement. Seller covenants to take such further actions as
are necessary in order to perfect Buyer's first priority security interest in
the Hedges.
7. PAYMENT, TRANSFER AND CUSTODY
a. Unless otherwise mutually agreed in writing, all transfers of funds hereunder
shall be in immediately available funds.
b. On or before each Purchase Date, Seller shall deliver or cause to be
delivered to Buyer or its designee the Custodial Delivery in the form attached
hereto as Exhibit II.
c. On the Purchase Date for each Transaction, ownership of the Purchased
Eligible Assets shall be transferred to the Buyer or its designee (including the
Custodian) against the simultaneous transfer of the Purchase Price to an account
of Seller specified in the Confirmation. Seller, simultaneously with the
delivery to Buyer or its designee (including the Custodian) of the Purchased
Eligible Assets relating to each Transaction hereby sells, transfers, conveys
and assigns to Buyer or its designee (including the Custodian) without recourse,
but subject to the terms of this Agreement, all the right, title and interest of
Seller in and to the Purchased Eligible Assets together with all right, title
and interest in and to the proceeds of any related insurance policies.
d. In connection with each sale, transfer, conveyance and assignment, on or
prior to each Purchase Date with respect to each Home Improvement Loan or Home
Equity Loan, the Seller shall deliver or cause to be delivered and released to
the Custodian the related Loan File.
In connection with each sale, transfer, conveyance and assignment, on
or prior to each Purchase Date with respect to each Equipment Lease, the Seller
shall, within 10 Business Days of each Purchase Date, segregate and hold on
behalf of and as custodian for Buyer the following original documents
(collectively the "Lease File"), pertaining to each of the Purchased Equipment
Leases identified in the Confirmation:
(i) the original counterparts of the Equipment Lease, executed by a
duly authorized representative of the Obligor, as lessee, and Seller, as lessor;
(ii) if such Equipment Lease consists of a master lease and a schedule,
the original schedule;
(iii) if received, the acknowledgment copy of each UCC-1 financing
statement filed or recorded in connection with each Equipment Lease, with
evidence of filing or recording thereon, or if not yet received, a copy of each
such UCC-1 financing
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statement;
(iv) if received, the acknowledgment copy of each filed or recorded
intervening UCC-3 assignment showing a complete chain to Seller, with evidence
of filing or recording thereon, or if not yet received, a copy of each such
UCC-3 assignment;
(v) a copy of the insurance certificate or other evidence that all
required insurance to be maintained pursuant to the Equipment Lease has been
obtained by the Obligor and is in full force and effect; and
(vi) the original of any guaranty, indemnity, letter of credit or other
security agreement, chattel mortgage or equivalent document executed in
connection with the Equipment Lease (if any).
In connection with each sale, transfer, conveyance and assignment, on
or prior to each Purchase Date with respect to each Retail Installment Contract,
the Seller shall, within 10 Business Days of each Purchase Date, segregate and
hold on behalf of and as custodian for Buyer the following original documents
(collectively the "Retail Installment Contract Loan File"), pertaining to each
of the Purchased Retail Installment Contracts identified in the Confirmation:
(1) the original copy of the Retail Installment Contract, including the
executed evidence of the obligation of the obligor;
(2) either (i) the original title document for the related Consumer
Product or a duplicate certified by the appropriate governmental authority which
issued the original thereof or the application for such title document or (ii)
if the laws of the jurisdiction in which the related Consumer Product is located
do not provide for the issuance of title documents for goods of the type
including the Consumer Product, other evidence of ownership of the related
Consumer Product which is customarily relied upon in such jurisdiction as
evidence of title to such goods;
(3) evidence of one or more of the following types of perfection of the
security interest in the related Consumer Product granted by such Retail
Installment Contract, as appropriate: (i) notation of such security interest on
the title document, (ii) a financing statement meeting the requirements of the
UCC, with evidence of recording indicated thereon (if required to perfect a
security interest in the related Consumer Product under the UCC as in force in
the relevant state), (iii) in the case of a Retail Installment Contract secured
by a security interest in an aircraft, evidence of filing with the Federal
Aviation Administration Aircraft Registry or (iv) such other
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evidence of perfection of a security interest in goods of the type including the
Consumer Product as is customarily relied upon in the jurisdiction in which the
related Consumer Product is located;
(4) the assignment of the Retail Installment Contract from the
originator (if other than the Seller or a wholly-owned subsidiary of the Seller)
to the Seller or a wholly-owned subsidiary of the Seller;
(5) any extension, modification or waiver agreement(s);
(6) a credit application signed by the obligor, or a copy thereof; and
(7) if required by Buyer in its sole discretion with respect to such
Retail Installment Contract, a certificate of insurance or application form for
insurance signed by the obligor, or copies thereof.
e. In connection with each securitization or whole loan sale disposition of any
Purchased Eligible Assets, the proceeds of such sale shall be used to pay down
any outstanding Transactions.
f. With respect to each Home Improvement Loan, High LTV Home Equity Loan, Home
Equity Loan or Equipment Lease delivered by Seller to Buyer or its designee
(including the Custodian), Seller shall execute an omnibus power of attorney
substantially in the form of Exhibit III attached hereto irrevocably appointing
Buyer its attorney-in-fact with full power to complete and record the assignment
of Mortgage, complete the endorsement of the Mortgage Note and take such other
steps as may be necessary or desirable to enforce Buyer's rights against such
Home Improvement Loans, High LTV Home Equity Loans, Home Equity Loans and
Equipment Leases, the related Loan Files and the Servicing Records.
g. Buyer shall deposit the Loan Files related to the Home Improvement Loans,
High LTV Home Equity Loans and Home Equity Loans that are Purchased Eligible
Assets, or direct that such Loan Files be deposited directly, with the
Custodian. The Home Improvement Loan Files and Home Equity Loan Files shall be
maintained in accordance with the Custodial Agreement.
h. Any Loan Files (including all Retail Installment Contract Loan Files and
Lease Files) not delivered to Buyer or its designee (including the Custodian)
are and shall be held in trust by Seller or its designee for the benefit of
Buyer as the owner thereof. Seller or its designee shall maintain a copy of the
Loan File and the originals of the Loan File not delivered to Buyer or its
designee. The possession of the Loan File by Seller or its designee is at the
will of the Buyer for the sole purpose of servicing the related Purchased
Eligible Assets, and such
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retention and possession by the Seller or its designee is in a custodial
capacity only. The books and records (including, without limitation, any
computer records or tapes) of Seller or its designee shall be marked
appropriately to reflect clearly the sale of the related Purchased Eligible
Asset to Buyer. Seller or its designee (including the Custodian) shall release
its custody of the Loan File only in accordance with written instructions from
Buyer, unless such release is required as incidental to the servicing of the
Purchased Eligible Assets or is in connection with a repurchase of any Purchased
Eligible Asset by Seller.
8. REHYPOTHECATION OR PLEDGE OF PURCHASED ELIGIBLE ASSETS
Title to all Purchased Eligible Assets shall pass to Buyer and Buyer shall have
free and unrestricted use of all Purchased Eligible Assets. Nothing in this
Agreement shall preclude Buyer from engaging in repurchase transactions with the
Purchased Eligible Assets or otherwise pledging, repledging, hypothecating, or
rehypothecating the Purchased Eligible Assets, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Eligible Assets to Seller
pursuant to Section 3. Nothing contained in this Agreement shall obligate Buyer
to segregate any Purchased Eligible Assets delivered to Buyer by Seller.
9. SUBSTITUTION
a. Subject to Section 9(b), Seller may, upon one (1) Business Days written
notice to Buyer, with a copy to Custodian, substitute other Eligible Assets for
any Purchased Eligible Assets. Such substitution shall be made by transfer to
Buyer or its designee (including the Custodian) of the Loan File of such other
Eligible Assets (if such other Eligible Assets are Home Improvement Loans or
Home Equity Loans) together with a Custodial Delivery and transfer to Seller or
its designee of the Purchased Eligible Assets requested for release. After
substitution, the substituted Eligible Assets shall be deemed to be Purchased
Eligible Assets subject to the same Transaction as the released Eligible Assets.
b. Notwithstanding anything to the contrary in this Agreement, Seller may not
substitute other Eligible Assets for any Purchased Eligible Assets (i) if after
taking into account such substitution, a Collateral Deficit would occur or (ii)
such substitution would cause a breach of any provision of this Agreement.
10. REPRESENTATIONS AND WARRANTIES
a. Each of Buyer and Seller represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder
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and to perform its obligations hereunder and has taken all necessary action to
authorize such execution, delivery and performance; (ii) it will engage in such
Transactions as principal; (iii) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf and upon execution this Agreement will
create a legal, valid and binding obligation, enforceable in accordance with its
terms; (iv) no approval, consent or authorization of the Transactions
contemplated by this Agreement from any federal, state, or local regulatory
authority having jurisdiction over it is required or, if required, such
approval, consent or authorization has been or will, prior to the Purchase Date,
be obtained; (v) the execution, delivery, and performance of this Agreement and
the Transactions hereunder will not violate any law, regulation, order,
judgment, decree, ordinance, charter, by-law, or rule applicable to it or its
property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
agreement or other instrument by which it is bound or by which any of its assets
are affected; (vi) it has received approval and authorization to enter into this
Agreement and each and every Transaction actually entered into hereunder
pursuant to its internal policies and procedures; and (vii) neither this
Agreement nor any Transaction pursuant hereto are entered into in contemplation
of insolvency or with intent to hinder, delay or defraud any creditor.
b. Seller represents and warrants to Buyer that as of the Purchase Date for the
purchase of any Purchased Eligible Assets by Buyer from Seller and as of the
date of this Agreement and any Transaction hereunder and at all times while this
Agreement and any Transaction hereunder is in full force and effect:
i. Organization. Seller is duly organized, validly existing and in good
standing under the laws and regulations of the state of Minnesota
and the Seller, or a servicer on the Seller's behalf, is duly
licensed, qualified, and in good standing in every state where
Seller transacts business and in any state where any mortgaged
property is located if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by
Seller therein.
ii. No Litigation. There is no action, suit, proceeding, arbitration or
investigation pending or threatened against Seller which, either in
any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition,
properties or assets of Seller, or in any material impairment of the
right or ability of Seller to carry on its business substantially as
now conducted, or in any material liability on the part of Seller,
or which if
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adversely determined would affect the validity of this Agreement or
any of the Purchased Eligible Assets or of any action taken or to be
taken in connection with the obligations of Seller contemplated
herein, or which would be likely to impair materially the ability of
Seller to perform under the terms of this Agreement;
iii. No Broker. Seller has not dealt with any broker, investment banker,
agent, or other person, except for Buyer, who may be entitled to any
commission or compensation in connection with the sale of Purchased
Eligible Assets pursuant to this Agreement;
iv. Good Title to Collateral. Purchased Eligible Assets shall be free
and clear of any lien, encumbrance or impediment to transfer, and
Seller has good, valid and marketable title and the right to sell
and transfer such Purchased Eligible Assets to Buyer.
v. Delivery of Loan File. With respect to each Purchased Eligible Asset
that is a Home Improvement Loan or Home Equity Loan, the Loan File
and any other documents required to be delivered under this
Agreement and the Custodial Agreement have been delivered to the
Custodian. Seller or its designee is in possession of a complete,
true and accurate Loan File with respect to the Purchased Eligible
Assets, except for such documents the originals of which have been
delivered to the Custodian.
vi. Selection Process. The Purchased Eligible Assets were selected from
among the outstanding assets in Seller's portfolio as to which the
representations and warranties set forth in this Agreement could be
made and such selection was not made in a manner so as to affect
adversely the interests of Buyer.
vii. Approved Seller. Seller is a HUD approved Seller. There has been no
material detrimental finding in a HUD or other investigation of
Seller;
viii. No Untrue Statements. To the best of Seller's knowledge, neither
this Agreement nor any written statement made, or any report or
other document issued or delivered or to be issued or delivered by
Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of
fact or omits to state a fact necessary to make the statements
contained herein or therein not misleading;
ix. Origination Practices. The origination practices with respect to
each Eligible Asset (i) have been and are in
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all respects legal and proper in the mortgage origination business
and consumer finance business and (ii) are in accordance with the
underwriting guidelines previously supplied and approved by the
Buyer;
x. Performance of Agreement. Seller does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement on its part to be
performed;
xi. Seller Not Insolvent. Seller is not, and with the passage of time
does not expect to become, insolvent; and
xii. No Event of Default. No Event of Default has occurred and is
continuing hereunder.
c. Seller represents and warrants to the Buyer that each Purchased Eligible
Asset sold hereunder and each pool of Purchased Eligible Assets sold in a
Transaction hereunder, as of the related Purchase Date conform to the
representations and warranties set forth in Exhibit V, VI, VII or VIII attached
hereto, as applicable, and that each Eligible Asset delivered hereunder as
Additional Eligible Assets or Substituted Eligible Assets, as of the date of
such delivery, conforms to the representations and warranties set forth in
Exhibit V, VI, VII or VIII attached hereto, as applicable. Seller further
represents and warrants to the Buyer that, as of the first Business Day of each
month, the Computer Tape with respect to each Purchased Eligible Asset is
complete, true and correct. It is understood and agreed that the representations
and warranties set forth in Exhibit V, VI, VII or VIII attached hereto shall
survive delivery of the respective Loan File to Buyer or its designee (including
the Custodian).
d. On the Purchase Date for any Transaction, Buyer and Seller shall each be
deemed to have made all the foregoing representations with respect to itself as
of such Purchase Date.
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until this
Agreement is no longer in force with respect to any Transaction, Seller
covenants that it will not:
a. take any action which would directly or indirectly impair or adversely affect
Buyer's title to or the value of the Purchased Eligible Assets;
b. pledge, assign, convey, grant, bargain, sell, set over, deliver or otherwise
transfer any interest in the Purchased Eligible Assets to any person not a party
to this Agreement nor will the Seller create, incur or permit to exist any lien,
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encumbrance or security interest in or on the Purchased Eligible Assets except
as described in Section 6 of this Agreement;
c. amend, alter, modify or change in any material way its underwriting
guidelines without Buyer's consent; or
d. commence a voluntary bankruptcy proceeding or similar insolvency proceeding
under applicable laws, without a unanimous vote of the board of directors of
Seller.
e. with respect to Wet Home Equity Loans subject to Transactions hereunder,
exceed an aggregate Purchase Price of $150,000,000.
12. AFFIRMATIVE COVENANTS OF THE SELLER
For so long as this Agreement is in effect:
a. Seller covenants that it will promptly notify Buyer of any material adverse
change in its business operations and/or financial condition.
b. Seller shall provide Buyer with copies of such documentation as Buyer may
reasonably request evidencing the truthfulness of the representations set forth
in Section 10, including but not limited to resolutions evidencing the approval
of this Agreement by Seller's board of directors or loan committee, copies of
the minutes of the meetings of Seller's board of directors or loan committee at
which this Agreement and the Transactions contemplated by this Agreement were
approved, and evidence of Seller's status as an approved Seller/Servicer.
c. Seller shall, at Buyer's request, take all action necessary to ensure that
Buyer will have a first priority security interest in the Purchased Eligible
Assets, including, among other things, filing such UCC financing statements,
mortgages or other instruments as Buyer may reasonably request.
d. Seller covenants that it will not create, incur or permit to exist any lien,
encumbrance or security interest in or on any of the Purchased Eligible Assets
without the prior express written consent of Buyer.
e. Seller shall notify Buyer no later than one (1) Business Day after obtaining
actual knowledge thereof, if any event has occurred that constitutes an Event of
Default with respect to Seller or any event that with the giving of notice or
lapse of time, or both, would become an Event of Default with respect to Seller.
f. Seller covenants to provide Buyer with a copy of any material changes to
Seller's underwriting guidelines prior to the
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effectiveness of any such change.
g. Seller covenants, upon the reasonable request of Buyer after the occurrence
of a Collateral Deficit, to enter into Hedges in order to protect adequately, in
the reasonable judgment against interest rate risks.
h. Seller covenants to provide Buyer on the 15th day of each month with respect
to Purchased Eligible Assets, either by direct modem electronic transmission or
via a computer diskette, the Computer Tape with respect to all Purchased
Eligible Assets then subject to Transactions.
i. Seller covenants to provide Buyer with the following financial and reporting
information:
i. Within 90 days after the last day of its fiscal year, Seller's
audited consolidated and consolidating statements of income and
statements of changes in cash flow for such year and balance sheets as
of the end of such year in each case presented fairly in accordance
with GAAP, and accompanied, in all cases, by an unqualified report of a
firm of "Big Six" independent certified public accountants or any other
nationally recognized independent certified public accounting firm
consented to by Buyer (which consent shall not be unreasonably
withheld);
ii. Upon request, within 30 days after the last day of the first three
fiscal quarters in any fiscal year, Seller's consolidated and
consolidating statements of income and statements of changes in cash
flow for such quarter and balance sheets as of the end of such quarter
presented fairly in accordance with GAAP;
iii. Upon request, within 30 days after the last day of each calendar
month an officer's certificate from a senior officer of the Seller
addressed to Buyer certifying that, as of such calendar month, (x)
Seller is in compliance with all of the terms, conditions and
requirements of this Agreement, and (y) no Event of Default exists; and
iv. Upon request, within 30 days, copies of all proxy statements,
financial statements, and reports which Seller sends to its
stockholders, and copies of all regular, periodic and special reports,
and all registration statements under the Securities Act of 1933, as
amended, which it files with the Securities and Exchange Commission or
any government authority which may be substituted therefor, or with any
national securities exchange.
j. Seller shall do all things necessary to remain duly
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incorporated, validly existing and in good standing as a domestic corporation in
its jurisdiction and maintain all requisite authority to conduct its business in
each jurisdiction in which Seller conducts business.
13. EVENTS OF DEFAULT
a. If any of the following events (each an "Event of Default") occur, Buyer
shall have the rights set forth in Section 14, as applicable:
i. Seller fails to satisfy or perform any material obligation or
covenant under this Agreement;
ii. An Act of Insolvency occurs with respect to Seller or Green Tree;
iii. Any representation made by Seller shall have been incorrect or
untrue in any material respect when made or repeated or deemed to
have been made or repeated;
iv. Seller shall admit its inability to, or its intention not to,
perform any of its obligations hereunder;
v. Any governmental, regulatory, or self-regulatory authority takes any
action to remove, limit, restrict, suspend or terminate the rights,
privileges, or operations of the Seller or Green Tree, including
suspension as an issuer, lender or seller/servicer of mortgage loans
or loans arising under consumer finance contracts, which suspension
has a material adverse effect on the ordinary business operations of
Seller or Green Tree, and which continues for more than 24 hours;
vi. Seller dissolves, merges or consolidates with another entity (unless
(A) it is the surviving party or (B) the entity into which it merges
has equity and a market value of at least that of the Seller
immediately prior to such merger and such entity expressly assumes
the obligations of the Seller at the time of such merger), or sells,
transfers, or otherwise disposes of a material portion of its
business or assets;
vii. Buyer, in its good faith judgment, believes that there has been a
material adverse change in the business, operations, corporate
structure or financial condition of Seller or that Seller will not
meet any of its obligations under any Transaction pursuant to this
Agreement, or any other agreement
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between the parties;
viii. Seller is in default under any other agreement to which it is a
party, PROVIDED, HOWEVER, such a default shall not constitute an
Event of Default if the exercise of such remedies as are available
to Seller's counterparty with respect to such default would not
result in a material adverse change in the business operations or
financial condition of the Seller;
ix. A final judgment by any competent court in the United States of
America for the payment of money in an amount of at least $1,000,000
is rendered against the Seller, and the same remains undischarged or
unpaid for a period of sixty (60) days during which execution of
such judgment is not effectively stayed;
x. This Agreement shall for any reason cease to create a valid, first
priority security interest in any of the Purchased Eligible Assets
purported to be covered hereby;
xi. A Collateral Deficit occurs with respect to Seller, and is not
eliminated within the time period specified in Section 4(b); or
xii. An "event of default" has occurred pursuant to a Hedge.
(b) In making a determination as to whether an Event of Default has occurred,
the Buyer shall be entitled to rely on reports published or broadcast by media
sources believed by such party to be generally reliable and on information
provided to it by any other sources believed by it to be generally reliable,
provided that such party reasonably and in good faith believes such information
to be accurate and has taken such steps as may be reasonable in the
circumstances to attempt to verify such information.
14. REMEDIES
a. If an Event of Default occurs with respect to Seller, the following rights
and remedies are available to Buyer:
i. At the option of Buyer, exercised by written notice to Seller (which
option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency), the
Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
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ii. If Buyer exercises or is deemed to have exercised the option
referred to in subsection (a)(i) of this Section,
(A) Seller's obligations hereunder to repurchase all Purchased
Eligible Assets in such Transactions shall thereupon become
immediately due and payable,
(B) to the extent permitted by applicable law, the Repurchase Price
with respect to each such Transaction shall be increased by the
aggregate amount obtained by daily application of, on a 360 day per
year basis for the actual number of days during the period from and
including the date of the exercise or deemed exercise of such option
to but excluding the date of payment of the Repurchase Price as so
increased, (x) the greater of the Prime Rate or the Pricing Rate for
each such Transaction to (y) the Repurchase Price for such
Transaction as of the Repurchase Date as determined pursuant to
subsection (a)(i) of this Section (decreased as of any day by (I)
any amounts actually in the possession of Buyer pursuant to clause
(C) of this subsection, (II) any proceeds from the sale of Purchased
Eligible Assets applied to the Repurchase Price pursuant to
subsection (a)(xii) of this Section, and (III) any amounts applied
to the Repurchase Price pursuant to subsection (a)(iii) of this
Section), and
(C) all Income actually received by the Buyer or its designee
(including the Custodian) pursuant to Section 5 shall be applied to
the aggregate unpaid Repurchase Price owed by Seller.
iii. After one Business Day's notice to Seller (which notice need not be
given if an Act of Insolvency shall have occurred, and which may be
the notice given under subsection (a)(i) of this Section), Buyer may
(A) immediately sell, without notice or demand of any kind, at a
public or private sale and at such price or prices Buyer may
reasonably deem satisfactory any or all Purchased Eligible Assets
subject to a Transaction hereunder or (B) in its sole discretion
elect, in lieu of selling all or a portion of such Purchased
Eligible Assets, to give Seller credit for such Purchased Eligible
Assets in an amount equal to the Market Value of the Purchased
Eligible Assets against the aggregate unpaid Repurchase Price and
any other amounts owing by Seller hereunder. The proceeds of any
disposition of
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Purchased Eligible Assets shall be applied first to the costs and
expenses incurred by Buyer in connection with Seller's default;
second to consequential damages, including but not limited to costs
of cover and/or related hedging transactions; third to the
Repurchase Price; and fourth to any other outstanding obligation of
Seller to Buyer or its Affiliates.
iv. The parties recognize that it may not be possible to purchase or
sell all of the Purchased Eligible Assets on a particular Business
Day, or in a transaction with the same purchaser, or in the same
manner because the market for such Purchased Eligible Assets may not
be liquid. In view of the nature of the Purchased Eligible Assets,
the parties agree that liquidation of a Transaction or the
underlying Purchased Eligible Assets does not require a public
purchase or sale and that a good faith private purchase or sale
shall be deemed to have been made in a commercially reasonable
manner. Accordingly, Buyer may elect, in its sole discretion, the
time and manner of liquidating any Purchased Eligible Asset and
nothing contained herein shall (A) obligate Buyer to liquidate any
Purchased Eligible Asset on the occurrence of an Event of Default or
to liquidate all Purchased Eligible Assets in the same manner or on
the same Business Day or (B) constitute a waiver of any right or
remedy of Buyer. However, in recognition of the parties' agreement
that the Transactions hereunder have been entered into in
consideration of and in reliance upon the fact that all Transactions
hereunder constitute a single business and contractual relationship
and that each Transaction has been entered into in consideration of
the other Transactions, the parties further agree that Buyer shall
use its best efforts to liquidate all Transactions hereunder upon
the occurrence of an Event of Default as quickly as is prudently
possible in the reasonable judgment of Buyer.
v. Buyer shall, without regard to the adequacy of the security for the
Seller's obligations under this Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without
notice, to take possession of and protect, collect, manage,
liquidate, and sell the Purchased Eligible Assets or any portion
thereof, and collect the payments due with respect to the Purchased
Eligible Assets or any portion thereof. Seller shall pay all costs
and expenses incurred by Buyer in connection
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with the appointment and activities of such receiver.
vi. Seller agrees that Buyer may obtain an injunction or an order of
specific performance to compel Seller to fulfill its obligations as
set forth in Section 25, if Seller fails or refuses to perform its
obligations as set forth therein.
vii. Seller shall be liable to Buyer for the amount of all expenses,
reasonably incurred by Buyer in connection with or as a consequence
of an Event of Default, including, without limitation, reasonable
legal fees and expenses and reasonable costs incurred in connection
with hedging or covering transactions.
viii. Buyer shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws
(including, without limitation, the rights and remedies of a secured
party under the UCC of the State of New York, to the extent that the
UCC is applicable, and the right to offset any mutual debt and
claim), in equity, and under any other agreement between Buyer and
Seller.
ix. Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and, except
to the extent provided in subsections (a)(i) and (iii) of this
Section, at any time thereafter without notice to Seller. All rights
and remedies arising under this Agreement as amended from time to
time hereunder are cumulative and not exclusive of any other rights
or remedies which Buyer may have.
x. In addition to its rights hereunder, Buyer shall have the right to
proceed against any assets of Seller which may be in the possession
of Buyer or its designee (including the Custodian) including the
right to liquidate such assets and to set off the proceeds against
monies owed by Seller to Buyer pursuant to this Agreement. Buyer may
set off cash, the proceeds of the liquidation of the Purchased
Eligible Assets, and all other sums or obligations owed by Seller to
Buyer against all of Seller's obligations to Buyer, whether under
this Agreement, under a Transaction, or under any other agreement
between the parties, or otherwise, whether or not such obligations
are then due, without prejudice to Buyer's right to recover any
deficiency. Any cash, proceeds, or property in excess of any amounts
due, or which Buyer reasonably believes may become due, to
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it from Seller shall be returned to Seller after satisfaction of all
obligations of Seller to Buyer.
xi. Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any
defenses Seller might otherwise have to require Buyer to enforce its
rights by judicial process. Seller also waives any defense Seller
might otherwise have arising from the use of nonjudicial process,
enforcement and sale of all or any portion of the Purchased Eligible
Assets, or from any other election of remedies. Seller recognizes
that nonjudicial remedies are consistent with the usages of the
trade, are responsive to commercial necessity and are the result of
a bargain at arm's length.
xii. Buyer and Seller hereby agree that sales of the Purchased Eligible
Assets shall be deemed to include and permit the sales of Purchased
Eligible Assets pursuant to a securities offering.
xiii. Notwithstanding the foregoing remedies, if the Event of Default
(other than an Event of Default under Section 13(a)(xi)) arises from
a breach of any representation or warranty set forth in Sections
10(b)(iii), (v) or (ix) or in Exhibit V, Exhibit VI, Exhibit VII or
Exhibit VIII attached hereto with respect to a Purchased Eligible
Asset, then Seller may elect, subject to Buyer's written consent
(which consent shall not be unreasonably withheld or delayed), to
cure such default by repurchasing such Eligible Asset or
substituting for such Eligible Asset within two (2) Business Days of
such Event of Default, PROVIDED, however, that Seller shall not have
the right to make the foregoing election if such breach causes a
default with respect to Eligible Assets that in the aggregate
represent ten percent (10%) or more of the aggregate Purchase Price
of all Purchased Eligible Assets subject to then outstanding
Transactions. The repurchase price for any such repurchase shall be
the outstanding Repurchase Price of such Eligible Asset. Any such
substitution shall be performed in accordance with Section 9 of this
Agreement.
15. ADDITIONAL CONDITION
Seller shall, on the date of the initial Transaction hereunder and,
upon the request of Buyer (but no more than once in any calendar year), on the
date of any subsequent Transaction,
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cause to be delivered to Buyer, with reliance thereon permitted as to any Person
that purchases the Purchased Eligible Assets from Buyer in a repurchase
transaction, a favorable opinion or opinions of counsel with respect to the
matters set forth in Exhibit IV attached hereto.
Additionally, prior to entering into the initial Transaction under this
Agreement, Seller shall cause Green Tree to have executed and delivered the
Limited Guaranty.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereunto and will enter into
each Transaction hereunder in consideration of and in reliance upon the fact
that, all Transactions hereunder constitute a single business and contractual
relationship and that each has been entered into in consideration of the other
Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all of
its obligations in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be entitled
to set off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries and other transfers made by either of them
in respect of any Transaction shall be deemed to have been made in consideration
of payments, deliveries, and other transfers in respect of any other
Transactions hereunder, and the obligations to make any such payments,
deliveries, and other transfers may be applied against each other and netted;
PROVIDED, HOWEVER, that the parties hereto acknowledge and agree that each
Purchased Eligible Asset is identified and unique and nothing in this Agreement
should limit or reduce Buyer's obligation to deliver the Purchased Eligible
Assets to Seller as and when provided herein.
17. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party to whom
any written notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in the Confirmation.
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the applicable Confirmation constitutes the entire
understanding between Buyer and Seller with respect to the subject matter it
covers and shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions involving
Purchased
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Eligible Assets. By acceptance of this Agreement, Buyer and Seller acknowledge
that they have not made, and are not relying upon, any statements,
representations, promises or undertakings not contained in this Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under any
Transaction shall not be assigned by (i) Seller without the prior written
consent of Buyer or (ii) by Buyer to a non-affiliate without notifying Seller.
Subject to the foregoing, this Agreement and any Transactions shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and assigns. Nothing in this Agreement express or implied, shall give
to any person, other than the parties to this Agreement and their successors
hereunder, any benefit or any legal or equitable right, power, remedy or claim
under this Agreement.
20. TERMINABILITY
This Agreement shall terminate in 180 days unless the Buyer and Seller agree to
extend this Agreement for a period of 180 days therefrom. Notwithstanding any
such termination or the occurrence of an Event of Default, all of the
representations and warranties hereunder (including those made in Exhibit V,
Exhibit VI, Exhibit VII and Exhibit VIII hereof) shall continue and survive.
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21. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York, the parties
irrevocably waiving any objection thereto. If, for any reason, federal
jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto. Notwithstanding the foregoing two sentences, at either
party's sole option exercisable at any time not later than thirty (30) days
after an action or proceeding has been commenced, the parties agree that the
matter may be submitted to binding arbitration in accordance with the commercial
rules of the American Arbitration Association then in effect in the State of New
York and judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof within the City, County and State of New
York; PROVIDED, HOWEVER, that the arbitrator shall not amend, supplement, or
reform in any regard this Agreement or the terms of any Confirmation, the rights
or obligations of any party hereunder or thereunder, or the enforceability of
any of the terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase transactions
and the secondary mortgage market in the City, County, and State of New York.
23. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.
24. INTENT
The parties understand and intend that this Agreement and each Transaction
hereunder constitute a "repurchase agreement" and a "securities contract" as
those terms are defined under the
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relevant provisions of Title 11 of the United States Code, as amended.
25. SERVICING
a. Notwithstanding the purchase and sale of the Purchased Eligible Assets
hereby, Seller shall cause Green Tree to service the Purchased Eligible Assets
for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or
hypothecate the Purchased Eligible Asset prior to the related Repurchase Date
pursuant to Section 8, Buyer's assigns; PROVIDED, HOWEVER, that the obligations
of Seller to service the Purchased Eligible Assets shall cease upon the payment
by Seller to Buyer of the Repurchase Price therefor. Seller shall cause Green
Tree to service the Purchased Eligible Assets in accordance with the servicing
standards maintained by other prudent mortgage and consumer finance lenders with
respect to loans similar to the Purchased Eligible Assets.
b. Seller agrees that Buyer is the owner of all servicing records owned by
Seller, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Purchased Eligible Assets (the "Servicing Records").
Seller grants Buyer a security interest in all servicing fees and rights
relating to the Eligible Assets and all Servicing Records to secure the
obligation of the Seller or its designee to service in conformity with this
Section and any other obligation of Seller to Buyer. Seller covenants to
safeguard such Servicing Records and to deliver them promptly to Buyer or its
designee (including the Custodian) at Buyer's request.
c. Upon the occurrence and continuance of an Event of Default, Buyer may, in its
sole discretion, (i) sell its right to the Purchased Eligible Assets on a
servicing released basis or (ii) terminate the Seller or its nominee as servicer
of the Purchased Eligible Assets with or without cause, in each case without
payment of any termination fee.
d. Seller shall not employ sub-servicers to service the Purchased Eligible
Assets without the prior approval of Buyer.
e. Seller shall cause any sub-servicer hereunder to execute a letter agreement
with Buyer acknowledging Buyer's security interest and agreeing that, upon
notice from Buyer (or the Custodian on its behalf) that an Event of Default has
occurred and is continuing hereunder, it shall deposit all Income with respect
to the Purchased Eligible Assets in the account specified in the
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third sentence of Section 5(a).
26. MISCELLANEOUS
a. Time is of the essence under this agreement and all Transactions and all
references to a time shall mean New York time in effect on the date of the
action unless otherwise expressly stated in this Agreement.
b. Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person with apparent
authority to act on behalf of the Seller, and the Seller shall indemnify Buyer,
defend, and hold Buyer harmless from and against any and all liabilities,
losses, damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from the Seller.
c. If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this Agreement
shall prevail.
d. If there is any conflict between the terms of a Confirmation or a corrected
Confirmation issued by the Buyer and this Agreement, the Confirmation shall
prevail.
e. This Agreement may be executed in counterparts, each of which so executed
shall be deemed to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
f. Seller agrees to reimburse Buyer for all reasonable costs and expenses of
Buyer in connection with this Agreement including, without limitation, (i) the
fees, expenses and disbursement of counsel to Buyer, (ii) due diligence expenses
and (iii) on-going auditing fees.
g. The headings in this Agreement are for convenience of reference only and
shall not affect the interpretation or construction of this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth above.
LEHMAN COMMERCIAL PAPER INC.,
Buyer
By:
-------------------------------------
Title:
----------------------------------
Date:
----------------------------------
GREEN TREE FINANCE CORP.--FIVE,
Seller
By:
-------------------------------------
Title:
----------------------------------
Date:
----------------------------------
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EXHIBITS
EXHIBIT I Confirmation
EXHIBIT II Form of Power of Attorney
EXHIBIT III Opinion of Counsel to Seller
EXHIBIT IV Representations and Warranties Regarding
Home Improvement Loans
EXHIBIT V Representations and Warranties Regarding
High LTV Home Equity Loans and Home Equity Loans
EXHIBIT VI Representations and Warranties Regarding
Retail Installment Contracts
EXHIBIT VII Representations and Warranties Regarding
Equipment Leases
EXHIBIT VIII Form of Limited Guaranty
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EXHIBIT I
Form of Confirmation Letter
(date)
[Green Tree Finance Corp.--Five]
Attention:
Confirmation No.____________________
Ladies/Gentlemen:
This letter confirms our oral agreement to purchase from you the Eligible Assets
listed in Appendix I hereto, pursuant to the Amended and Restated Master
Repurchase Agreement between us, dated February 4, 1998 (the "Agreement"), as
follows:
Purchase Date:
Eligible Assets to be Purchased: See Appendix I hereto.
[Appendix I to Confirmation Letter will list Eligible Assets]
Aggregate Principal Amount of Purchased Eligible Assets:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Collateral Amount Percentage with respect to Market Value for Home
Equity:
Collateral Amount Percentage with respect to Market Value for
Insured Home Improvement Loans:
Collateral Amount Percentage with respect to Market Value for
Uninsured Home Improvement Loans:
Collateral Amount Percentage with respect to Market Value for Loans
arising under Retail Installment Contracts:
Collateral Amount Percentage with respect to Market Value for
Equipment Leases:
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Names and addresses for communications:
Buyer:
[Lehman Commercial Paper Inc.
101 Hudson Street
Jersey City, NJ
Attention: Richard DePaulis or Chris Czako
with a copy to:
Lehman Commercial Paper Inc.
200 Vesey Street
12th Floor New York, New York 10285-0900
Attention: Eugene Nagotko or Fred Madonna]
Seller: [Green Tree Finance Corp.--Five]
Attention:
LEHMAN COMMERCIAL PAPER INC.,
Buyer
By:
---------------------------
Name:
-------------------------
Title:
------------------------
The Seller hereby confirms that all of the representations and warranties
contained in the Agreement (including Exhibit V, Exhibit VI, Exhibit VII and
Exhibit VIII) are true and correct as if made as of the date hereof, the Seller
is not in breach of any covenant contained therein and there exists no Event of
Default thereunder.
Agreed and Acknowledged:
Green Tree Finance Corp.--Five
Seller
By:_________________________
Name:_______________________
Title:______________________
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EXHIBIT II
Form of Power of Attorney
"Know All Men by These Presents, that Green Tree Finance Corp.--Five ("Seller"),
does hereby appoint Lehman Commercial Paper Inc. ("Buyer"), its attorney-in-fact
to act in Seller's name, place and stead in any way which Seller could do with
respect to (i) the completion of the endorsements of the Mortgage Notes and the
Assignments of Mortgages, (ii) the recordation of the assignments of Mortgages
and (iii) the enforcement of the Seller's rights under the Eligible Assets
purchased by Buyer pursuant to an Amended and Restated Master Repurchase
Agreement dated November 1, 1997 between Seller and Buyer and to take such other
steps as may be necessary or desirable to enforce Buyer's rights against such
Eligible Assets, the related Loan Files and the Servicing Records to the extent
that Seller is permitted by law to act through an agent.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD
PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS
OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND
HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY
ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON
THE PROVISIONS OF THIS INSTRUMENT.
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IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and
the Seller's seal to be affixed this ____ day of, _____________, 199__.
Green Tree Finance Corp.--Five
By:_________________________
Name:_______________________
Title:______________________
[NOTARIZE]
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OPINION OF SELLER'S COUNSEL EXHIBIT III
1. CORPORATE EXISTENCE
2. AUTHORIZATION, EXECUTION AND DELIVERY
3. ENFORCEABILITY
4. NO DEFAULTS
5. NO LITIGATION
6. COMPLIANCE WITH LAWS
7. NO CONSENTS/APPROVALS NEEDED
8. VALIDLY CREATED FIRST PRIORITY PERFECTED SECURITY INTEREST IN
COLLATERAL
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EXHIBIT IV
Representations with respect
to Home Improvement Loans
1. Payments. The scheduled payment of principal and interest due under
the Home Improvement Loan with respect to the prior Due Date was made on or
before such Due Date by or on behalf of the obligor (without any advance from
Seller or any Person acting at the request of Seller) or was not delinquent for
more than 30 days after such Due Date.
B. No Waivers. The terms of the Home Improvement Loan have not been
waived, altered or modified in any respect, except by instruments or documents
identified in the Home Improvement Loan File (as defined in the Custodial
Agreement). All costs, fees and expenses incurred in making, closing and
perfecting the lien and/or security interest, as applicable, of the Home
Improvement Loan have been paid.
C. Binding Obligation. The Home Improvement Loan is the legal, valid
and binding obligation of the obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited by laws
affecting the enforcement of creditors' rights generally. In the case of Home
Improvement Loans other than Unsecured Home Improvement Loans, Seller has
delivered, or caused to be delivered, to the Custodian the original Mortgage,
with evidence of recording thereon, or if the original Mortgage has not yet been
returned from the recording office, a true copy of the Mortgage which has been
delivered for recording in the appropriate recording office of the jurisdiction
in which the Real Property is located.
D. No Defenses. The Home Improvement Loan is not subject to any right
of rescission, set off, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Home Improvement Loan or the
exercise of any right thereunder will not render the Home Improvement Loan
unenforceable in whole or in part or subject to any right of rescission, set
off, counterclaim or defense, including the defense of usury, and no such right
of rescission, set off, counterclaim or defense has been asserted with respect
thereto.
E. Insurance. In the case of Home Improvement Loans other than
Unsecured Home Improvement Loans, all improvements on the related real property
are covered by a hazard insurance policy. All premiums due on such insurance
have been paid in full.
Each Insured Home Improvement Loan was originated in compliance with
FHA regulations and is insured, without set-off,
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surcharge or defense, by FHA insurance. Seller has, in conformity with FHA
regulations, filed all reports necessary for the Insured Home Improvement Loan
to be registered for FHA insurance. Following assignment of the Insured Home
Improvement Loan to Custodian, on behalf of the Owners, Custodian will be
entitled to the full benefits of the FHA insurance.
F. Origination. The Home Improvement Loan was originated by a home
improvement contractor or Seller in the regular course of its business and, if
originated by a home improvement contractor, was purchased by Seller in the
regular course of its business.
G. Lawful Assignment. The Home Improvement Loan was not originated in
and is not subject to the laws of any jurisdiction whose laws would make the
transfer of the Home Improvement Loan to Custodian or the ownership of the Home
Improvement Loans by the Owner thereof unlawful or make the Home Improvement
Loan unenforceable.
H. Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws and FHA regulations, applicable to the Home Improvement Loan
have been complied with and such compliance is not affected by the holding of
the Home Improvement Loans by Custodian or the Owner's ownership of the Home
Improvement Loans, and Seller shall for at least the period of this Agreement,
maintain in its possession, available for Custodian's inspection, and shall
deliver to Custodian upon demand, evidence of compliance with all such
requirements.
I. Home Improvement Loan in Force. The Home Improvement Loan has not
been satisfied or subordinated (except for such subordination as may be allowed
under FHA regulations) in whole or in part or rescinded, and, in the case of
Home Improvement Loans other than Unsecured Home Improvement Loans, the real
property securing the Home Improvement Loan, as applicable, has not been
released from the lien of the Home Improvement Loan in whole or in part.
J. Valid Lien. The Home Improvement Loan has been duly executed and
delivered by the obligor and either the related Mortgage is a valid and
subsisting first, second or third lien on the property therein described or the
Home Improvement Loan is an unsecured borrowing of the obligor; any related
Mortgage has been assigned by Seller to Custodian, and Custodian has and will
have, on behalf of the Owners of the Home Improvement Loans, a valid and
subsisting lien on the property therein described. Seller has full right to sell
and assign the Home Improvement Loans to Custodian.
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K. Capacity of Parties. All parties to the Home Improvement Loan had
capacity to execute the Home Improvement Loan.
L. Good Title. Prior to transfer to Custodian, Seller is the sole owner
of the Home Improvement Loan and has the authority to sell, transfer and assign
the Home Improvement Loan. Seller has not sold, assigned or pledged the Home
Improvement Loan to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the Home Improvement Loan and no event
which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Home Improvement Loan. Seller has not waived any such default,
breach, violation or event permitting acceleration.
N. No Liens. In the case of Home Improvement Loans other than Unsecured
Home Improvement Loans, there are, to the best of Seller's knowledge, no liens
or claims which have been filed for work, labor or materials affecting the real
property securing the Home Improvement Loan which are or may be liens prior to,
or equal or coordinate with, the lien of the Home Improvement Loan.
O. Equal Installments. The Home Improvement Loan has a fixed rate and
provides for level monthly payments which fully amortize the loan over its term.
P. Enforceability. The Home Improvement Loan contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security provided thereby.
Q. One Original. There is only one original executed Home Improvement
Loan contract and note, each of which has been delivered to the Custodian.
R. Primary Resident. At the time of origination of the Home Improvement
Loan, the obligor was the primary resident of the related real property.
S. Qualified Mortgage for REMIC. Each Home Improvement Loan that is
secured by a Mortgage on the property described therein is a "qualified
mortgage" under Section 860G(a)(3) of the Code.
T. Proceedings. There is no proceeding pending or, to Seller's
knowledge, threatened for the total or partial condemnation of collateral
securing a Home Improvement Loan.
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U. Marking Records. Seller has caused the portions of the Electronic
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such Home Improvement Loans are owned by Custodian in accordance
with the terms of the related Custodial Agreement.
V. No Adverse Selection. Except for the effect of the representations
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the Home Improvement Loans.
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EXHIBIT V
Representations with respect
to High LTV Home Equity Loans and Home Equity Loans
A. Payments. The scheduled payment of principal and interest due under
the High LTV Home Equity Loan or Home Equity Loan with respect to the prior Due
Date was made on or before such Due Date by or on behalf of the obligor (without
any advance from Seller or any Person acting at the request of Seller) or was
not delinquent for more than 30 days after such Due Date.
B. No Waivers. The terms of the High LTV Home Equity Loan or Home
Equity Loan have not been waived, altered or modified in any respect, except by
instruments or documents identified in the High LTV Home Equity Loan File or
Home Equity Loan File, as applicable. All costs, fees and expenses incurred in
making, closing and perfecting the lien and/or security interest, as applicable,
of the High LTV Home Equity Loan or Home Equity Loan have been paid.
C. Binding Obligation. The High LTV Home Equity Loan or Home Equity
Loan is the legal, valid and binding obligation of the obligor thereunder and is
enforceable in accordance with its terms, except as such enforceability may be
limited by laws affecting the enforcement of creditors' rights generally. Seller
has delivered, or caused to be delivered, to the Custodian the original
Mortgage, with evidence of recording thereon, or if the original Mortgage has
not yet been returned from the recording office, a true copy of the Mortgage
which has been delivered for recording in the appropriate recording office of
the jurisdiction in which the Real Property is located.
D. No Defenses. The High LTV Home Equity Loan or Home Equity Loan is
not subject to any right of rescission, set off, counterclaim or defense,
including the defense of usury, and the operation of any of the terms of the
High LTV Home Equity Loan or Home Equity Loan or the exercise of any right
thereunder will not render the High LTV Home Equity Loan or Home Equity Loan
unenforceable in whole or in part or subject to any right of rescission, set
off, counterclaim or defense, including the defense of usury, and no such right
of rescission, set off, counterclaim or defense has been asserted with respect
thereto.
E. Insurance. All improvements on the related real property are covered
by a hazard insurance policy. All premiums due on such insurance have been paid
in full.
F. Origination. The High LTV Home Equity Loan or Home Equity Loan was
originated by a home equity lender or Seller in
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the regular course of its business and, if originated by a home equity lender,
was purchased by Seller in the regular course of its business.
G. Lawful Assignment. The High LTV Home Equity Loan or Home Equity Loan
was not originated in and is not subject to the laws of any jurisdiction whose
laws would make the transfer of the High LTV Home Equity Loan or Home Equity
Loan to Custodian or the ownership of the High LTV Home Equity Loan or Home
Equity Loans by the Owner thereof unlawful or make the High LTV Home Equity Loan
or Home Equity Loan unenforceable.
H. Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the High LTV Home Equity Loan or Home Equity
Loan have been complied with and such compliance is not affected by the holding
of the High LTV Home Equity Loans or Home Equity Loans by Custodian or the
Owners' ownership of the High LTV Home Equity Loans or Home Equity Loans, and
Seller shall for at least the period of this Agreement, maintain in its
possession, available for Custodian's inspection, and shall deliver to Custodian
upon demand, evidence of compliance with all such requirements.
I. High LTV Home Equity Loan or Home Equity Loan in Force. The High LTV
Home Equity Loan or Home Equity Loan has not been satisfied or subordinated in
whole or in part or rescinded, and the real property securing the High LTV Home
Equity Loan or Home Equity Loan has not been released from the lien of the High
LTV Home Equity Loan or Home Equity Loan in whole or in part.
J. Valid Lien. The High LTV Home Equity Loan or Home Equity Loan has
been duly executed and delivered by the obligor and the related Mortgage is a
valid and subsisting first, second or third lien on the property therein
described; any related Mortgage has been assigned by Seller to Custodian, and
Custodian has and will have, on behalf of the Owners of the High LTV Home Equity
Loans and Home Equity Loans, a valid and subsisting lien on the property therein
described. Seller has full right to sell and assign the High LTV Home Equity
Loans and Home Equity Loans to Custodian.
K. Capacity of Parties. All parties to the High LTV Home Equity Loan
and Home Equity Loan had capacity to execute the High LTV Home Equity Loan and
Home Equity Loan.
L. Good Title. Prior to transfer to Custodian, Seller is the sole owner
of the High LTV Home Equity Loan or Home Equity Loan and has the authority to
sell, transfer and assign the High LTV Home Equity Loan or Home Equity Loan.
Seller has not sold, assigned or pledged the High LTV Home Equity Loan or Home
Equity
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Loan to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the High LTV Home Equity Loan or Home
Equity Loan and no event which, with notice and the expiration of any grace or
cure period, would constitute such a default, breach, violation or event
permitting acceleration under such High LTV Home Equity Loan or Home Equity
Loan. Seller has not waived any such default, breach, violation or event
permitting acceleration.
N. No Liens. There are, to the best of Seller's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the real
property securing the High LTV Home Equity Loan or Home Equity Loan which are or
may be liens prior to, or equal or coordinate with, the lien of the High LTV
Home Equity Loan or Home Equity Loan.
O. Equal Installments. The High LTV Home Equity Loan or Home Equity
Loan has a fixed rate and provides for level monthly payments which fully
amortize the loan over its term.
P. Enforceability. The High LTV Home Equity Loan or Home Equity Loan
contains customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
collateral of the benefits of the security provided thereby.
Q. One Original. There is only one original executed High LTV Home
Equity Loan note or Home Equity Loan note, and it has been delivered to the
Custodian.
R. Primary Resident. At the time of origination of the High LTV Home
Equity Loan or Home Equity Loan, the obligor was the primary resident of the
related real property.
S. Qualified Mortgage for REMIC. Each High LTV Home Equity Loan or Home
Equity Loan that is secured by a Mortgage on the property described therein is a
"qualified mortgage" under Section 860G(a)(3) of the Code.
T. Proceedings. There is no proceeding pending or, to Seller's
knowledge, threatened for the total or partial condemnation of collateral
securing a High LTV Home Equity Loan or Home Equity Loan.
U. Marking Records. Seller has caused the portions of the Electronic
Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to
indicate that such High LTV Home Equity Loans and Home Equity Loans are owned by
Custodian in accordance with the terms of the related Custodial Agreement.
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V. No Adverse Selection. Except for the effect of the representations
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the High LTV Home Equity Loans or Home Equity Loans.
W. Real Property. Each mortgaged property is improved by a single
family dwelling which constitutes real property under state law and is the
principal residence of the obligor.
X. Wet Home Equity Loans. Each Wet Home Equity Loan, together with
other Wet Home Equity Loans subject to Transactions hereunder, does not exceed
an aggregate Purchase Price of $150,000,000.
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EXHIBIT VI
Representations with respect to Retail Installment Contracts
A. Payments. The scheduled payment of principal and interest for the
most recent Due Date was made by or on behalf of the obligor (without any
advance from Seller or any Person acting at the request of Seller) or was not
delinquent for more than 30 days.
B. No Waivers. The terms of the Retail Installment Contract have not
been waived, altered or modified in any respect, except by instruments or
documents identified in the Retail Installment Contract file.
C. Binding Obligation. The Retail Installment Contract is the legal,
valid and binding obligation of the obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited by laws
affecting the enforcement of creditors' rights general.
D. No Defenses. The Retail Installment Contract is not subject to any
right of rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of the Retail Installment Contract
or the exercise of any right thereunder will not render the Retail Installment
Contract unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of usury, and
no such right of rescission, setoff, counterclaim or defense has been asserted
with respect thereto.
E. Origination. The Retail Installment Contract was originated by a
dealer or Seller in the regular course of its business and, if originated by a
dealer, was purchased by Seller in the regular course of its business.
F. Lawful Assignment. The Retail Installment Contract was not
originated in and is not subject to the laws of any jurisdiction whose laws
would make the transfer of the Retail Installment Contract to the Custodian or
the ownership of the Retail Installment Contracts by the Owner unlawful.
G. Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the Retail Installment Contract have been
complied with and such compliance is not affected by the holding of the Retail
Installment Contracts by the Custodian or the Owner's ownership of the Retail
Installment Contracts, and Seller shall maintain in its possession, available
for the Buyer's inspection, and shall
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deliver to the Buyer upon demand, evidence of compliance with all such
requirements.
H. Contract in Force. The Retail Installment Contract has not been
satisfied or subordinated in whole or in part or rescinded, and the Seller's
lien on the related Consumer Product has not been released in whole or in part.
I. Purchase Money Security Interest. The Retail Installment Contract
creates a "purchase money security interest" (as defined in the Uniform
Commercial Code) in favor of Seller in the Consumer Product covered thereby as
security for payment of the outstanding principal balance of such Retail
Installment Contract and all other obligations of the obligor under such Retail
Installment Contract; such security interest has been assigned by Seller to the
Custodian, and the Custodian has and will have a valid purchase money security
interest in such Consumer Product.
J. Capacity of Parties. All parties to the Retail Installment Contract
had capacity to execute the Retail Installment Contract.
K. Good Title. Prior to the transfer to the Custodian, Seller is the
owner of the Retail Installment Contract and has the authority to sell, transfer
and assign the Retail Installment. Seller has not sold, assigned or pledged the
Retail Installment Contract to any Person other than the Custodian.
L. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the Retail Installment Contract and no
event which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Retail Installment Contract. Seller has not waived any such default,
breach, violation or event permitting acceleration.
M. No Liens. There are, to the best of Seller's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the Consumer
Product which are or may be liens prior to, or equal or coordinate with, the
lien of the Retail Installment Contract.
N. Equal Installments. The Retail Installment Contract has a fixed rate
and provides for level monthly payments which fully amortize the loan over its
term.
O. Enforceability. The Retail Installment Contract contains customary
and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the collateral of the
benefits of the
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security.
P. One Original. There is only one original executed the Retail
Installment Contract, which is held by Seller.
Q. No Adverse Selection. Except for the effect of the representations
and warranties made hereunder, no adverse selection procedures have been
employed in selecting the Retail Installment Contracts.
R. Notation of Security Interest. With respect to each Retail
Installment Contract, if the related Consumer Product is located in a state in
which notation of a security interest on the title document is required or
permitted to perfect such security interest, the title document shows, or if a
new or replacement title document with respect to such Consumer Product is being
applied for such title document will be issued within 180 days and will show,
Seller as the holder of a first priority security interest in such Consumer
Product; if the related Consumer Product is located in a state in which the
filing of a financing statement under the UCC is required to perfect a security
interest in goods of the type including the Consumer Product, such filings or
recordings have been duly made and show Seller as secured party; and if the
related Consumer Product is an aircraft subject to registration with the Federal
Aviation Administration's Aircraft Registry, and the recordation of a mortgage,
security agreement or similar conveyance with such registry is required to
perfect the lien created thereby, such recordation has been duly made and shows
Seller as secured party or mortgagee. In any case, Buyer has the same rights as
the secured party of record would have (if such secured party were still the
owner of the Contract) against all Persons (including Seller and any trustee in
bankruptcy of Seller) claiming an interest in such Consumer Product.
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EXHIBIT VII
Representations with respect to Equipment Leases
A. Binding Obligation. Each Equipment Lease (i) constitutes a valid,
binding and enforceable payment obligation of the Obligor in accordance with its
terms (except as may be limited by applicable bankruptcy, insolvency or other
similar laws affecting the enforceability of creditors' rights generally and the
availability of equitable remedies), (ii) has been duly and properly sold,
assigned and conveyed by Seller, (iii) was originated by Seller in the ordinary
course of its business, or (in the case of any Equipment Lease purchased by
Seller) was acquired by Seller for proper consideration and was validly assigned
to Seller by the originator of such Equipment Lease and (iv) contains customary
and enforceable provisions adequate to enable realization against the Obligor
and/or the related Equipment (although no representation or warranty is made
with respect to the perfection or priority of any security interest in such
related Equipment).
B. No Adverse Selection. No selection procedures adverse to Buyer were
utilized in selecting the Equipment Leases from those leases owned by Seller.
C. Compliance with Law. All requirements of applicable Federal, state
and local laws, and regulations thereunder, in respect of all of the Equipment
Leases, have been complied with in all material respects.
D. No Defaults. There is no known default, breach, violation or event
permitting cancellation or termination of the Equipment Lease by the lessor
under the terms of any Equipment Lease (other than scheduled payment
delinquencies (in excess of 10% of the scheduled payment due) of not more than
59 days), and there has been no waiver of any of the foregoing; no related
Equipment had been repossessed.
E. No Liens. Immediately prior to the sale, assignment and conveyance
of each Equipment Lease by Seller to Buyer, Seller had good title to such lease
and Seller's interest in the related Equipment (subject to the terms of such
Equipment Lease) and was the sole owner thereof, free of any lien.
F. No Participations. No person has a participation in or other right
to receive scheduled payments under any Equipment Lease, and neither the Buyer
nor Seller has taken any action to convey any right to any person that would
result in such person
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having a right to scheduled payments received with respect to any Equipment
Lease.
G. Origination. Each Equipment Lease was originated by Seller or
acquired by Seller and was sold and assigned by Seller to the Buyer without any
fraud or misrepresentation on the part of Seller.
H. Obligors. Each Obligor (i) is located in the United States, and (ii)
is not (a) the United States of America or any State or local government or any
agency, department, subdivision or instrumentality thereof or (b) Seller or any
affiliate thereof.
I. Lawful Assignment. The sale, transfer and assignment of such
Equipment Lease and Seller's interest in the related Equipment to Buyer, and the
transfer and conveyance of such Equipment Lease are not unlawful, void or
voidable under the laws of the jurisdiction applicable to such Equipment Lease.
J. Filings. All filings and other actions required to be made, taken or
performed by any person in any jurisdiction to give Buyer a first priority
perfected lien or ownership interest in the Equipment Leases and a first
priority perfected security interest in Seller's interest in the Equipment have
been made, taken or performed.
K. Lease File. There exists a Lease File pertaining to each Equipment
Lease, and such Lease File contains the Equipment Lease or a facsimile copy
thereof.
L. Original. There is only one original executed copy of each Equipment
Lease or, if there are multiple originals, all such originals are in the
possession of Seller or the signed original in the possession of Seller is noted
thereon as being the only copy that constitutes chattel paper.
M. Chattel Paper. The Equipment Leases constitute chattel paper within
the meaning of the UCC as in effect in the States of Minnesota and Delaware
(other than those Equipment Leases in which the lessor is financing exclusively
the Obligor's software license or maintenance contract for Equipment).
N. No Bankruptcy. Each Equipment Lease was entered into by an Obligor
who had not been identified on the records of Seller as being the subject of a
current bankruptcy proceeding.
O. Computer Tape. The computer tape containing information with respect
to the Equipment Leases that was made available by Seller to Buyer and was used
to select the Equipment Leases was complete and accurate in all material
respects and includes a description of the same Equipment Leases that are
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described in the Confirmation.
P. No Delinquency. No Equipment Lease has a scheduled payment
delinquency (in excess of 10% of the scheduled payment due) of more than 59 days
past due as of the date hereof.
Q. No Consent. Each Equipment Lease may be sold, assigned and
transferred by Seller to Buyer, without the consent of, or prior approval from,
or any notification to, the applicable Obligor, other than (i) certain Equipment
Leases (which, in proportion to the aggregate of all of the Equipment Leases,
are not material) that require notification of the assignment to the Obligor,
which notification will be given by Seller not later than 10 days following the
date hereof, and (ii) Equipment Leases (which, in proportion to the aggregate of
all of the Equipment Leases, are not material) that require the consent of the
Obligor, which consent will be obtained by Seller not later than 10 days
following the date hereof.
R. No Assumption. Each Equipment Lease prohibits the sale, assignment
or transfer of the Obligor's interest therein, the assumption of the Equipment
Lease by another person in a manner that would release the Obligor thereof from
the Obligor's obligation, or any sale, assignment or transfer of the related
Equipment, without the prior consent of the lessor, other than Equipment Leases
which may (i) permit assignment to a subsidiary, corporate parent or other
affiliate, (ii) permit the assignment to a third party, provided the Obligor
remains liable under the Equipment Lease, or (iii) permit assignment to a third
party with a credit standing (determined by Seller in accordance with its
underwriting policy and practice at the time for an equivalent contract type,
term and amount) equal to or better than the original Obligor.
S. Payment Currency. The Obligor under each Equipment Lease is required
to make payments thereunder (i) in United States dollars, and (ii) in fixed
amounts and on fixed and predetermined dates.
T. Obligor Responsibility. Each Equipment Lease requires the Obligor to
assume responsibility for payment of all expenses in connection with the
maintenance and repair of the related Equipment, the payment of all premiums for
insurance of such Equipment and the payment of all taxes (including sales and
property taxes) relating to such Equipment.
U. No Set-Off. Each Equipment Lease requires the Obligor thereunder to
make all scheduled payments thereon under all circumstances and regardless of
the condition or suitability of the related Equipment and notwithstanding any
defense, set-off or counterclaim that the Obligor may have against the
manufacturer,
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lessor or lender (as the case may be).
V. Damaged Equipment. Under each Equipment Lease, if the Equipment is
damaged or destroyed, the Obligor is required either (i) to repair such
Equipment, (ii) to make a termination payment to the lessor, or (iii) in some
cases, to replace such damaged or destroyed Equipment with other equipment of
comparable use and value.
W. No Termination. None of the Equipment Leases permit the Obligor to
terminate the Equipment Lease prior to the termination hereof or to otherwise
prepay the amounts due and payable thereunder, except for a de minimis number of
Equipment Leases which allow for an early termination or prepayment.
X. No Transfer of Title Required. It is not a precondition to the valid
transfer or assignment of Seller's interest in any of the Equipment related to
any Equipment Lease that title to such Equipment be transferred on the records
of any governmental or quasi-governmental agency, body or authority.
Y. Accurate Information. The information with respect to the Equipment
Leases listed on the Confirmation is true, correct and complete in all material
respects.
Z. No Waiver. No provisions of any Equipment Lease have been waived,
altered or modified in any material respect, except as indicated in the
Equipment Lease File.
AA. No Consumer Leases. No Equipment Lease is a "consumer lease" as
defined in Article 2A of the Uniform Commercial Code, except for a de minimis
number of Equipment Leases.
BB. Right to Inspect. To the best of Seller's knowledge, each Obligor
has accepted the related Equipment and has had reasonable opportunity to inspect
and test such Equipment.
VIII-4
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EXHIBIT VIII
February 4, 1998
Lehman Commercial Paper Inc.
Three World Financial Center
New York, New York 10285-0700
GREEN TREE FINANCIAL CORPORATION
Limited Guaranty
Amended and Restated Master Repurchase Agreement Dated as of
February 4, 1998
Gentlemen:
AA. For value received and in accordance with the terms of the amended
and restated Master Repurchase Agreement, dated as of February 4, 1998 as
amended from time to time (the "Repurchase Agreement") between Lehman Commercial
Paper Inc., as buyer ("Buyer"), and Green Tree Finance Corp. -- Five, as seller
("Seller"), Green Tree Financial Corporation, formerly known as Green Tree
Acceptance, Inc. ("Green Tree") hereby guarantees payment to the Buyer or any
successor in interest of the Buyer with respect to any Securities under the
Repurchase Agreement in an aggregate amount from time to time not exceeding the
sum of the Guaranty Amount, as hereinafter defined. Buyer or U.S. Bank National
Association, as custodian under the Custodial Agreement (as defined in the
Repurchase Agreement), may make demands under this Limited Guaranty of the
Guaranty Amount from time to time. Green Tree hereby represents that its
obligations hereunder do and shall rank pari passu with all unsecured and
unsubordinated indebtedness of Green Tree.
BB. Payments required under this Limited Guaranty shall be payable
whenever any Guaranty Amount (as defined below) has not been promptly made to
Buyer in accordance with the Repurchase Agreement and the Custodial Agreement,
without regard to any stay or delay with respect to such payment permitted or
required by bankruptcy or any other applicable law. Neither Buyer nor Custodian
on behalf of Buyer shall be required to realize upon any Security or other
security or exercise any remedies prior to making a payment demand under this
Limited Guaranty. The aggregate sum remaining available hereunder from time to
time shall be available upon the presentation by Buyer or Custodian on behalf of
Buyer of the Notice for Payment in the form of Exhibit A hereto (the "Notice"),
setting forth the information called for
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therein.
CC. The "Guaranty Amount" as of any date means, collectively, the sums
described in paragraphs 8 and 9 of this Limited Guaranty plus the lesser of (x)
the sum of (A) the Repurchase Price of any Security (whether payable upon demand
by the Buyer, as a result of an acceleration of the Repurchase Date therefor as
a result of a material adverse change in the condition (financial or otherwise)
of Green Tree or Seller, or otherwise and (B) the excess of (i) the sum of the
Repurchase Price for any Security that Buyer realizes upon and sells, the Price
Differential thereof and any liquidation costs and attorneys' fees associated
with realizing upon and selling a Security over (i) 10% of the outstanding
principal amount of the Securities at the time a payment demand is made under
this Limited Guaranty. All payments due hereunder shall be paid in immediately
available funds after receipt of the Notice no later than 1:00 P.M. on the
second business day following the date of presentation of the Notice.
DD. Presentation of the Notice shall be made in writing to the address
specified in this paragraph or by presentation of facsimile documentation at
(612) 293-5745, Attention: Chief Financial Officer, or such other number or name
as Green Tree may specify. Such documentation shall be followed by original
documentation as soon as reasonably practicable to Green Tree's office located
at 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota 55102-1639,
Attention: Chief Financial Officer, or such other number or name which may be
designated by Green Tree by written notice delivered to the Custodian.
EE. This Limited Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New York. Communications with respect
to this Limited Guaranty other than requests for payment pursuant to a Notice
referred to in the preceding paragraph shall be addressed to Green Tree at 1100
Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota 55102-1639,
Attention: Chief Financial Officer, specifically referring to this Limited
Guaranty.
FF. Green Tree hereby waives all rights of subrogation, contribution,
reimbursement, indemnity or otherwise, whether arising by contract or operation
of law (including, without limitation, any such right arising under the Federal
Bankruptcy Code) or otherwise by reason of any payment by Green Tree pursuant to
the provisions of this Limited Guaranty and agrees for the benefit of each of
the Seller's creditors that any such payment by it shall constitute a
contribution of capital by Green Tree to the Seller.
GG. As further security for this Limited Guaranty and to
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secure all of Seller's obligations to Buyer, Green Tree hereby grants a present
security interest in and transfers and assigns to Buyer (a) any and all
interest, if any, it may now or hereafter have in the Purchased Securities (as
defined in the Repurchase Agreement) until such securities have been sold or
otherwise disposed of by Buyer, and (b) all claims and demands, presently
existing or hereafter accrued thereon, and any and all collateral or security
Green Tree now has or may hereafter have or acquire against Seller with respect
to the Securities or any of them with full right on the part of Buyer in its own
name or in the name of Green Tree to collect and enforce such claims by legal
action, proof of debt in bankruptcy or other liquidation proceedings, and to
vote in any proceedings for the arrangement of debts at any time proposed, and
Green Tree hereby irrevocably appoints Buyer as attorney-in-fact for Green Tree
for the purpose of such enforcement and for the purpose of endorsing in the name
of Guarantors any instrument for the payment of money.
HH. In the event that any representation or warranty made by Seller in
the Repurchase Agreement or by Green Tree or Seller under any servicing
arrangements or the Custodial Agreement shall be false or misleading in any
material respect, there shall be immediately due from Green Tree to Buyer the
loss, cost, damage or expense incurred by Buyer by reason of such representation
or warranty being false or misleading in any material respect.
II. In the event that Buyer for any reason whatsoever shall deem it
necessary to refer this Limited Guaranty to an attorney for the enforcement
thereof or of any rights hereunder or otherwise, there shall be immediately due
from Green Tree to Buyer, reasonable attorneys' fees and disbursements, together
with all costs and expenses of such action.
JJ. This Limited Guaranty sets forth in full Green Tree's undertaking,
and such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to herein
other than any request, for payment hereunder and the Repurchase Agreement, and
any such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except for requests for payment pursuant to a
Notice and the Repurchase Agreement.
KK. Green Tree hereby waives the right of trial by jury in any
litigation arising hereunder and also waives the right in any such litigation,
to impose counterclaims or set offs of any kind or description unless such
counterclaim or set off is compulsory or mandatory in nature under the New York
Civil Practice Law and Rules. Green Tree further agrees to submit to personal
jurisdiction in the State of New York in any action or proceeding arising out of
this Guaranty.
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<PAGE>
IN WITNESS WHEREOF, this Limited Guaranty is impressed, imprinted or
engraved hereon, attested by its secretary or any Assistant Secretary.
GREEN TREE FINANCIAL CORPORATION
f/k/a GREEN TREE ACCEPTANCE, INC.
By:______________________________
Name:
Title:
Attest:
By:_______________________
Name:
Title:
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<PAGE>
EXHIBIT A
to
Limited Guaranty
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Attention: Chief Financial Officer
NOTICE FOR PAYMENT
UNDER THE LIMITED GUARANTY
The undersigned individual, a duly authorized officer of Lehman
Commercial Paper Inc. (the "Buyer"), U.S. Bank National Association, as
custodian ("Custodian") under that certain Custodial Agreement among Custodian,
Buyer and Green Tree Finance Corp. -- Five ("Seller"), hereby certified to Green
Tree Financial Corporation, formerly known as Green Tree Acceptance, Inc.
("Green Tree") on behalf of the Buyer with reference to that certain Limited
Guaranty, dated February 4, 1998 (the "Limited Guaranty"), of Green Tree in
favor of Buyer, executed pursuant to the amended and restated Master Repurchase
Agreement, dated February 4, 1998 (the "Repurchase Agreement"), between Seller
and Buyer, in respect of Securities (as defined in the Repurchase Agreement) as
follows:
1. [Buyer] [Custodian on behalf of Buyer] is entitled to make a demand
under the Limited Guaranty.
2. The Guaranty Amount as of the Date of this Notice is $_________. The
amount demanded by this notice (together with the amount of any other payments
demanded under all other Notices for
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Payment) does not exceed the Guaranty Amount.
3. [Buyer] [Custodian on behalf of Buyer] demands payment of
$_______________, which is the amount it is entitled to demand pursuant to the
Limited Guaranty.
4. The amount demanded is to be paid in immediately available funds by
1:00 P.M. of the second business day following the date of presentation of this
notice.
4. [Provide payment instructions.]
6. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Repurchase Agreement.
IN WITNESS WHEREOF, this notice has been executed this __ day of
________.
[LEHMAN COMMERCIAL PAPER INC.]
[CUSTODIAN]
By:______________________________
Name:
Title:
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<PAGE>
GREEN TREE FINANCIAL ANNOUNCES CLOSING OF NEW COMMITTED FINANCING ARRANGEMENTS
FEBRUARY 18, 1998 03:07 PM
SAINT PAUL, Minn., Feb. 18/PRNewswire/ -- Green Tree Financial Corporation GNT
today announced that it has fully executed new agreements that have restructured
its committed financing arrangements. The company announced that it has closed
on a $500 million, two-year committed facility with an affiliate of Lehman
Brothers Holdings, Inc. The new secured facility will be used for general
corporate purposes, including the financing of existing and future residual
interests created from Green Tree's broadly diversified securitization programs.
The company also said that it has executed certain amendments and waivers to its
two unsecured revolving lines of credit with banks. The committed facilities, a
$750 million three-year facility and a $750 million 364-day facility, have each
been reduced to $375 million and now total $750 million, reflecting Green Tree's
substantial curtailment of its commercial paper issuance and the fact that these
credit facilities had been used primarily to support a larger commercial paper
program. The company continues to finance its overall loan inventory position
through a number of arrangements in addition to these committed facilities,
including $3.3 billion in master repurchase agreements with a variety of
investment banking firms, two third-party financing conduits, and through
general corporate resources.
Green Tree Financial Corporation is a leading diversified financial services
company with nationwide operations serving customers in the consumer finance,
commercial finance and insurance markets. With managed finance receivables of
$28 billion, Green Tree is one of the largest multi-line finance companies in
the United States. Founded in 1975, Green Tree has 5,700 employees at 200
company locations that work with over 20,000 retail dealers across the country
as well as directly with consumers.
SOURCE Green Tree Financial Corporation
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<PAGE>
EXHIBIT 10(k)
ANNEX I
SUPPLEMENTAL TERMS TO AMENDED AND RESTATED
MASTER REPURCHASE AGREEMENT,
DATED AS OF JANUARY 27, 1998, BETWEEN
SALOMON BROTHERS HOLDING COMPANY INC AND
GREEN TREE FINANCIAL CORPORATION
1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to the
Amended and Restated Master Repurchase Agreement (the "Amended and
Restated Master Repurchase Agreement", and collectively with these
Supplemental Terms, the "Agreement") modify the terms and conditions under
which the parties hereto, from time to time, enter into Transactions.
2. ADDITIONAL DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Amended and Restated Master Repurchase
Agreement.
(b) "Buyer" shall refer to Salomon Brothers Holding Company Inc.
(c) "Consumer Products" refers to consumer goods consisting of personal
watercraft, motorcycles, all terrain vehicles, boats, outboard
motors, boat trailers, horse trailers, pianos and organs,
recreational vehicles and any other asset as shall be acceptable to
Buyer in its sole discretion, financed by Seller pursuant to a
Retail Installment Contract.
(d) "Custodial Agreement" shall refer to a custodial agreement, as
amended from time to time, among the parties having ownership
interests in the related Securities and the party named as custodian
therein, providing for the maintenance of ownership records relating
to the Securities.
(e) "Custodian" refers to the party named as custodian in the Custodial
Agreement, or any permitted successor thereto.
(f) "Electronic Ledger" refers to the electronic master record of
installment sale contracts of Seller.
(g) "FHA" shall refer to the Federal Housing Administration of HUD.
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(h) "FHA/VA MH Contracts" shall refer to MH Contracts that are insured
by the FHA or guaranteed by the Department of Veterans Affairs.
(i) "Home Equity Loans" shall refer to the home equity loans secured by
first, second or third liens on single family residential real
property (including, without limitation, condominiums and planned
unit developments) certain documents relating to which have been
delivered to Custodian pursuant to the Custodial Agreement and the
ownership of which is evidenced by a Trust Receipt issued pursuant
to the Custodial Agreement.
(j) "Home Improvement Loans" means (i) first, second and third-lien home
improvement retail installment contracts and promissory notes,
whether conventional or insured by the Federal Housing
Administration, and including without limitation, all rights to
receive payments which are due pursuant thereto and all other
proceeds thereof (including any recourse rights against third
persons) from and after the related Purchase Date, but excluding any
rights to receive payments which are due prior to the related
Purchase Date, and (ii) Unsecured Home Improvement Loans.
(k) "HUD" shall refer to the Department of Housing and Urban
Development.
(l) "List of Home Equity Loans" shall have the meaning set forth in
Paragraph 3.
(m) "List of Home Improvement Loans" shall have the meaning set forth in
Paragraph 3.
(n) "List of MH Contracts" shall have the meaning set forth in Paragraph
3.
(o) "List of Retail Installment Contracts" shall have the meaning set
forth in Paragraph 3.
(p) "Market Value" shall, in addition to the definition set forth in the
Amended and Restated Master Repurchase Agreement, provide that:
(i) the Market Value of any Security shall be determined solely by
Buyer;
(ii) the Market Value of a Security shall be determined by valuing
such Security net of any applicable
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servicing fee;
(iii) that a value of zero shall be assigned to any Security which
has been delinquent for thirty (30) days or more; and
(iv) in no event shall the Market Value of a Security exceed the
outstanding principal amount thereof.
(q) "MH Contract" refers to a manufactured housing conditional sales
contract, the ownership of which is evidenced by a Trust Receipt
issued pursuant to a Custodial Agreement.
(r) "Owner" shall have the meaning set forth in the Custodial Agreement.
(s) "Retail Installment Contract" refers to any retail installment
contract between Seller and a third party obligor pursuant to which
Seller finances a Consumer Product, all rights to receive payments
which are due pursuant thereto, and any "purchase money security
interest" (as defined in the Uniform Commercial Code) created in
favor of Seller in the Consumer Product financed thereunder.
(t) "Retail Installment Contract File" shall have the meaning set forth
in the Custodial Agreement.
(u) "Securities" shall refer to MH Contracts, Home Improvement Loans,
Home Equity Loans and Retail Installment Contracts; provided,
however, that such MH Contracts, Home Improvement Loans, Home Equity
Loans and Retail Installment Contracts shall not be deemed to be
securities for any federal securities law or state blue sky law
purposes.
(v) "Seller" shall refer to Green Tree Financial Corporation.
(w) "Step-Rate" shall refer to the rate of interest on a MH Contract
which increases one year after origination to a rate that is
specified on the date of origination.
(x) "Title I Loan" shall refer to a Home Improvement Loan insured under
the FHA's Title I Program.
(y) "Transaction" shall, in addition to the definition set forth in the
Amended and Restated Master Repurchase Agreement, refer to
deliveries of Securities or cash
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pursuant to Paragraph 4(a) of the Amended and Restated Master
Repurchase Agreement and substitutions pursuant to Paragraph 9 of
the Amended and Restated Master Repurchase Agreement.
(z) "Trust Receipt" shall refer to the trust receipt issued by the party
named as custodian in the Custodial Agreement that evidences
ownership of the Securities indicated thereon.
(aa) "UCC" refers to the Uniform Commercial Code as in effect in the
applicable jurisdiction.
(bb) "Unsecured Home Improvement Loans" shall refer to Home Improvement
Loans that are not secured by mortgaged property.
3. CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto
unless written notice of objection is given by the objecting party to the
other party within two (2) business days after the objecting party's
receipt of such Confirmation. In the case of Transactions involving MH
Contracts, Home Improvement Loans, Home Equity Loans or Retail Installment
Contracts, the Purchased Securities shall be identified on a detailed
listing to be provided by Seller to Buyer (a "List of MH Contracts" for MH
Contracts, a "List of Home Improvement Loans" for Home Improvement Loans,
a "List of Home Equity Loans" for Home Equity Loans and a "List of Retail
Installment Contracts" for Retail Installment Contracts) and may be
identified in the related Confirmation by reference to such lists.
4. INCOME PAYMENTS. So long as no Event of Default shall have occurred and be
continuing, Seller shall be entitled to all payments of principal and
interest and principal prepayments payable to the holder of the Purchased
Securities.
5. SECURITY INTEREST.
(a) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the parties
intend that Buyer shall have a perfected first priority security
interest in all of the Purchased Securities.
(b) Seller shall pay all fees and expenses associated with perfecting
such security interest including, without limitation, the cost of
filing financing statements under the UCC.
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(c) In the event that Buyer elects to engage in repurchase transactions
with the Purchased Securities or otherwise elects to pledge or
hypothecate the Purchased Securities, Seller shall, at the request
of Buyer and at the expense of Seller, provide Buyer's counterparty
in such repurchase transaction with an opinion of counsel to the
effect that such counterparty has either an ownership interest or a
perfected first priority security interest in such Purchased
Securities.
6. REPRESENTATIONS.
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the execution, delivery and performance of the Agreement and
the performance of each Transaction do not and will not result
in or require the creation of any lien, security interest or
other charge or encumbrance (other than pursuant hereto) upon
or with respect to any of its properties; and
(ii) the Agreement is, and each Transaction when entered into under
the Agreement will be, a legal, valid and binding obligation
of it enforceable against it in accordance with the terms of
the Agreement.
(b) Seller represents and warrants to Buyer, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) the documents disclosed by Seller to Buyer pursuant to these
Supplemental Terms are either original documents or genuine
and true copies thereof;
(ii) Seller is a separate and independent corporate entity from the
custodian named in the Custodial Agreement, Seller does not
own a controlling interest in such custodian either directly
or through affiliates and no director or officer of Seller is
also a director or officer of such custodian;
(iii) Seller shall be at the time it delivers any Purchased
Securities for any Transaction, and shall continue to be,
through the Purchase Date relating to each such Transaction,
the legal and
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beneficial owner of such Purchased Securities free and clear
of any lien, security interest, option or encumbrance except
for the security interest created by the Agreement;
(iv) each MH Contract, Home Improvement Loan and Home Equity Loan
conforms, and through the Repurchase Date of the related
Transaction shall continue to conform, to the securitization
requirements of the most recent related pass-through
transaction underwritten or placed on behalf of Seller or any
affiliate thereof (which transaction has received an
investment grade rating by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc. or Moody's Investors Service,
Inc.) and otherwise conforms, and through the Repurchase Date
of the related Transaction shall continue to conform, to the
current standards of institutional securitization applicable
to contracts and loans similar in nature to the MH Contracts,
the Home Improvement Loans and the Home Equity Loans; all MH
Contracts, Home Improvement Loans and Home Equity Loans,
individually and in the aggregate, substantially comply, and
through the Repurchase Date of the related Transaction shall
continue to substantially comply, with each related
representation and warranty made in the most recent related
pass-through transaction underwritten or placed on behalf of
Seller or an affiliate thereof and will otherwise
substantially comply, and through the Repurchase Date of the
related Transaction shall continue to substantially comply,
with each related representation or warranty customarily
required under the current standards of institutional
securitization applicable to contracts and loans similar in
nature to the MH Contracts, the Home Improvement Loans and the
Home Equity Loans;
(v) each Retail Installment Contract conforms to the current
standards of securitization in publicly registered
asset-backed offerings applicable to contracts similar in
nature to the Retail Installment Contracts; all Retail
Installment Contracts, individually and in the aggregate, will
substantially comply with each related representation or
warranty customarily required under the current standards of
securitization in publicly registered, highly rated
asset-backed offerings applicable to contracts similar to the
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Retail Installment Contracts;
(vi) each MH Contract is, and through the Repurchase Date of the
related Transaction will continue to be, secured by a
manufactured housing unit that satisfies the conditions for
backing a "mortgage related security" as described in Section
3(a)(41) of the Securities Exchange Act of 1934, as amended;
(vii) each MH Contract, Home Improvement Loan, Home Equity Loan and
Retail Installment Contract was originated by Seller directly
or through its correspondent network in its ordinary course of
business and has not been purchased in any bulk transaction,
unless otherwise expressly approved by Buyer in writing;
(viii) each MH Contract, Home Improvement Loan, Home Equity Loan and
Retail Installment Contract was underwritten in accordance
with the written underwriting standards of Seller furnished by
Seller to Buyer, and no material change to such underwriting
standards has occurred since the date of the last written
revision to such standards was furnished to Buyer by Seller;
and
(ix) since the date of the most recent financial statement of
Seller, delivered by it pursuant to Paragraph 9 hereof, there
has been no material adverse change in the financial condition
or results or operations of Seller.
(c) Seller makes the representations and warranties to Buyer concerning
the MH Contracts, and shall as of the Purchase Date of any
Transaction be deemed to make such representations and warranties,
as are set forth at Exhibit A-1 hereto, with respect to those MH
Contracts relating to manufactured housing that is not considered to
be real property under applicable state law, and Exhibit A-2 hereto,
with respect to those MH Contracts relating to manufactured housing
that is considered to be real property under applicable state law.
Seller further represents and warrants to Buyer that the Exhibit A-1
and A-2 representations and warranties, as applicable, shall
continue to be true for all MH Contracts through the Repurchase Date
of the related Transaction. The representations and warranties set
forth in Exhibits A-1 and A-2 hereto are incorporated herein in
their entirety.
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(d) Seller makes the representations and warranties to Buyer concerning
the Home Improvement Loans and the Home Equity Loans, and shall as
of the Purchase Date of any Transaction be deemed to make such
representations and warranties, as are set forth at Exhibit B
hereto. Seller further represents and warrants to Buyer that the
Exhibit B representations and warranties shall continue to be true
for all Home Improvement Loans and Home Equity Loans through the
Repurchase Date of the related Transactions. The representations and
warranties set forth in Exhibit B hereto are incorporated herein in
their entirety.
(e) Seller makes the representations and warranties to Buyer concerning
the Retail Installment Contracts, and shall as of the Purchase Date
of any Transaction be deemed to make such representations and
warranties, as are set forth at Exhibit C hereto. Seller further
represents and warrants to Buyer that the Exhibit C representations
and warranties shall continue to be true for all Retail Installment
Contracts through the Repurchase Date of the related Transactions.
The representations and warranties set forth in Exhibit C hereto are
incorporated herein in their entirety.
7. EVENTS OF DEFAULT.
(a) The term "Event of Default" shall, in addition to the definition set
forth in the Amended and Restated Master Repurchase Agreement,
include the following events:
(i) any governmental or self-regulatory authority shall take
possession of Buyer or Seller or its property or appoint any
receiver, conservator or other official, or such party shall
take any action to authorize any of the actions set forth in
this clause (i);
(ii) Buyer shall have reasonably determined that Seller is or will
be unable to meet its commitments under the Agreement, shall
have notified Seller of such determination and Seller shall
not have responded with appropriate information to the
contrary to the satisfaction of Buyer within twenty-four (24)
hours;
(iii) the Agreement shall for any reason cease to create either an
ownership interest (which ownership interest shall be
confirmed upon request of Buyer
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in an opinion of counsel provided by Seller) or a valid, first
priority security interest in any of the Purchased Securities
purported to be covered thereby;
(iv) a final judgment by any competent court in the United States
of America for the payment of money in an amount of at least
$1,000,000 is rendered against the defaulting party, and the
same remains undischarged for a period of 60 days during which
execution of such judgment is not effectively stayed;
(v) any representation or warranty made by Seller in the Agreement
or the Custodial Agreement shall have been incorrect or untrue
when made or repeated or when deemed to have been made or
repeated or, in the case of continuing representations, shall
be untrue in any material respect during the term of any
Transaction under the Agreement; or
(vi) HUD or the FHA shall have withdrawn or adversely modified its
approval of Seller to act as an FHA-approved mortgagee and
servicer (including an FHA-approved mortgagee and servicer
under Title I).
(b) Upon the occurrence and during the continuance of an Event of
Default by Seller:
(i) all rights of Seller to receive payments which it would
otherwise be authorized to receive pursuant to Paragraph 4 of
these Supplemental Terms shall cease, and all such rights
shall thereupon become vested in Buyer, which shall thereupon
have the sole right to receive such payments and apply them to
the aggregate unpaid Repurchase Prices owed by Seller; and
(ii) all payments which are received by Seller contrary to the
provisions of the preceding clause (i) shall be received in
trust for the benefit of Buyer and shall be segregated from
other funds of Seller.
(c) Any sale of Purchased Securities under Paragraph 11 of the Amended
and Restated Master Repurchase Agreement shall be conducted in a
commercially reasonable manner.
8. ADDITIONAL EVENTS OF TERMINATION.
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(a) At the option of Buyer, exercised by written notice to Seller, the
Repurchase Date for each Transaction under the Agreement shall be
deemed to immediately occur in the event that:
(i) Salomon Brothers Inc is not selected to be, or has resigned
as, the lead manager or a co-manager for the securitization of
any of the MH Contracts;
(ii) in the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Seller;
(iii) Buyer shall request written assurances as to the financial
well-being of Seller and such assurances shall not have been
provided within twenty-four (24) hours of such request; or
(iv) Seller shall be in default with respect to any normal and
customary covenants under any contract or agreement to which
it is a party (which covenants include, but are not limited
to, an Act of Insolvency of Seller or the failure of Seller to
make required payments under such contract or agreement as
they become due).
(b) The events specified in Paragraph 8(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for each Transaction shall be in addition to any
other rights of Buyer to cause such an acceleration under the
Agreement.
9. FINANCIAL STATEMENTS. As of the date hereof, the parties hereto shall each
provide the other with its audited year-end financial statements and its
most recent publicly available interim financial statement. The parties
hereto shall from time to time each provide the other with audited
year-end financial statements and additional publicly available interim
financial statements upon the other's reasonable request. Each delivery of
Purchased Securities by Seller to Buyer hereunder will constitute a
representation by Seller that there has been no material adverse change in
Seller's financial condition not disclosed to Buyer since the date of
Seller's most recent financial statement delivered to Buyer. Seller shall
provide Buyer, from time to time at Seller's expense, with such
information of a financial or operational nature as Buyer may reasonably
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request promptly upon receipt of such request.
10. USE OF PROCEEDS. Seller represents, warrants and covenants that none of
the Purchase Price for any Purchased Securities will be used either
directly or indirectly to acquire any security, as that term is defined in
Regulation G or Regulation T of the Board of Governors of the Federal
Reserve System, and that Seller has not taken any action that might cause
any Transaction to violate any regulation of the Federal Reserve Board.
11. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. The parties hereto agree
and acknowledge that Transactions hereunder will be entered into by Buyer
in its sole discretion and that Buyer is under no obligation to enter into
any Transaction with Seller. With respect to any Transaction and without
limiting the discretion of Buyer referred to in the foregoing sentence and
in Paragraph 16 of these Supplemental Terms:
(a) the minimum amount of any Transaction under this Agreement shall
have a Purchase Price of $5,000,000;
(b) the aggregate outstanding Purchase Price for Purchased Securities
that are Home Improvement Loans shall not exceed $100,000,000 at any
one time;
(c) the aggregate outstanding Purchase Price for Purchased Securities
that are Unsecured Home Improvement Loans and Consumer Products
shall not exceed $50,000,000 at any one time;
(d) the aggregate outstanding Purchase Price for all Purchased
Securities shall not exceed $300,000,000 at any one time; and
(e) the percentage used to determine Buyer's Margin Amount shall be as
mutually agreed upon by Buyer and Seller but in no event less than
(i) 110% in the case of Transactions involving Home Improvement
Loans (other than Unsecured Home Improvement Loans) and MH Contracts
and (ii) 120% in the case of Transactions involving Unsecured Home
Improvement Loans and Consumer Products.
12. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date
shall include that portion of the Price Differential that has accrued but
has not been paid. The Price Differential shall accrue and be calculated
on a daily basis for each MH Contract, Home Improvement Loan, Home
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<PAGE>
Equity Loan and Retail Installment Contract (such calculation to be made
on the basis of a 360-day year and the actual number of days elapsed). The
Price Differential shall be payable weekly in arrears to Buyer with
respect to each MH Contract, Home Improvement Loan, Home Equity Loan and
Retail Installment Contract on the earlier of Friday of each week or the
termination date for the related Transaction. The Price Differential for
any MH Contract, Home Improvement Loan, Home Equity Loan and Retail
Installment Contract shall be equal to the product of (i) the Purchase
Price and (ii) a per annum percentage 50 basis points (or such other
number of basis points as Buyer and Seller may mutually agree) in excess
of the prevailing overnight rate on Federal funds (as reported on Page 5
of Telerate) existing at the opening of business on the date of
calculation. Payment of the Price Differential to Buyer shall be made by
wire transfer in immediately available funds.
13. ADDITIONAL INFORMATION.
(a) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in
their possession pertaining to each Purchased Security that is the
subject of such Transaction. Such inspection shall occur upon the
request of Buyer at a mutually agreeable location during regular
business hours and on a date not more than two (2) business days
after the date of such request.
(b) Seller agrees to provide Buyer from time to time with such
information concerning Seller of a financial or operational nature
as Buyer may request.
(c) Seller shall provide Buyer with copies of all filings made by or on
behalf of Seller or its affiliates with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as
amended, promptly upon making such filings.
14. BUYER MAY REJECT SECURITIES. Buyer may, in its sole discretion, refuse to
purchase any Security offered for sale by Seller under the Agreement or
offered as Additional Purchased Securities pursuant to Paragraph 4(a) or
for substitution pursuant to Paragraph 9 of the Amended and Restated
Master Repurchase Agreement or may require an immediate repurchase of any
such Security in the manner provided in the Custodial Agreement. Seller
shall have no right to object to such repurchase.
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<PAGE>
15. MARGIN MAINTENANCE.
(a) Paragraph 4(a) of the Amended and Restated Master Repurchase
Agreement is hereby modified to provide that if the notice to be
given by Buyer to Seller under such paragraph is given at or prior
to 10:00 a.m. New York City time, Seller shall transfer the
Additional Purchased Securities or cash to Buyer prior to the close
of business in New York City on the date of such notice, and if such
notice is given after 10:00 a.m. New York City time, Seller shall
transfer the Additional Purchased Securities or cash prior to the
close of business in New York City on the business day following the
date of such notice.
(b) Additional Purchased Securities that are MH Contracts, Home
Improvement Loans, Home Equity Loans and Retail Installment
Contracts that are transferred by Seller to Buyer pursuant to
Paragraph 4(a) of the Amended and Restated Master Repurchase
Agreement shall be transferred to Custodian for the benefit of Buyer
pursuant to the provisions of the Custodial Agreement. Any cash
transferred by Seller to Buyer shall be sent via wire transfer in
immediately available funds to the account designated by Buyer.
(c) Paragraph 4 of the Amended and Restated Master Repurchase Agreement
is hereby amended by adding the following at the end thereof:
"(g) In the case of any Transactions that have a term greater
than one business day, any cash paid by either party in
respect of a margin payment or reduction made pursuant to
paragraph 4(a) or (b) shall be deemed to neither increase or
decrease the Purchase Price for purposes of calculating the
Price Differential."
16. TRANSACTIONS OPTIONAL; NO COMMITMENT. Notwithstanding any other provision
of the Agreement or the Custodial Agreement to the contrary, Buyer shall
be under no obligation to enter into Transactions with Seller and the
initiation of each Transaction is subject to the approval of Buyer in its
sole discretion.
17. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction
under this Agreement, Seller shall cause each of the following conditions
to occur:
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(a) A Custodial Agreement relating to the MH Contracts, Home Improvement
Loans, Home Equity Loans and Retail Installment Contracts, in form
and substance satisfactory to Buyer, shall have been executed and
delivered by the parties thereto;
(b) Seller shall have disclosed information satisfactory to Buyer with
respect to the scheduled maturities and termination provisions of
all outstanding credit facilities and debt of Seller; and
(c) Seller shall, on the Purchase Date of the first Transaction
hereunder and, upon the request of Buyer, on the Purchase Date of
any subsequent Transaction, cause to be delivered to Buyer, with
reliance thereon permitted as to any person or entity that purchases
the Securities from Buyer in a repurchase transaction, an opinion of
counsel, in form and substance satisfactory to Buyer and its
counsel, concerning (i) the authorization and authority of Seller to
enter into the Agreement and the Custodial Agreement and
Transactions thereunder, (ii) the ownership interest or perfected
security interest of Buyer or its agent in the Purchased Securities
and (iii) such other matters as Buyer may reasonably require.
18. SERVICING ARRANGEMENTS.
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the MH Contracts, Home Improvement Loans, Home
Equity Loans and Retail Installment Contracts contemplated hereby,
Seller shall continue to service the MH Contracts, Home Improvement
Loans, Home Equity Loans and Retail Installment Contracts for the
benefit of Buyer and, if Buyer shall exercise its rights to sell the
MH Contracts, Home Improvement Loans, Home Equity Loans and Retail
Installment Contracts pursuant to this Agreement prior to the
related Repurchase Date, Buyer's assigns; PROVIDED, HOWEVER, that
the obligation of Seller to service the MH Contracts, Home
Improvement Loans, Home Equity Loans and Retail Installment
Contracts for the benefit of Buyer as aforesaid shall cease upon the
payment to Buyer of the Repurchase Price therefor.
(b) Seller shall service the MH Contracts, Home Improvement Loans, Home
Equity Loans and Retail Installment Contracts and shall enforce its
rights and the rights of the beneficial owner thereunder in
accordance with
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the standards of a prudent lender in the manufactured housing
industry, the home improvement loan industry, the home equity loan
industry and the consumer finance industry, as applicable.
(c) Seller shall service all FHA/VA MH Contracts and all FHA/VA Home
Improvement Loans in a manner such that such insurance or guarantee
will not be impaired and will remain in full force and effect.
(d) Buyer may, in its sole discretion if an Event of Default shall have
occurred and be continuing, without payment of any termination fee
or any other amount to Seller, (i) sell its right to the MH
Contracts, Home Improvement Loans, Home Equity Loans and Retail
Installment Contracts on a servicing released basis or (ii)
terminate Seller as servicer of the MH Contracts, Home Improvement
Loans, Home Equity Loans and Retail Installment Contracts with or
without cause.
19. TRANSFERS TO THIRD PARTIES. Buyer and Seller agree that, notwithstanding
any provision of the Agreement or the Custodial Agreement to the contrary,
Buyer may engage in repurchase transactions with the Purchased Securities
and may otherwise pledge or hypothecate the Purchased Securities, provided
that no such transaction shall relieve Buyer of its obligations under the
Agreement.
20. SINGLE AGREEMENT. Paragraph 12 of the Amended and Restated Master
Repurchase Agreement is amended by adding at the end thereof the
following:
"Each party to the Agreement agrees that, upon an Act of Insolvency
by a party hereto (such party being herein referred to as "Party A")
or any of its affiliates or the default by Party A or any of its
affiliates under any transaction with the other party hereto or any
of such other party's affiliates (such other party or any of its
affiliates, a "Non-Defaulting Party"), each Non-Defaulting Party
may: (a) liquidate any transaction between Party A and any
Non-Defaulting Party, (b) reduce any amounts due and owing to Party
A under this or any other transactions between Party A and any
Non-Defaulting Party by setting off against such amounts any amounts
due and owing to a Non-Defaulting Party by Party A or any of Party
A's affiliates, and (c) treat all security for any transactions
between Party A and any Non-Defaulting Party as security for all
transactions between Party A or any of Party A's affiliates and any
Non-Defaulting
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Party.
21. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Buyer and Seller hereby agree
to submit to the courts of the State of New York in any action or
proceeding arising out of this Agreement. Buyer and Seller each hereby
waives the right of trial by jury in any litigation arising hereunder.
22. BINDING TERMS. All of the covenants, stipulations, promises and agreements
in the Agreement shall bind the successors and assigns of the parties
hereto, whether expressed or not.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same
instrument.
24. INCORPORATION OF TERMS. The Amended and Restated Master Repurchase
Agreement as supplemented by this Annex I and by Exhibits A-1, A-2, B and
C shall be read, taken and construed as one and the same instrument.
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<PAGE>
EXHIBIT A-1
REPRESENTATIONS WITH RESPECT TO MH CONTRACTS
(NOT RELATING TO REAL PROPERTY)
1. Payments. The scheduled payment of principal and interest for the next
Due Date was made by or on behalf of the obligor (without any advance from
Seller or any Person acting at the request of Seller) or was not delinquent for
more than 30 days.
B. No Waivers. The terms of the MH Contract have not been waived, altered
or modified in any respect, except by instruments or documents identified in the
MH Contract file.
C. Binding Obligation. The MH Contract is the legal, valid and binding
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. No Defenses. The MH Contract is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the MH Contract or the exercise of any right
thereunder will not render the MH Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
E. Insurance. Seller or its agent has monitored the existence of a hazard
insurance policy with respect to the manufactured home securing a MH Contract
and if Seller has determined that no such policy exists, Seller has arranged for
such insurance and has billed the related obligor through its loan account
F. Origination. The MH Contract was originated by a manufactured housing
dealer or Seller in the regular course of its business and, if originated by a
manufactured housing dealer, was purchased by Seller in the regular course of
its business.
G. Lawful Assignment. The MH Contract was not originated in and is not
subject to the laws of any jurisdiction whose laws would make the transfer of
the MH Contract to Custodian or the ownership of the MH Contracts by the Owner
unlawful.
A-1-1
<PAGE>
H. Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by Custodian or
the Owner's ownership of the MH Contracts, and Seller shall maintain in its
possession, available for Buyer's inspection, and shall deliver to Buyer upon
demand, evidence of compliance with all such requirements.
I. MH Contract in Force. The MH Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. Valid Security Interest. The MH Contract creates a valid and
enforceable perfected first priority security interest in favor of Seller in the
manufactured home covered thereby as security for payment of the outstanding
principal balance of such MH Contract and all other obligations of the obligor
under such MH Contract; such security interest has been assigned by Seller to
Custodian, and Custodian has and will, on behalf of the Owners of the MH
Contracts, have a valid and perfected and enforceable first priority security
interest in such manufactured home.
K. Capacity of Parties. All parties to the MH Contract had capacity to
execute the MH Contract.
L. Good Title. In the case of a MH Contract purchased from a manufactured
housing dealer, Seller purchased the MH Contract for fair value and took
possession thereof in the ordinary course of its business, without knowledge
that the MH Contract was subject to a security interest. Seller has not sold,
assigned or pledged the MH Contract to any Person other than Custodian.
M. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Seller has not waived any such default, breach, violation or event
permitting acceleration.
N. No Liens. There are, to the best of Seller's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
A-1-2
<PAGE>
O. Equal Installments. The MH Contract has either a fixed rate or a
Step-Rate and provides for level monthly payments which fully amortize the loan
over its term.
P. Enforceability. The MH Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed MH Contract, which is
held by Seller.
R. Loan-to-Value Ratio. At the time of its origination each MH Contract
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Seller's
underwriting guidelines in effect at the time the MH Contract was originated.
S. Primary Resident. At the time of origination of the MH Contract the
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
T. Not Real Estate. The related manufactured home is not considered or
classified as part of the real estate on which it is located under the laws of
the jurisdiction in which it is located and such manufactured home is, to the
best of Seller's knowledge, free of damage and in good repair.
U. Notation of Security Interest. If the related manufactured home is
located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the title
document shows, or if a new or replacement title document with respect to such
manufactured home is being applied for such title document will be issued within
180 days and will show, Seller as the holder of a first priority security
interest in such manufactured home. If the related manufactured home is located
in a state in which the filing of a financing statement under the UCC is
required to perfect a security interest in manufactured housing, such filings or
recordings have been duly made and show Seller as secured party. In either case,
Custodian has the same rights as the secured party of record would have (if such
secured party were still the owner of the MH Contract) against all Persons
claiming an interest in such manufactured home.
V. Qualified Mortgage for REMIC. Each MH Contract is a
A-1-3
<PAGE>
"qualified mortgage" under Section 860G(a)(3) of the Code, and the related
manufactured home is "manufactured housing" within the meaning of Section
25(e)(10) of the Code.
W. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the MH
Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
X. No Adverse Selection. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the MH Contracts.
A-1-4
<PAGE>
EXHIBIT A-2
REPRESENTATIONS WITH RESPECT TO MH CONTRACTS
(RELATING TO REAL PROPERTY)
A. Payments. The scheduled payment of principal and interest for the next
Due Date was made by or on behalf of the obligor (without any advance from
Seller or any Person acting at the request of Seller) or was not delinquent for
more than 30 days.
B. No Waivers. The terms of the MH Contract have not been waived, altered
or modified in any respect, except by instruments or documents identified in the
MH Contract file.
C. Binding Obligation. The MH Contract is the legal, valid and binding
obligation of the obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights general.
D. No Defenses. The MH Contract is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the MH Contract or the exercise of any right
thereunder will not render the MH Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
E. Insurance. Seller or its agent has monitored the existence of a hazard
insurance policy with respect to the manufactured home securing a MH Contract
and if Seller has determined that no such policy exists, Seller has arranged for
such insurance and has billed the related obligor through its loan account
F. Origination. The MH Contract was originated by a manufactured housing
dealer or Seller in the regular course of its business and, if originated by a
manufactured housing dealer, was purchased by Seller in the regular course of
its business.
G. Lawful Assignment. The MH Contract was not originated in and is not
subject to the laws of any jurisdiction whose laws would make the transfer of
the MH Contract to Custodian or the ownership of the MH Contracts by the Owner
unlawful.
A-2-1
<PAGE>
H. Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the MH Contract have been complied with and such
compliance is not affected by the holding of the MH Contracts by Custodian or
the Owner's ownership of the MH Contracts, and Seller shall maintain in its
possession, available for Buyer's inspection, and shall deliver to Buyer upon
demand, evidence of compliance with all such requirements.
I. MH Contract in Force. The MH Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the manufactured home
securing the MH Contract has not been released from the lien of the MH Contract
in whole or in part.
J. Interest in Real Property. Each mortgage is a valid first lien in favor
of Seller on real property securing the amount owed by the obligor under the
related MH Contract subject only to (a) the lien of current real property taxes
and assessments, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally in the area wherein the property subject to the
mortgage is located or specifically reflected in the appraisal obtained in
connection with the origination of the related MH Contract obtained by Seller
and (c) other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be provided
by such mortgage. Seller has assigned all of its right, title and interest in
such MH Contract and related mortgage, including the security interest in the
manufactured home covered thereby, to Custodian. Custodian has and will have a
valid and perfected and enforceable first priority security interest in such MH
Contract. The MH Contract creates a valid and enforceable perfected first
priority security interest in favor of Seller in the manufactured home covered
thereby as security for payment of the outstanding principal balance of such MH
Contract and all other obligations of the obligor under such MH Contract; such
security interest has been assigned by Seller to Custodian, and Custodian has
and will, on behalf of the Owners of the MH Contracts, have a valid and
perfected and enforceable first priority security interest in such manufactured
home.
K. Capacity of Parties. All parties to the MH Contract had capacity to
execute the MH Contract.
A-2-2
<PAGE>
L. Good Title. In the case of a MH Contract purchased from a manufactured
housing dealer, Seller purchased the MH Contract for fair value and took
possession thereof in the ordinary course of its business, without knowledge
that the MH Contract was subject to a security interest. Seller has not sold,
assigned or pledged the MH Contract to any Person other than Custodian.
M. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the MH Contract and no event which, with
notice and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such MH
Contract. Seller has not waived any such default, breach, violation or event
permitting acceleration.
N. No Liens. There are, to the best of Seller's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the
manufactured home securing the MH Contract which are or may be liens prior to,
or equal or coordinate with, the lien of the MH Contract.
O. Equal Installments. The MH Contract has either a fixed rate or a
Step-Rate and provides for level monthly payments which fully amortize the loan
over its term.
P. Enforceability. The MH Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security.
Q. One Original. There is only one original executed MH Contract, which is
held by Seller.
R. Loan-to-Value Ratio. At the time of its origination each MH Contract
had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home
was new at the time such MH Contract was originated, the original principal
balance of such MH Contract was not in excess of that permitted by Seller's
underwriting guidelines in effect at the time the MH Contract was originated.
S. Primary Resident. At the time of origination of the MH Contract the
obligor was the primary resident of the related manufactured home or the primary
resident was the child of the obligor.
T. Good Repair. The related manufactured home is, to the best of Seller's
knowledge, free of damage and in good repair.
A-2-3
<PAGE>
U. Qualified Mortgage for REMIC. Each MH Contract is a "qualified
mortgage" under Section 860G(a)(3) of the Code, and the related manufactured
home is "manufactured housing" within the meaning of Section 25(e)(10) of the
Code.
V. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the MH
Contract has been serviced in accordance with the FHA/VA regulations, the
insurance or guarantee of the MH Contract under FHA/VA regulations and related
laws is in full force and effect, and no event has occurred which, with or
without notice or lapse of time or both, would impair such insurance or
guarantee.
W. No Adverse Selection. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the MH Contracts.
A-2-4
<PAGE>
EXHIBIT B
REPRESENTATIONS WITH RESPECT TO
HOME IMPROVEMENT LOANS AND HOME EQUITY LOANS
A. List of Loans. The information set forth in the List of Home
Improvement Loans and List of Home Equity Loans is true and correct as of its
date. (Each such Home Improvement Loan and Home Equity Loan shall be referred to
hereafter in this Exhibit as a "Loan.")
B. Payments. No scheduled payment due under the Loan is more than 30 days
delinquent.
C. Costs Paid and No Waivers. The terms of the Loan have not been waived,
altered or modified in any respect, except by instruments or documents
identified in the Loan File. All costs, fees and expenses incurred in making,
closing and perfecting the lien of the Loan have been paid. The subject real
property has not been released from the lien of such Loan.
D. Binding Obligation. The Loan is the legal, valid and binding obligation
of the obligor thereunder and is enforceable in accordance with its terms,
except as such enforceability may be limited by laws affecting the enforcement
of creditors' rights generally. In the case of each Loan other than an Unsecured
Home Improvement Loan, Seller has delivered, or caused to be delivered, to
Custodian the original mortgage, with evidence of recording thereon, or if the
original mortgage has not yet been returned from the recording office, a true
copy of the mortgage which has been delivered for recording in the appropriate
recording office of the jurisdiction in which the real property is located.
E. No Defenses. The Loan is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Loan or the exercise of any right
thereunder will not render the Loan unenforceable in whole or in part or subject
to any right of rescission, setoff, counterclaim or defense, including the
defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
F. Insurance Coverage. With respect to each Loan
B-1
<PAGE>
other than an Unsecured Home Improvement Loan, Seller has been named as an
additional insured party under any hazard insurance on the related real
property, to the extent required by Seller's underwriting guidelines. If upon
origination of the Loan, the property securing the Loan was in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards (and if flood insurance was required by federal
regulation and such flood insurance has been made available in the locale where
the mortgaged property is located), the property is covered by a flood insurance
policy of the nature and in an amount which is consistent with the servicing
standard set forth in Paragraph 18 of the Agreement.
G. FHA Insurance. If the Loan is a Home Improvement Loan that is a Title I
Loan, such Loan was originated in compliance with FHA regulations and is
insured, without setoff, surcharge or defense, by FHA insurance. In the case of
each such Title I Loan, Seller has, in conformity with FHA regulations, filed
all reports necessary for such Loan to be registered for FHA insurance.
H. Lawful Assignment. The Loan was not originated in and is not subject to
the laws of any jurisdiction whose laws would make the transfer of the Loan to
Custodian or the ownership of the Loan by Buyer unlawful or render the Loan
unenforceable. With respect to each Loan subject to the Custodial Agreement and
therefore eligible for inclusion in a Transaction, Seller has duly executed a
valid assignment of the Loan. Each such assignment, any and all documents
executed and delivered by Seller pursuant to the Custodial Agreement and this
Agreement each constitutes the legal, valid and binding obligation of Seller
enforceable in accordance with its respective terms.
I. Compliance with Law. At the date of origination of the Loan, all
requirements of any federal, state and local laws, rules and regulations
applicable to the Loan, including, without limitation, usury and truth in
lending laws and (if such Loan is a Title I Loan) the FHA regulations have been
complied with, and such compliance is not affected by the holding of the Loan by
Custodian or Buyer's ownership of the Loan, and Seller shall, for at least the
period of this Agreement, maintain in its possession, available for Custodian's
inspection, and shall deliver to Custodian upon demand, evidence of compliance
with all such requirements.
J. Loan in Force. The Loan has not been satisfied or
B-2
<PAGE>
subordinated in whole or in part or rescinded, and, in the case of Loans other
than Unsecured Home Improvement Loans, the real estate securing such Loan has
not been released from the lien of such Loan in whole or in part.
K. Valid Lien. The Loan has been duly executed and delivered by the
obligor, and either: (1) the related mortgage has been duly recorded, or has
been delivered to the appropriate governmental authority for recording and will
be duly recorded within 180 days, and constitutes a valid and perfected first,
second, third or fourth priority lien on the real estate described therein; or
(2) the Loan is an Unsecured Home Improvement Loan. Any related mortgage has
been assigned by Seller to Custodian, and Custodian has and will have, on behalf
of Buyer, a valid and subsisting lien on the property therein described. Seller
has full right to sell and assign the Loans to Custodian.
L. Capacity of Parties. The signature(s) of the obligor(s) on the Loan
documents are genuine and all parties to the Loan had full legal capacity to
execute the Loan.
M. Good Title. Prior to transfer to Custodian, Seller is the sole owner of
the Loan and, if such Loan is a Title I Loan, because Custodian is a lender
approved by HUD to originate and purchase Title I loans under a valid Title I
contract of insurance, has the authority to sell, transfer and assign such Loan
to Custodian under the terms of this Agreement. There has been no assignment,
sale or hypothecation of the Loan by Seller, except for the transfer of the Loan
to Custodian, and except the usual past hypothecation of the Loan in connection
with Seller's normal banking transactions in the conduct of its business, which
hypothecation terminates upon sale of the Loan under the Amended and Restated
Master Repurchase Agreement. Seller has good and marketable title to the Loan,
free and clear of any encumbrance, equity, loan, pledge, charge, claim, lien or
encumbrance of any type and has full right to transfer the Loan to Custodian.
N. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the Loan and no event which, with notice
and the expiration of any grace or cure period, would constitute such a default,
breach, violation or event permitting acceleration under such Loan (except
payment delinquencies permitted by clause (B) above). Seller has not waived any
such default, breach, violation or event permitting acceleration except payment
delinquencies permitted by clause (B) above.
B-3
<PAGE>
O. Equal Installments. The Loan provides for monthly payments (except, in
the case of a balloon loan, for the final monthly payment of such loan) which
fully amortize the loan over its term.
P. Enforceability. Each Loan contains customary and enforceable provisions
so as to render the rights and remedies of the holder thereof adequate for the
realization against the collateral of the benefits of the lien provided thereby.
Q. One Original. There is only one original executed Loan contract, which
has been delivered to Custodian on or before the related Purchase Date.
R. Genuine Documents. All documents submitted are genuine, and all other
representations as to each Loan, including the List of Home Improvement Loans or
List of Home Equity Loans, as applicable, are true and correct. Any copies of
documents provided by Seller are accurate and complete (except that, with
respect to each Loan that was originated by a contractor or lender other than
Seller, Seller makes such representation and warranty only to the best of
Seller's knowledge).
S. Origination. Each Home Improvement Loan was originated by a home
improvement contractor in the ordinary course of such contractor's business or
was originated by Seller directly. Each Home Equity Loan was originated by a
home equity lender in the ordinary course of such lender's business or was
originated by Seller directly. Each such Loan that was originated by a home
improvement contractor or home equity lender was purchased by Seller in the
regular course of its business.
T. Underwriting Guidelines. Each Loan was originated or purchased in
accordance with Seller's then-current underwriting guidelines.
U. Good Repair. The property described in the mortgage securing any Loan
is, to the best of Seller's knowledge, free of damage and in good repair.
V. Interest Rate and Payment Amount Adjustments. With respect to each Loan
that does not provide for a fixed interest rate over the life of the Loan, the
Loan interest rate and monthly payment have been adjusted in accordance with the
terms of the Loan. All required notices of interest rate and payment amount
adjustments have been sent to the obligor on a timely basis and the computations
of
B-4
<PAGE>
such adjustments were properly calculated. All Loan interest rate adjustments
have been made in strict compliance with state and federal law and the terms of
the related Loan.
W. No Liens. In the case of each Loan other than an Unsecured Home
Improvement Loan, there are, to the best of Seller's knowledge, no liens or
claims that have been filed for work, labor or materials affecting the real
property securing the Loan that are or may be liens prior to, or equal or
coordinate with, the lien of the Loan.
X. Primary Resident. At the time of origination of the Loan, the obligor
was the primary resident of the related real property.
Y. Proceedings. There is no proceeding pending or, to Seller's knowledge,
threatened for the total or partial condemnation of collateral securing a Loan.
Z. Marking Records. Seller has caused the portions of the Electronic
Ledger relating to the Loans to be clearly and unambiguously marked to indicate
that such Loans are owned by Custodian in accordance with the terms of the
related Custodial Agreement.
AA. No Adverse Selection. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the Loans.
B-5
<PAGE>
EXHIBIT C
REPRESENTATIONS WITH RESPECT TO RETAIL INSTALLMENT CONTRACTS
A. Payments. The scheduled payment of principal and interest for the next
Due Date was made by or on behalf of the obligor (without any advance from
Seller or any Person acting at the request of Seller) or was not delinquent for
more than 30 days.
B. No Waivers. The terms of the Retail Installment Contract have not been
waived, altered or modified in any respect, except by instruments or documents
identified in the Retail Installment Contract file.
C. Binding Obligation. The Retail Installment Contract is the legal, valid
and binding obligation of the obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited by laws
affecting the enforcement of creditors' rights general.
D. No Defenses. The Retail Installment Contract is not subject to any
right of rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of the Retail Installment Contract
or the exercise of any right thereunder will not render the Retail Installment
Contract unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of usury, and
no such right of rescission, setoff, counterclaim or defense has been asserted
with respect thereto.
E. Origination. The Retail Installment Contract was originated by a dealer
or Seller in the regular course of its business and, if originated by a dealer,
was purchased by Seller in the regular course of its business.
F. Lawful Assignment. The Retail Installment Contract was not originated
in and is not subject to the laws of any jurisdiction whose laws would make the
transfer of the Retail Installment Contract to the Custodian or the ownership of
the Retail Installment Contracts by the Owner unlawful.
G. Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the Retail Installment Contract have been
complied with and such compliance is not affected by the holding of the Retail
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<PAGE>
Installment Contracts by the Custodian or the Owner's ownership of the Retail
Installment Contracts, and Seller shall maintain in its possession, available
for the Buyer's inspection, and shall deliver to the Buyer upon demand, evidence
of compliance with all such requirements.
H. Contract in Force. The Retail Installment Contract has not been
satisfied or subordinated in whole or in part or rescinded, and the Seller's
lien on the related Consumer Product has not been released in whole or in part.
I. Purchase Money Security Interest. The Retail Installment Contract
creates a "purchase money security interest" (as defined in the Uniform
Commercial Code) in favor of Seller in the Consumer Product covered thereby as
security for payment of the outstanding principal balance of such Retail
Installment Contract and all other obligations of the obligor under such Retail
Installment Contract; such security interest has been assigned by Seller to the
Custodian, and the Custodian has and will have a valid purchase money security
interest in such Consumer Product.
J. Valid Lien. Seller has a valid and subsisting lien on each Consumer
Product evidence of which is in the related Retail Installment Contract file.
K. Capacity of Parties. All parties to the Retail Installment Contract had
capacity to execute the Retail Installment Contract.
L. Good Title. Prior to the transfer to the Custodian, Seller is the owner
of the Retail Installment Contract and has the authority to sell, transfer and
assign the Retail Installment. Seller has not sold, assigned or pledged the
Retail Installment Contract to any Person other than the Custodian.
M. No Defaults. There was no default, breach, violation or event
permitting acceleration existing under the Retail Installment Contract and no
event which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Retail Installment Contract. Seller has not waived any such default,
breach, violation or event permitting acceleration.
N. No Liens. There are, to the best of Seller's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the Consumer
Product which are or may be liens prior to, or equal or coordinate with, the
lien of the Retail Installment Contract.
C-2
<PAGE>
O. Equal Installments. The Retail Installment Contract has a fixed rate
and provides for level monthly payments which fully amortize the loan over its
term.
P. Enforceability. The Retail Installment Contract contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the collateral of the benefits of
the security.
Q. One Original. There is only one original executed the Retail
Installment Contract, which is held by Seller.
R. No Adverse Selection. Except for the effect of the representations and
warranties made hereunder, no adverse selection procedures have been employed in
selecting the Retail Installment Contracts.
C-3
<PAGE>
Exhibit 10(p)
- --------------------------------------------------------------------------------
ASSET ASSIGNMENT AGREEMENT
By and Between
LEHMAN COMMERCIAL PAPER INC.,
as Lender,
and
GREEN TREE RESIDUAL FINANCE CORP. I,
as Borrower
Dated as of February 13, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions...................................................-1-
Section 2. Loan..........................................................-9-
Section 3. Purpose of this Agreement....................................-13-
Section 4. Pledge and Security..........................................-14-
Section 5. Representations and Warranties...............................-14-
Section 6. Collateral Amount Maintenance................................-18-
Section 7. Borrower Covenants...........................................-19-
Section 8. Events of Default............................................-25-
Section 9. Remedies Upon Default........................................-27-
Section 10. Indemnification..............................................-28-
Section 11. Power of Attorney............................................-29-
Section 12. Participation; Assignments...................................-29-
Section 13. Notices......................................................-30-
Section 14. No Oral Modifications; Successors and Assigns................-30-
Section 15. Severability of Provisions...................................-31-
Section 16. No Waiver....................................................-31-
Section 17. Governing Law; Agreement Constitutes Security Agreement......-31-
Section 18. Jurisdiction.................................................-31-
Section 19. Waiver of Jury Trial.........................................-31-
Section 20. Integration..................................................-31-
Section 21. Advice from Independent Counsel..............................-32-
<PAGE>
Section 22. Judicial Interpretation......................................-32-
Exhibits:
Exhibit A Instruction Letter
Exhibit B Secured Note
Exhibit C Projected Cash Receipts and Minimum Monthly Principal Payment
Schedule
Exhibit D Certificates, Fees, Release Amounts
Exhibit E Inside Refinance Payment Factors
Schedule 1 Securitization Trusts
ii
<PAGE>
ASSET ASSIGNMENT AGREEMENT
This ASSET ASSIGNMENT AGREEMENT (this "Agreement"), dated as of
February 13, 1998, by and between LEHMAN COMMERCIAL PAPER INC., a New York
corporation (the "Lender"), and GREEN TREE RESIDUAL FINANCE CORP. I, a Minnesota
corporation (the "Borrower").
WHEREAS, the Lender wishes to lend, and the Borrower wishes to borrow,
subject to certain terms and conditions, moneys in connection with the financing
of the Certificates, Fees and Release Amounts owned by the Borrower, and certain
other collateral described herein and pledged pursuant hereto;
WHEREAS, Green Tree Financial Corporation will fully and
unconditionally guarantee the obligations of Borrower hereunder pursuant to a
separate Guaranty Agreement; and;
WHEREAS, the parties desire to agree upon the terms and conditions
governing such financing facility;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used in this Agreement shall
have the meanings set forth below.
"Additional Assets" has the meaning specified in Section 2(h).
"Adjusted Net Equity" means the shareholders' equity of the Guarantor
and its consolidated subsidiaries, determined in accordance with GAAP (less
goodwill and similar amounts).
"Affiliate" means, when used with respect to any specified Person, any
other Person directly or indirectly controlling, controlled by, or under common
control with, such Person. Control shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise and in any event shall refer to the ownership of more than
10% of the common equity of such Person and "controlling" and "controlled" shall
have meanings correlative the foregoing. For purposes of the definitions of
"ERISA Violation" and "Plan" and the notice requirements of Section 7(g)(ix),
"Affiliate" shall include any Person who is part of the controlled group or
under common control with the Borrower within the meaning of Section 414 of the
Code or Section 4001 of ERISA.
"Applicable Percentage" means for the first twelve Distribution Dates,
50%, for the next twelve Distribution Dates, 75% and thereafter 100%.
<PAGE>
"Business Day" means any day other than (a) a Saturday or a Sunday,
and (b) any day on which the Lender or banking institutions in the State of New
York are authorized or required by law or regulation, executive order or
governmental decree to be closed.
"Cash Receipts" has the meaning specified therefor in Section 2(d).
"Certificates" means the residual certificates with respect to
Securitization Trusts identified in Exhibit D hereto, as amended from time to
time in accordance with the provisions hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means any collateral pledged by the Borrower to the
Lender as described in Section 4.
"Collection Account" means an account in the name of the Lender
established and maintained by the Borrower with a depository institution
acceptable to Lender.
"Contract" means, with respect to each Securitization Trust as of any
date of determination, any home equity, home improvement, manufactured housing
or retail installment loan or other receivable held by such trust and
securitized pursuant thereto.
"Default" means any event which, with the giving of notice or the
lapse of time or both, would become an Event of Default.
"Determination Period" means, in connection with the calculation of
the LIBOR Rate, one month.
"Distribution Date" means the 15th day of each calendar month, or if
such 15th day is not a Business Day, the next succeeding Business Day,
commencing on March 15, 1998.
"Due Period" means for each Securitization Trust, the monthly period
for which collections on the Contracts for a particular payment or distribution
date are aggregated for application on such date.
"EBIT" means earnings before income taxes, as interpreted in
accordance with generally accepted accounting principles.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and rulings thereunder.
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<PAGE>
"ERISA Violation" means the occurrence of any of the following events
or conditions with respect to any Plan or Multiemployer Plan if, as a result of
such event or condition, Borrower or any Affiliate shall incur, or in the
determination of the Lender shall be reasonably likely to incur a liability to a
Plan, a Multiemployer Plan, or the PBGC that, individually or in the aggregate,
would constitute a Material Adverse Change:
(i) any reportable event, as defined in Section 4043(c) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which the
PBGC has not by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified within 30 days of the occurrence of such
event (provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any
waivers in accordance with Section 412(d) of the Code), and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by the Borrower or an Affiliate
to terminate nay Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer,
any Plan, or the receipt by the Borrower or any Affiliate of a notice
from a Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by the
Borrower or any Affiliate that results in liability under Section 4201
or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the
Borrower or any Affiliate of notice from a Multiemployer Plana that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section
4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any Multiemployer
Plan against the Borrower or any Affiliate to enforce Section 515 of
ERISA, which proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if
the Borrower or an Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections.
-3-
<PAGE>
"Event of Default" has the meaning specified therefor in Section 8.
"Facility Balance" means, as of any date, the sum of (a) the Loan
Balance plus any unpaid interest expense, and (b) any other fees or expenses
owing to Lender hereunder.
"Fees and Release Amounts" means the guarantee fees and excess cash
release amounts with respect to the Securitization Trusts identified in Exhibit
D hereto, as amended from time to time in accordance with the provisions hereof.
"Funding Date" means the date hereof, or such later date on which the
initial advance on the Loan is made after all conditions hereunder to the making
of the Loan have been satisfied as determined by the Lender in its sole
discretion.
"GAAP" means United States generally accepted accounting principles,
consistently applied, as in effect from time to time.
"Guarantor" means Green Tree Financial Corporation, and any successor
thereto.
"Guaranty Agreement" means the Guaranty Agreement, dated the date
hereof, among the Guarantor, the Borrower and the Lender pursuant to which the
Guarantor unconditionally guarantees the full performance of the Borrower's
obligations hereunder.
"Hedging Contract" means any instrument or agreement acquired or
entered into by Borrower from time to time for the purpose of hedging risks
associated with the Pledged Assets.
"Hypothecation" has the meaning specified in Section 12(a).
"Indebtedness" has the meaning specified in Section 9(i).
"Indemnified Amounts" has the meaning specified in Section 10.
"Indemnified Parties" has the meaning specified in Section 10.
"Independent Accountants" means a nationally recognized independent
certified public accounting firm or other accounting firm acceptable to Lender
in its sole discretion.
"Inside Refinancing Payment" means with respect to each Contract
refinanced by an Obligor through Guarantor or an Affiliate thereof, an amount
equal to the unpaid balance of such Contract multiplied by a factor applicable
to such Contract, based on the month in which such refinancing occurs and the
Securitization Trust in which such Loan was included, as specified in Exhibit E
hereto.
-4-
<PAGE>
"Instruction Letter" has the meaning specified in Section 2(a)(viii).
"Interest Amount" means, with respect to any Distribution Date, the
aggregate amount of interest on the Facility Balance computed on a daily basis
for the related Monthly Period computed as the product of (i) the Interest Rate
in effect on each day of such period, and (ii) the Facility Balance on each day
of such Monthly Period.
"Interest Rate" means, as of any date of determination, to the extent
permitted by applicable law, the per annum percentage rate, calculated daily,
equal to the sum of the LIBOR Rate and two percentage points (2.00%), computed
on the basis of the actual days elapsed and a 360 day year; provided, however,
that upon the occurrence and during the continuation of an Event of Default, the
Interest Rate shall be equal to the sum of the LIBOR Rate and four percentage
points (4.00%).
"Interest Reset Period" means the period commencing on and including a
Distribution Date (or commencing on and including the Funding Date in the case
of the initial Interest Reset Period) to but excluding the next succeeding
Distribution Date. The final Interest Reset Period shall terminate on and shall
include the date of the final payment to the Lender of all amounts due
hereunder.
"Lender Value" means the price at which the Pledged Assets could be
sold as of a particular date of determination, to be determined by the Lender at
its sole discretion.
"LIBOR Rate" means, with respect to each Interest Reset Period, the
London interbank offered rate for United States dollar deposits having a
duration equal to the Determination Period determined by Lender on the Rate
Determination Date immediately preceding the commencement of such Interest Reset
Period as follows:
(a) On each Rate Determination Date, Lender shall determine
the LIBOR Rate as of 11:00 A.M. (London time) on such Rate
Determination Date on the basis of the quotations thereof which
appears on Telerate Page 3750;
(b) If on any Rate Determination Date, the LIBOR Rate does
not appear on Telerate Page 3750, Lender shall determine the LIBOR
Rate on the basis of quotations provided by Reference Banks on such
Rate Determination Date to prime banks in the London interbank market.
The LIBOR Rate as determined by Lender is the arithmetic mean of such
quotations;
(c) If on any Rate Determination Date at least two of the
Reference Banks provide quotations, the LIBOR Rate shall be determined
in accordance with clause (b) above on the basis of the offered
quotations of those Reference Banks providing such quotations; and
-5-
<PAGE>
(d) If on the Rate Determination Date only one or none of
the Reference Banks provides such offered quotations, the LIBOR Rate
shall be:
(i) the rate per annum (rounded, as aforesaid) that Lender
determines to be either (A) the arithmetic mean of the
offered quotations that leading banks in the City of New
York selected by Lender are quoting at or about 11:00 A.M.
New York City time on the relevant Rate Determination Date
for loans in U.S. Dollars to leading banks active in the
London interbank eurodollar market for a period equal to the
related Determination Period or those of them (being at
least two in number) to which such offered quotations are,
in the opinion of Lender, being so quoted, or (B) in the
event that Lender can determine no such arithmetic mean, the
arithmetic mean of the offered quotations that leading banks
in the City of New York selected by Lender are quoting at or
about 11:00 A.M. (London time) on such Rate Determination
Date to leading banks active in the London interbank
eurodollar market for Dollar deposits having a duration
equal to the Determination Period; or
(ii) if the banks selected as aforesaid by Lender are not quoting
as described in clause (i) above, the LIBOR Rate for such
Distribution Date shall be the LIBOR Rate as determined on
the previous Rate Determination Date.
"Lien" means any interest in property securing an obligation owed to,
or claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, civil law, statute, civil code or
contract, whether or not such interest shall be recorded or perfected and
whether or not such interest shall be contingent upon the occurrence of some
future event or events or the existence of some future circumstance or
circumstances, and including the lien, privilege, security interest or other
encumbrance arising from a mortgage, deed of trust, hypothecation, cession,
transfer, assignment, pledge, adverse claim or charge, conditional sale or trust
receipt, or from a lease, consignment or bailment for security purposes.
"Loan" has the meaning specified therefor in Section 2(a).
"Loan Amount" means the lesser of (a) $500,000,000 or (b) 50% of the
Lender Value of the Pledged Assets.
"Loan Balance" means, as of any date, (a) the Loan Amount as of the
Funding Date plus any amounts borrowed pursuant to Section 2(h) or Section 2(i)
hereof, less (b) payments of principal applied hereunder with respect thereto.
"London Business Day" means any day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
-6-
<PAGE>
"Margin Deficit" has the meaning specified in Section 6(a).
"Material Adverse Change" means a material adverse change in or effect
upon any of (i) the condition (financial or otherwise), business, performance,
operations, properties, profits or prospects of the Borrower or the Guarantor,
(ii) the legality, validity or enforceability of this Agreement, the Secured
Note or any Related Documents, or (iii) the Collateral.
"Maturity Date" means February 15, 2000 or such earlier date on which
this Agreement shall terminate in accordance with the provisions thereof;
provided, however, that the maturity date may be extended for a period of 12
months to February 15, 2001 upon agreement of the Lender, Borrower and the
Guarantor, subject to the terms hereof.
"Monthly Period" means, with respect to any Distribution Date, the
period from and including the preceding Distribution Date (or in the case of the
first Distribution Date, from and including the Funding Date) to and excluding
the applicable Distribution Date.
"Monthly Principal Payment" means, with respect to each Distribution
Date, (a) the Applicable Percentage of the greater of (i) Cash Receipts for the
related Monthly Period and (ii) Projected Cash Receipts for such Monthly Period.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" as
defined in section 4001(a)(3) of ERISA.
"Participant" has the meaning specified in Section 12(a).
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor thereto.
"Person" means any legal person, including any individual,
corporation, limited liability company, partnership, joint venture, estate,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity.
"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Borrower or any of its Affiliates
or with respect to which the Borrower or any of its Affiliates may have any
liability.
"Pledged Assets" means the Certificates and the Fees and Release
Amounts.
"Projected Cash Receipts" means those amounts scheduled on Exhibit C
hereto.
-7-
<PAGE>
"Rate Determination Date" means, with respect to any day in an
Interest Reset Period, the second London Business Day prior to such day.
"Reference Banks" means two major banks in the London interbank market
as selected by Lender. Each Reference Bank shall be a leading bank engaged in
transactions in Eurodollar deposits in the international Eurocurrency market
with an established place of business in London and which has been designated as
such by Lender and is able and willing to provide such quotations to Lender on
each Rate Determination Date. If any Reference Bank designated by Lender fails
to meet the qualifications of a Reference Bank, Lender will use its best effort
to designate an alternative Reference Bank.
"Related Document" means, as applicable, any document executed in
connection herewith (including the Guaranty Agreement, the Warrant, Warrant
Agreement and the Side Letter) or with the Repurchase Facility or with the
Securitization Trusts, or related hereto or thereto.
"Repurchase Facility " means that repurchase facility created (a)
pursuant to the Amended and Restated Master Repurchase Agreement, dated February
4, 1998 and (b) the Master Repurchase Agreement, dated October 15, 1992, each
between Lender and Green Tree Finance Corp. -- Five, as the same may be amended,
supplemented or otherwise modified from time to time.
"Restricted Payment" means, as applied to any Person,
(i) any dividend or other distribution (including any
distribution of properties, assets, cash, rights,
obligations or securities), direct or indirect, on account
of any shares of capital stock of such Person now or
hereafter outstanding or any securities convertible into or
exercisable or exchangeable for such shares of capital
stock, except for a dividend payable to all of the holders
of such Person's common stock solely in shares of common
stock; and
(ii) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of capital stock of such
Person now or hereafter outstanding or any securities
convertible into or exercisable or exchangeable for such
shares of capital stock.
"Secured Note" means the promissory note in the form attached hereto
as Exhibit B hereto.
"Securitization Trusts" means, collectively, the trusts listed in
Schedule 1 hereto, as such schedule may be amended from time to time in
accordance with the terms hereof.
-8-
<PAGE>
"Side Letter" means that certain Letter Agreement between Guarantor
and Lender dated the date hereof.
"Telerate Page 3750" means the display so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Trust Agreement" means the trust or other agreement with respect to
the related Securitization Trust pursuant to which a Pledged Asset is issued.
"Trustees" means, collectively, the trustees of the Securitization
Trusts whose duties include administering distributions on the Pledged Assets.
"Warrant" means the common stock warrant of the Guarantor issued to
the Lender on or prior to the date of funding of the Loan.
"Warrant Agreement" means, collectively, the Common Stock Warrant
Agreement and Registration Rights Agreement, each dated the date hereof and each
between the Lender and Guarantor pursuant to which the Warrant is issued.
"Withdrawal Liability" shall have the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
Section 2. Loan. (a) Subject to the terms and conditions of this
Agreement, Borrower hereby agrees to borrow from Lender and Lender hereby agrees
to lend to Borrower the Loan Amount (the "Loan"). The Loan shall be evidenced by
the Secured Note. The Loan shall be collateralized by, among other things the
Pledged Assets, as set forth in Section 4. Prior to making the Loan, the
Borrower shall fulfill the following conditions precedent:
(i) The representations and warranties of the Borrower
in Section 5 hereof and of the Guarantor in
Section 2 of the Guaranty Agreement shall be true
and correct;
(ii) No Default or Event of Default shall have occurred
and be continuing;
(iii) The Borrower shall have delivered to the Lender
the certificates evidencing the Certificates with
all necessary bond powers or transfer instruments
executed in blank or in the name specified by the
Lender by the appropriate officers of the
Borrower, and such other documents as may be
required to transfer the Certificates of record
pursuant to the applicable Trust operative
agreements and/or as the Lender shall require to
perfect its first priority
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security interest in such Certificates, including,
without limitation, signature guarantees;
(iv) The Lender shall have received a certificate of
the Secretary of each of the Borrower and the
Guarantor certifying as to the following: (A) its
certificate of incorporation, (B) its bylaws, (C)
the resolutions of its board of directors
approving the definitive agreements, documents,
and instruments necessary to consummate the
transactions contemplated hereby, and (D) the
names and true signatures of the officers
authorized on its behalf to sign the definitive
agreements, documents and instruments;
(v) The Lender shall have received a good standing
certificate (or its equivalent) for each of the
Borrower and the Guarantor issued by the Secretary
of State of the jurisdiction of each such entity's
incorporation;
(vi) The Related Documents shall be in full force and
effect and in form and substance satisfactory to
Lender.
(vii) The Lender shall have received a search report
provided in writing to the Lender by one of the
national UCC search firms, listing all effective
financing statements that name the Borrower or any
entity that conveyed Pledged Assets to the
Borrower as debtor or seller and that are filed in
the jurisdiction of the Borrower's chief executive
offices and in such other jurisdictions as the
Lender shall request;
(viii) (A) The Borrower shall have (1) notified each of
the Trustees in connection with the Securitization
Trusts of the pledge of the related Pledged Assets
hereunder, and (2) instructed each of the
Trustees, as applicable, to pay all amounts
payable to the holder of the related Certificates
and to pay all related Fees and Release Amounts to
the Collection Account, and (B) each of the
Trustees shall have acknowledged in writing the
instructions set forth in clause (A) above, and a
copy of the fully executed Instruction Letter
shall be delivered to the Lender. Such
notification and instruction shall be in the form
of Exhibit A hereto (each, an "Instruction
Letter");
(ix) The Lender shall have received an original fully
executed copy of this Agreement and the Secured
Note and notice that the Collection Account has
been established;
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(x) The Lender shall have received acknowledgment
copies of effective financing statements of the
Borrower (Form UCC-1 or Form UCC-3, as
appropriate), filed on or prior to the date of the
Loan and naming the Borrower, as "debtor," the
Lender, as "secured party," and describing the
Collateral as the "collateral";
(xi) The Lender shall have received payment of a
structuring fee pursuant to the Side Letter;
(xii) The Lender shall have received the Warrant in form
and substance satisfactory to it;
(xiii) The Lender shall have received such other and
further documents and legal opinions as the Lender
in its sole discretion shall require; and
(xiv) The Lender shall receive the following, each dated
as of such date and in form and substance
satisfactory to the Lender and its counsel:
(1) Favorable authority and enforceability
opinions of counsel to the Borrower and
the Guarantor concerning this Agreement,
the Secured Note and the Guaranty
Agreement; and
(2) Favorable security interest opinions of
counsel to the Borrower concerning the
Collateral pledged hereunder.
(b) The Loan shall mature and shall be due and payable in full,
together with accrued and unpaid interest thereon at the Interest Rate, on the
Maturity Date. The Maturity Date may be extended for a period of twelve months
from February 15, 2000, subject to mutual agreement between Borrower and Lender
as to any additional conditions or provisions of such extension, acceptance of
which shall be without any obligation on the part of Lender and subject to its
sole discretion, and subject to payment to Lender of an extension fee as set
forth in the Side Letter.
(c) The Borrower shall timely make any payment of interest and
principal and any other sum which becomes due and payable, whether by
acceleration or otherwise (including any mandatory prepayment), under the terms
of this Agreement and the Secured Note.
(d) If no Event of Default shall have occurred, on each Distribution
Date all amounts received (i) from the Trustees with respect to the Pledged
Assets or during the related
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Monthly Period or (ii) by the Borrower in connection therewith during the
related Monthly Period (in either case, the "Cash Receipts") shall be applied
without duplication, as follows:
(i) first, to the Lender the amount required to pay or
reimburse the Lender for any fees or expenses
owing to Lender hereunder;
(ii) second, to the Lender the amount required to pay
the Interest Amount;
(iii) third, to the Lender the amount required to pay
the Monthly Principal Payment;
(iv) fourth, if the Loan Balance is greater than zero
and there exists a Margin Deficit, to the Lender
in reduction of the Loan Balance, the Margin
Deficit (provided, however, that nothing herein
shall alter the requirements specified in Section
6 hereof); and
(v) fifth, to the Borrower (by wire transfer on such
Distribution Date pursuant to instructions
provided to the Lender at least one (1) Business
Day prior to such Distribution Date) any and all
remaining amounts, if any; provided, however, that
if the Borrower does not notify the Lender at
least one (1) Business Day prior to such
Distribution Date as to the amount to be remitted
to the Borrower pursuant to this clause fifth and
Cash Receipts for the related Monthly Period for
each Securitization Trust from the Trustees are
not received by noon, New York City time, on such
Distribution Date, the Lender shall make such
remittance on the Business Day following the date
on which the Lender receives all such Cash
Receipts and reconciliation of such assets.
Lender and Borrower acknowledge that certain of the Pledged Assets have
payment dates on the first day of each month. It is agreed that the amount due
on each Distribution Date pursuant to this clause (d) will be prepaid by
applying Cash Receipts, as and to the extent received with respect to the first
day of the month of such Distribution Date, to the amounts scheduled to be due
on such Distribution Date, in the order set forth in this clause (d).
(e) In the event that the Cash Receipts on any Distribution Date are
not sufficient to make a full payment of the amounts set forth in clauses (i)
through (iv) of Section 2(d), the Borrower shall immediately pay to the Lender
on the applicable Distribution Date the amount of such deficiency (which amount
shall be treated hereunder as a Cash Receipt).
(f) In addition to and not in lieu of all other payments due to Lender
hereunder, Borrower shall be required to make a mandatory principal payment in
reduction of
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the Loan Balance (i) upon any securitization of any of the Pledged Assets in an
amount equal to 100% of the proceeds of the securitization of such Pledged
Assets and (ii) in an amount equal to 100% of any Inside Refinancing Payment.
(g) If the Borrower shall have paid or agreed to pay any interest on
the Facility Balance in excess of that permitted by law, then it is the express
intent of the parties hereto with respect thereto that (i) to the extent
possible given the term of the Facility Balance, all excess amounts previously
paid or to be paid by the Borrower be applied to reduce the Facility Balance and
the provisions thereof immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the then applicable law, but so as to permit
the recovery of the fullest amount otherwise called for thereunder, and (ii) to
the extent that the reduction of the Facility Balance and the reformation of the
provisions thereof described in the immediately preceding clause (i) are not
possible given the term of the Facility Balance, such excess amount shall be
deemed to have been paid with respect to the Facility Balance as a result of an
error and upon the Lender obtaining actual knowledge of an error, such amount
shall be refunded to the Borrower.
(h) If at any time prior to the Maturity Date the Borrower desires to
pledge additional residual certificates, fees and/or release amounts
("Additional Assets"), Borrower may borrow an amount hereunder up to 50% of the
Lender Value of the Additional Certificates, but in no event more than the
difference between $500,000,000 and the then current Loan Balance, subject to
mutual agreement between Borrower and Lender as to any additional conditions or
provisions of such borrowing, acceptance of which shall be without any
obligation on the part of Lender and subject to its sole discretion. Any such
borrowing shall be subject to revising Exhibit C hereto taking into account the
cash flows of the Additional Certificates.
(i) The parties hereto acknowledge that in addition to the conditions
precedent set forth in Section 2(a), prior to the making of the Loan, Lender
must have completed such due diligence with respect to the Pledged Assets as it
shall in its sole discretion deem necessary. To the extent that on the Funding
Date, Lender has not completed its due diligence with respect to all of the
Pledged Assets, the principal amount of the Loan advanced on such Distribution
Date will be equal to 50% of the Lender Value of the Pledged Assets as to which
due diligence has been completed. Thereafter, during the period commencing on
the Funding Date until Lender completes such due diligence with respect to all
of the Pledged Assets, as due diligence with respect to additional Pledged
Assets is completed, Lender will make one or more additional advances on the
Loan (i) at such times and in such amounts as Lender and Borrower may agree,
(ii) in each case, in an amount such that the Loan Balance after giving effect
to such advance does not exceed 50% of the Lender Value of the Pledged Assets as
to which due diligence has been completed, with the aggregate amount of all such
advances together with the amount advance on the Funding Date in no event to
exceed $500,000,000 and (iii) so long as on the date of each such advance, (x)
the representations and warranties of the Borrower in Section 5 hereof and of
the Guarantor in Section 2 of the
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Guaranty Agreement shall be true and correct and (y) no Default or Event of
Default shall have occurred and be continuing. Lender agrees to use commercially
reasonable efforts to complete its due diligence within 10 Business Days of the
date of this Agreement.
(j) With the prior written consent of Lender at Lender's sole
discretion, Borrower may substitute other Certificates, Fees and Release Amounts
for any of the Pledged Assets. Such substitution shall be made by transfer to
Lender (such transfer to be reflected on Exhibit D hereto) of the Pledged Assets
in the same manner as the initial pledge of the Pledged Assets hereunder,
including but not limited to the execution of an appropriate assignment,
delivery of any Certificates in the manner described herein to Lender and the
filling of appropriate UCC financing statements.
Section 3. Purpose of this Agreement.
(a) The Borrower agrees that the Loan shall be used for general
corporate purposes as permitted hereunder.
(b) The Borrower does not own, and will not, and will not permit any
subsidiary to, directly or indirectly, use any part of the proceeds of the Loan
for the purpose of purchasing or carrying any "margin stock" within the meaning
of Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System (herein called a "margin security") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause the Loan
to be considered a "purpose credit" within the meaning of said Regulation G or
cause this Agreement or any of the other Related Documents to violate Regulation
G or any other regulation of the Board of Governors of the Federal Reserve
System, or any other applicable law, statute, regulation, rule or order.
Section 4. Pledge and Security. The Borrower hereby pledges all of its
right, title, and interest in, to and under and grants a first lien on, and
security interest in, all of the following property, whether now owned or
hereafter acquired, now existing or hereafter created and wherever located
(collectively, the "Collateral") to the Lender to secure the repayment of
principal and interest on the Loan and payment and performance of all other
amounts or obligations owing to the Lender pursuant to this Agreement, the
Secured Note and any Related Documents:
(a) the Certificates;
(b) the Fees and Release Amounts;
(c) Collection Account; and
(d) all proceeds, payments, income and profits of, and records and
files relating to any and all of any of the foregoing.
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<PAGE>
Section 5. Representations and Warranties.
(a) The Borrower represents and warrants to the Lender as follows, as
of the date hereof (which representations and warranties shall be deemed
repeated on the Funding Date and at all times thereafter until the Borrower has
satisfied in full all of its obligations hereunder as though made on and as of
such date or times):
(i) it has the corporate power and authority and the legal right
to execute and deliver, to perform its obligations under,
and to grant the Lien on the Collateral pursuant to this
Agreement, the Secured Note and all Related Documents to
which it is a party and has taken all necessary action to
authorize its execution, delivery and performance of, and
grant of the Lien on the Collateral pursuant to, this
Agreement, the Secured Note and all such Related Documents;
(ii) this Agreement, the Secured Note and all Related Documents
to which it is party constitute its legal, valid and binding
obligation, enforceable against it in accordance with its
terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally;
(iii) the consummation of the transactions contemplated by this
Agreement, the Secured Note and all Related Documents and
the fulfillment of the terms hereof and thereof will not (i)
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or
lapse of time or both) a default under, its related
certificate of incorporation or bylaws, or any contract,
agreement, indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which it is a
party or by which it or any of its assets is bound and which
would result in a Material Adverse Change, (ii) result in
the creation or imposition of any Lien, adverse claim or
other encumbrance upon any of its assets pursuant to the
terms of any such contract, agreement, indenture, loan
agreement, receivables purchase agreement, mortgage, deed of
trust, or other agreement or instrument, other than as
expressly created under this Agreement, or (iii) violate any
law or order, rule, or regulation applicable to it of any
court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality
having jurisdiction over it or any of its assets and which
would result in a Material Adverse Change;
(iv) it is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal,
state, municipal or governmental agency;
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<PAGE>
(v) no litigation, proceeding or investigation is pending or, to
the best of its knowledge, threatened against it which
litigation, proceeding or investigation is likely to have
consequences that could prohibit its entering into this
Agreement, the Secured Note and all Related Documents to
which it is party or that which is likely to cause a
Material Adverse Change;
(vi) all actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained,
as the case may be, by or from any federal, state or other
governmental authority or agency, that are necessary or
advisable in connection with its execution, delivery and
performance of this Agreement, the Secured Note and all
Related Documents, have been duly taken, given or obtained,
as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or
appeals (administrative, judicial or otherwise) and either
the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are
adequate to authorize the consummation of the transactions
contemplated by this Agreement, the Secured Note and all
Related Documents and the performance of its obligations
hereunder and thereunder;
(vii) it is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the character of
the assets owned or leased or the nature of the activities
conducted makes such qualification or licensing necessary,
except for those jurisdictions in which the failure to be so
qualified or licensed or to be in good standing has not
resulted in, and could not be expected to cause a Material
Adverse Change;
(viii) there has been no change in its assets, liabilities or
financial condition which have been in the aggregate,
materially adverse to it, and no condition or event has
occurred which has resulted in, or could reasonably be
expected to result in, a Material Adverse Change, and it is
solvent as of the date hereof; and it will neither be
rendered insolvent by the transactions contemplated by this
Agreement, the Secured Note and all Related Documents, nor
be left with an unreasonably small amount of capital with
which to engage in its business. The Borrower does not
intend to incur, or believe that it has incurred, debts
beyond its ability to pay such debts as they mature. The
Borrower does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of the
Borrower or any of its assets;
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<PAGE>
(ix) its principal place of business, chief executive office and
location of books and records regarding Collateral is set
forth in Section 13;
(x) it has good and valid title to all of its properties and
assets. It enjoys peaceful and undisturbed possession under
all leases under which it will operate on and all of such
leases are valid, subsisting and in full force and effect;
(xi) it has all licenses as are adequate for the conduct of its
businesses as now conducted and now proposed to be
conducted. Each such license is in full force and effect,
and it has performed all obligations with respect thereto
required of it. No default in its performance or observance
of its obligations thereunder has occurred which permits, or
after notice or lapse of time or both would permit, the
revocation or termination of any such license or which has
resulted in, or could reasonably be expected to result in, a
Material Adverse Change;
(xii) none of this Agreement, the Secured Note, and all Related
Documents, or any financial statements, reports,
certificates or other information furnished by the Borrower
or any of its officers to the Lender in connection with this
Agreement, the Secured Note or any Related Documents contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
contained herein or therein not misleading in the light of
the circumstances under which such statements were made. All
such financial statements have been prepared in accordance
with GAAP. There is no fact known to its executive officers
which has resulted in, or could reasonably be expected to
result in, a Material Adverse Change which has not been set
forth in this Agreement, the Secured Note and all Related
Documents or otherwise disclosed to the Lender;
(xiii) no dispute involving its employees or any of its
relationships with its employees has resulted in, or could
reasonably be expected to result in, a Material Adverse
Change;
(xiv) the Pledged Assets have been offered, issued and sold in
compliance with all applicable laws and (A) there are no
outstanding rights, options, warrants or agreements for the
purchase from, or sale or issuance, in connection with the
Pledged Assets; (B) there are no agreements on the part of
the Borrower to issue, sell or distribute the Pledged
Assets; and (C) the Borrower has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any
securities or any interest therein or to pay any dividend or
in respect of the Pledged Assets; the
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Certificates have been validly issued, and are fully paid
and non-assessable and not subject to preemptive rights;
(xv) the Borrower is the record and beneficial owner of, and has
good and marketable title to the Collateral, free of any and
all Liens or options in favor of, or claims of, any other
Person other than the Lender, except the Lien created by
this Agreement;
(xvi) on the Funding Date, the Lien granted pursuant to this
Agreement will constitute a valid, perfected first priority
Lien on the Collateral, enforceable as such against all
creditors of the Borrower and any Persons purporting to
purchase any Collateral from the Borrower;
(xvii) all of the representations and warranties of any Affiliate
of the Borrower in any Trust Agreement are true and correct;
(xviii) each of the Borrower and its Affiliates has operated and
administered each Plan in compliance with all applicable
laws. Neither the Borrower nor any of its Affiliates has
incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in section 3 of ERISA),
and no event, transaction or condition has occurred or
exists that could be expected to result in the incurrence of
any such liability by the Borrower or any of its Affiliates,
or in the imposition of any Lien on any of the rights or
assets of the Borrower or any of its Affiliates, in either
case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to section 401(a)(29) or 412 of
the Code. The Borrower and its Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA
in respect of Multiemployer Plans. The Borrower and its
Affiliates have made all required contributions to
Multiemployer Plans. Neither the Borrower nor any of its
Affiliates has incurred, nor would expect to incur, any
Withdrawal Liability upon a complete or partial withdrawal
from any Multiemployer Plan. No Multiemployer Plan is, or is
expected to be, insolvent, in reorganization or terminated
within the meaning of Title IV of ERISA; and
(xix) the Borrower is not, and will not become as a result of the
transactions contemplated hereby, an "investment company" or
a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as
amended.
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(b) Upon discovery by the Borrower of any breach of any of the
representations and warranties listed in this Section 5, the Borrower shall
promptly give notice of such discovery to the Lender.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 5 or deemed to be made hereunder shall
survive the execution of this Agreement.
Section 6. Collateral Amount Maintenance.
(a) The Lender shall mark to market the Pledged Assets from time to
time in its sole discretion, but at least monthly. If at any time the aggregate
Lender Value of the Pledged Assets is less than 200% of the Facility Balance (a
"Margin Deficit"), then Lender may by notice to Borrower require Borrower to
cure such Margin Deficit by delivering cash or such other additional collateral
as is acceptable to the Lender in its sole discretion, to Lender within one (1)
Business Day of notice thereof.
(b) Notice required pursuant to subsection (a) may be given by any
means of telecopier or telegraphic transmission. A notice for the payment of a
Margin Deficit received before 9:00 a.m. on a Business Day, local time, of the
party receiving the notice, must be met not later than 5:00 p.m. on the Business
Day on which the notice was given, local time, of the party receiving the
notice. Any notice given on a Business Day after 9:00 a.m., local time, of the
party receiving the notice, shall be met not later than 2:00 p.m. (New York
time) on the following Business Day. The failure of Lender, on any one or more
occasions, to exercise its rights under subsection (a) of this Section 6 shall
not change or alter the terms and conditions to which this Agreement is subject
or limit the right of the Lender to do so at a later date. A failure or delay by
Lender to exercise its rights under subsection (a) of this Section 6 shall not
limit Lender's rights under this Agreement or otherwise existing by law or in
any way create additional rights for the Borrower.
Section 7. Borrower Covenants.
(a) The Borrower shall promptly deliver to the Lender (i) any report
delivered to security holders pursuant to the Securitization Trusts, including,
without limitation, any trustee's or servicer's report and any reports delivered
to related surety companies; (ii) any notice of transfer of servicing; and (iii)
any other such document or information as the Lender may reasonably request from
time to time, including for each Monthly Period, the related servicing reports
in a readable electronic format by the 15th day of the month.
(b) The Borrower shall permit the Lender to inspect its books and
records relating to the Securitization Trusts, the Pledged Assets and other
matters relating to the transactions contemplated hereby, upon reasonable prior
notice and during normal business hours.
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(c) If the Borrower shall, as a result of its ownership of the Pledged
Assets, become entitled to receive or shall receive any rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for the
Pledged Assets, or otherwise in respect thereof, the Borrower shall accept the
same as the Lender's agent, hold the same in trust for the Lender and deliver
the same forthwith to the Lender in the exact form received, duly endorsed by
the Borrower to the Lender, if required, together with an undated bond power
covering such certificate duly executed in blank and with, if the Lender so
requests, signature guaranteed, to be held by the Lender hereunder as additional
collateral security for the Indebtedness. If any sums of money or property so
paid or distributed in respect of the Pledged Assets shall be received by the
Borrower, the Borrower shall, until such money or property is paid or delivered
to the Lender, hold such money or property in trust for the Lender, segregated
from other funds of the Borrower, as additional collateral security for the
Indebtedness.
(d) Without the prior written consent of the Lender, the Borrower will
not (i) vote to enable, or take any other action to permit, any rights afforded
it as holder of the Pledged Assets under any Trust Agreement, or (ii) sell,
assign, transfer, exchange or otherwise dispose of, or grant any option with
respect to, the Collateral, or (iii) create, incur or permit to exist any
indebtedness, Lien or option in favor of, or any claim of any Person other than
the Lender with respect to, any of the Collateral, or any interest therein,
except for the Lien provided for by this Agreement and the Secured Note, or (iv)
guarantee or otherwise in any way become liable with respect to the obligations
or liabilities of any other Person; provided, however, that Borrower may sell
all or any portion of the Pledged Assets pursuant to a securitization free and
clear of the Lien of this Agreement upon payment of the principal payment
required pursuant to Section 2(f) hereof, so long as no Margin Deficit shall
exist after giving effect to such sale or any such Margin Deficit is cured
concurrently. The Borrower will defend the right, title and interest of the
Lender in and to the Collateral against the claims and demands of all Persons
whomsoever.
(e) At any time and from time to time, upon the written request of the
Lender, and at the sole expense of the Borrower, the Borrower will promptly and
duly execute and deliver such further instruments and documents and take such
further actions as the Lender may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement, the Secured Note
and all Related Documents and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the Lender,
duly endorsed in a manner satisfactory to the Lender, to be held as Collateral
pursuant to this Agreement, the Secured Note and all Related Documents.
(f) The Borrower agrees to pay, and to save the Lender harmless from,
any and all liabilities with respect to, or resulting from any delay in paying,
any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this
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Agreement, the Secured Note and all Related Documents, other than income taxes
of the Lender.
(g) Borrower and Guarantor shall each deliver to the Lender:
(i) with respect to the Guarantor only, as soon as
available and in any event within 45 days after
the end of each quarterly accounting period in
each fiscal year (other than the last quarterly
accounting period of each such fiscal year), its
balance sheet as of the end of such period and the
related statements of operations, shareholders'
equity, and cash flows for such period and for the
portion of such fiscal year ended on the last day
of such period, in each case setting forth in
comparative form the corresponding figures for the
same period and portion of the next preceding
fiscal year, all in reasonable detail and
certified by its chief financial officer to fairly
present the financial position and the results of
its operations, shareholders' equity and cash
flows as of the respective dates and for the
respective period indicated and to have been
prepared in accordance with GAAP, subject to
normal year-end and audit adjustments (and the
absence of footnote presentation);
(ii) with respect to the Guarantor only, as soon as
available and in any event within 90 days after
the end of each of its fiscal years, its balance
sheet as of the end of such year and the related
statements of operations, shareholders' equity,
and cash flows for such year, in each case setting
forth in comparative form the corresponding
figures for the next preceding fiscal year, all in
reasonable detail and accompanied by the standard
unqualified report (which shall not contain any
additional explanatory paragraph concerning
uncertainties or other matters) on such financial
statements of its Independent Accountants,
together with a separate certificate of such
accountants which shall state whether or not their
examination has disclosed the existence, during or
at the end of the fiscal year covered by such
financial statements and/or the date of such
certificate, of any "reportable condition" (as
defined in Statement on Auditing Standards No. 60
issued by the Auditing Standards Board of the
American Institute of Certified Public
Accountants) in its internal control structure or
any of its subsidiaries;
(iii) on the first day of each month, a certificate
signed by the chief financial officer or treasurer
of the Guarantor which shall state that, after due
inquiry, the signer does not have knowledge of the
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existence, during such period or as at the date of
such certificate, of any default or event of
default under this Agreement, the Secured Note and
all Related Documents, or, if such is not the
case, specifying in reasonable detail the nature
and period of existence thereof and what action it
or the Borrower has taken, is taking and proposes
to take with respect thereto;
(iv) as promptly as practicable following any request
of the Lender therefor, copies of all reports or
written comments (including, without limitation,
audit reports, management letters and any other
reports or communications with respect to the
internal control structure) submitted by the
Independent Accountants;
(v) as promptly as practicable (but in any event not
later than three (3) Business Days) after it
becomes aware of the occurrence of any condition
or event which has resulted in, or could
reasonably be expected to result in, a Material
Adverse Change, a certificate of a responsible
officer specifying in reasonable detail the nature
and period of existence thereof, what action it
has taken, is taking and proposes to take with
respect thereto and the date, if any, on which it
is estimated the same will be remedied;
(vi) not later than 11:00 a.m., New York City time, on
the Business Day after it becomes aware thereof, a
report setting forth any material changes or
developments in its business, taken as a whole,
including, without limitation, any material
changes, developments or defaults under any
uncured payment default;
(vii) as promptly as practicable (but in any event not
later than three (3) Business Days after filing),
copies of all materials filed with respect to the
Guarantor thereof with the Securities and Exchange
Commission along with any materials relating to
the Guarantor sent to the Guarantor's
shareholders; and
(viii) on the Business Day prior to the Distribution
Date, on a monthly basis, an analysis of the
amounts received in the Collection Account and the
application thereof pursuant to Section 2 hereof;
(ix) as promptly as practicable, and in any event
within ten days after the Borrower or Guarantor
knows or has reason to believe that any of the
events or conditions described in paragraphs (i)
through (vi) of the definition of "ERISA
Violation" has occurred or exists with respect to
any Plan or Multiemployer Plan,
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including in such notice a description of the
event or condition, a description of the action
that the Borrower or any Affiliate proposes to
take with respect to the event or condition, and a
copy of any report or notice required to be filed
with or given to PBGC by the Borrower or such
Affiliate with respect to such event or condition;
and
(x) such other information as, from time to time, may
reasonably be requested by the Lender.
(h) The Borrower and Guarantor shall each (i) at all times keep proper
books of record and account in which full, true and correct entries shall be
made of its transactions in accordance with GAAP; and (ii) set aside on its
books from its earnings for each fiscal year all such proper reserves as shall
be required in accordance with GAAP.
(i) The Borrower and Guarantor shall each:
(i) pay and discharge promptly as they become due and
payable all taxes, assessments and other governmental charges or
levies of a material nature imposed upon it or its income or upon any
of its assets as well as all claims of any kind which, if unpaid,
might by law become a Lien upon its property; provided, however, that
shall it not be required to pay any such tax, assessment, charge, levy
or claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings and if
it shall have set aside on its books such reserves, if any, with
respect thereto as are required by GAAP and deemed adequate by it and
its Independent Accountants; provided, further, that it shall pay any
such tax, assessment, charge, levy or claim prior to the commencement
of any proceeding to foreclose any Lien securing the same;
(ii) do or cause to be done all things necessary to preserve
and maintain in full force and effect its corporate existence, and all
licenses material to its business;
(iii) maintain and keep its assets in good repair, working
order and condition, ordinary wear and tear excepted, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; and
(iv) comply with the requirements of all applicable laws,
statutes, rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities having
jurisdiction over its operations respect of the conduct of its
business and the ownership of its property; provided, however, that it
shall not be required by reason of this Section 7(i)(iv) to comply
therewith at any time while its shall be contesting its obligation to
do so in good faith by appropriate proceedings, and if it shall have
set aside on its books such reserves, if any, with respect thereto as
are required by GAAP.
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(j) The Borrower shall not, without the consent of the Lender, which
consent may be withheld in its sole discretion, directly or indirectly, make or
commit to make any Restricted Payment which would cause a Default or an Event of
Default.
(k) Guarantor on a consolidated basis with its Subsidiaries shall: (i)
at all times after the date hereof, maintain an Adjusted Tangible Net Worth of
at least $1,422,292,000; (ii) for the twelve-month period ending on each Fiscal
Quarter, maintain a Fixed Charge Coverage Ratio of not less than 1.25:1.0; and
(iii) at all times after the date hereof, maintain a Debt to Equity Ratio of not
more than 5.0:1.0.
For purposes of this clause (k):
"Adjusted EBIT" means, for any applicable computation
period, the Guarantor's and Subsidiaries' Net Income on a consolidated
basis, plus (a) income and franchise taxes paid or accrued during such
period and (b) Interest Expense, minus (a) income derived from
discontinued operations of the Guarantor and its Subsidiaries and (b)
extraordinary gains of the Guarantor and its Subsidiaries resulting
from changes in the application of Agreement Accounting Principles.
"Adjusted Tangible Net Worth" means, at any date, (i) Net
Worth plus (ii) Subordinated Indebtedness minus (iii) Intangible
Assets.
"Agreement Accounting Principles" means generally accepted
accounting principles as in effect on the date hereof, applied in a
manner consistent with those used in preparing Guarantor's financial
statements.
"Consolidated Debt" means, at any time, the aggregate
principal amount of indebtedness outstanding at such time of the
Guarantor and its Subsidiaries as reflected on the consolidated
balance sheet of the Guarantor and its Subsidiaries, prepared in
accordance with Agreement Accounting Principles.
"Debt to Equity Ratio" means, at any time, the ratio of (a)
Consolidated Debt to (b) Net Worth.
"Fiscal Quarter" means each of the four quarterly accounting
periods comprising a Fiscal Year.
"Fiscal Year" means the twelve-month accounting period
commencing on January 1 and ending on December 31 of each year.
"Fixed Charge Coverage Ratio" means, for any applicable
computation period, the ratio of (a) Adjusted EBIT to (b) Interest
Expense.
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<PAGE>
"indebtedness" of Guarantor means Guarantor's (a)
obligations for borrowed money, (b) obligations representing the
deferred purchase price of property (whether real or personal,
tangible or intangible) or services (other than accounts payable
arising in the ordinary course of such Guarantor's business payable on
terms customary in the trade), (c) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production
from Property now or hereafter owned or acquired by Guarantor, (d)
obligations which are evidenced by notes, acceptances, or similar
instruments, (e) capitalized lease obligations, (f) rate hedging
obligations, (g) contingent obligations of any type, (h) obligations
for which Guarantor is obligated pursuant to or in respect of a letter
of credit or similar instrument and (i) repurchase obligations or
liabilities of Guarantor with respect to accounts or notes receivable
and chattel paper sold by such Person.
"Interest Expense" means, for any applicable computation
period, all interest paid or accrued during such period by the
Guarantor and its Subsidiaries on a consolidated basis, determined in
accordance with Agreement Accounting Principles.
"Intangible Assets" means, at any date, the assets of the
Guarantor and its consolidated Subsidiaries which would be treated as
intangibles in accordance with Agreement Accounting Principles.
"Net Income" means, for any computation period, with respect
to the Guarantor on a consolidated basis with its Subsidiaries (other
than any Subsidiary which is restricted from declaring or paying
dividends or otherwise advancing funds to its parent whether by
contract or otherwise), cumulative net income earned during such
period as determined in accordance with Agreement Accounting
Principles.
"Net Worth" means, at any date, the consolidated common
stockholder's equity of the Guarantor and its consolidated
subsidiaries determined in accordance with Agreement Accounting
Principles.
"Subordinated Indebtedness" means, at any time, any
indebtedness of the Guarantor the payment of which is contractually
subordinated to payment of the obligations represented by the Guaranty
to the written satisfaction of the Lender. Subordinated Indebtedness
shall include, without limitation, (i) the indebtedness in respect of
those certain 10-1/4% Senior Subordinated Notes due June 1, 2002
issued pursuant to that certain Indenture by and between the Guarantor
and First Wisconsin Trust Company dated as of March 15, 1992 and (ii)
any other indebtedness of the Guarantor issued on substantially
similar subordination terms and on other terms reasonably satisfactory
to the Lender.
"Subsidiary" of means (a) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall
at the time be owned or controlled, directly or indirectly, by
Guarantor or by one or more of its Subsidiaries or
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<PAGE>
by Guarantor and one or more of its Subsidiaries, or (b) any
partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled.
(l) Without the Lender's prior written consent, the Borrower shall not
consummate any merger or consolidation with any Person or sell all or
substantially all of its assets, unless the surviving entity by law or by
agreement in favor of the Lender assumes the Borrower's obligations under this
Agreement, the Secured Note, the Repurchase Facility and all Related Documents
and such transaction would not result in or cause a Default or an Event of
Default.
(m) The Borrower shall promptly give to the Lender notice of all legal
or arbitration proceedings affecting or that could cause a Material Adverse
Change.
(n) The Borrower shall not amend any Trust Agreement or any Related
Documents, or any organizational document pertaining to it or any Securitization
Trust without first obtaining the written consent of the Lender.
(o) The Borrower shall notify the Lender as soon as possible, but in
no event later than one (1) Business Days after obtaining actual knowledge
thereof, if any event has occurred that constitutes a Default or an Event of
Default.
(p) At any time after the Funding Date, if the Borrower enters into
one or more Hedging Contracts, the Borrower and shall assign the benefit thereof
to Lender.
Section 8. Events of Default. Each of the following shall constitute
an "Event of Default" hereunder:
(a) Failure of the Borrower and Guarantor to make any payment of
interest or principal or any other fee, expense, or any other amount owing to
the Lender, which has become due whether by acceleration or otherwise under the
terms of the Secured Note or this Agreement which failure is not remedied within
one (1) Business Day, in the case of the failure to make any payment of
principal or, interest or to cure any Margin Deficit, or two (2) Business Days,
in the case of the failure to make any other payment.
(b) Assignment or attempted assignment by the Borrower of this
Agreement or by the Guarantor of the Guaranty Agreement or any rights hereunder
or thereunder or the granting by the Borrower of any security interest, lien or
other encumbrance on any Collateral to other than the Lender.
(c) The filing against the Borrower or Guarantor of a petition for
liquidation, reorganization, arrangement or adjudication as a bankrupt or
similar relief under the bankruptcy, insolvency or similar laws of the United
States or any state or territory thereof
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<PAGE>
or of any foreign jurisdiction as to which the Borrower or Guarantor, as the
case may be, fails to secure dismissal within 60 days of such filing, or the
appointment of a receiver, conservator, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Borrower or Guarantor,
or, in the case of either Borrower or Guarantor, of any substantial part of its
property, the ordering or the winding-up or liquidation of its affairs, or the
entry of a decree or order for relief by a court having jurisdiction in the
premises in respect of the Borrower or Guarantor, in any involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect.
(d) Commencement by the Borrower or Guarantor of a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by the Borrower or Guarantor, to the entry
of an order for relief in an involuntary case under any such law or to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Borrower or
Guarantor or, in the case of either Borrower or Guarantor, of any substantial
part of its property, or the making by the Borrower or Guarantor of any general
assignment for the benefit of creditors, or the failure of the Borrower or
Guarantor generally to pay its debts as such debts become due, or the taking of
corporate action by the Borrower or Guarantor in furtherance of any of the
foregoing.
(e) Any material and adverse change in the financial condition or
operations of the Borrower or Guarantor, or the existence of any other condition
which, in Lender's sole discretion, constitutes an impairment of the Borrower's
or Guarantor's ability to perform its obligations under this Agreement, under
the Secured Note or under the Guaranty Agreement and which condition is not
remedied within one Business Day.
(f) An Event of Default under the Repurchase Facility.
(g) A breach by the Borrower of any covenant set forth herein or by
Guarantor of any covenant set forth in the Guaranty Agreement, or of the terms
and provisions of any other agreement between the Borrower and Lender or
Guarantor and Lender, in any case, which condition is not remedied within five
(5) days, or in the case of a Margin Deficit, one (1) Business Day, other than
breaches otherwise referred to in this Section 8.
(h) Any change in the identity of the servicer of any of the
Securitization Trusts.
(i) A default by the Borrower or Guarantor on any of their debt
instruments, financing facilities, or other financing agreements or agreement
with any Person other than the Lender, if the then aggregate outstanding
principal amount thereof exceeds $5,000,000.
(j) A representation or warranty of the Borrower in this Agreement,
the Secured Note or any Related Document shall prove to be incorrect in any
material respect.
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(k) A representation or warranty of the Guarantor in the Guaranty
Agreement shall prove to be incorrect in any material respect.
(l) An ERISA Violation occurs.
(m) The Guarantor shall terminate, revoke, rescind, disaffirm or fail
to honor any of its obligations or covenants under the Guaranty Agreement or
notice is received by Lender from Guarantor of its intention to take any of the
aforementioned actions.
(n) The failure of the Lender to have a perfected security interest in
first-priority position in any Collateral.
Section 9. Remedies Upon Default. Upon the happening of one or more
Events of Default:
(i) the Lender may immediately declare the principal of and
accrued and unpaid interest on the Secured Note, any and all amounts
due to the Lender under this Agreement and the Secured Note and
Related Documents or under any other agreement between Lender or any
Affiliate of Lender, and Borrower, the Guarantor or any Affiliate of
the Guarantor, to be immediately due and payable, together with all
fees and expenses due and payable to the Lender hereunder and
thereunder and, to the extent permitted by applicable law, interest on
all of the foregoing at the Interest Rate (collectively, the
"Indebtedness"); provided, however, that upon the occurrence of one of
the Events of Default referred to in Sections 8(c) and 8(d), such
amounts shall immediately and automatically become due and payable
without any further action by any person or entity; provided, further,
that upon such declaration or automatic acceleration, the balance of
all outstanding Indebtedness shall become immediately due and payable
without presentation, demand or further notice of any kind and Lender
may apply all Cash Receipts against all Indebtedness until it is paid
in full, in such order of priority as the Lender in its sole
discretion shall determine;
(ii) if an Event of Default shall occur and be continuing,
the Lender may exercise, in addition to all other rights and remedies
granted in this Agreement, the Secured Note and all Related Documents
and in any other instrument or agreement securing, evidencing or
relating to the Indebtedness, all rights and remedies of a secured
party under the Uniform Commercial Code as in effect in the State of
New York. Without limiting the generality of the foregoing, the
Lender, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower or any
other Person (all and each of which demands, defenses, advertisements
and notices are hereby waived), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or
options to purchase or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the foregoing), in one
or more parcels at
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public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices
as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Lender shall have the right
upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any
part of the Collateral so sold, free of any right or equity of
redemption of the Borrower, which right or equity is hereby waived or
released. The Lender shall apply any proceeds from time to time held
by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the
care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Lender hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Indebtedness, in such order as
the Lender may elect, and only after such application and after the
payment by the Lender of any other amount required by any provision of
law, including, without limitation, Section 9-504(1)(c) of the Uniform
Commercial Code as in effect in the State of New York, need the Lender
account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages
and demands it may acquire against the Lender arising out of the
exercise by the Lender of any of its rights hereunder. If any notice
of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The
Borrower shall remain liable for any deficiency if the proceeds of any
sale or other disposition of Collateral are insufficient to pay the
Indebtedness, the fees and disbursements of any attorneys employed by
the Lender in connection with the Indebtedness and all other expenses
of the Lender in connection therewith; and
(iii) the Lender may dispose of or otherwise deal with the
Collateral in such manner as the Lender, in its sole and absolute
discretion, deems necessary or desirable to maximize the likelihood of
repayment in full of the Indebtedness.
Section 10. Indemnification. (a) The Borrower hereby agrees to
indemnify the Lender, the Lender's designee and each of its officers, directors,
employees and agents ("Indemnified Parties") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
taxes (other than income taxes of the Lender), fees, costs, expenses (including
reasonable attorneys fees and disbursements) or disbursements (all of the
foregoing, collectively "Indemnified Amounts") which may at any time (including,
without limitation, such time as this Agreement, the Secured Note or any other
Related Document shall no longer be in effect and the Indebtedness shall have
been paid in full) be imposed on or asserted against any Indemnified Party in
any way whatsoever arising out of or in connection with, or relating to, this
Agreement, the Secured Note or any other Related Document or any transactions
thereunder or any action taken or omitted to be taken by any Indemnified Party
under or in connection with any of the foregoing; provided, that Borrower
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shall not be liable for Indemnified Amounts resulting from the gross negligence
or willful misconduct of any Indemnified Party.
(b) Costs and Expenses. The Borrower hereby agrees to pay on demand
all costs and expenses incurred by the Lender in connection with (i)
negotiation, preparation, execution and delivery of this Agreement, the Secured
Note and the other Related Documents, (ii) the negotiation, preparation,
execution and delivery of any amendments to any of them, (iii) the
administration (including periodic auditing) of this Agreement, the Secured Note
and the other Related Documents and the transactions contemplated hereby and
thereby, and (iv) the enforcement of this Agreement, the Secured Note or any
other Related Documents, or any actual or claimed breach hereunder or
thereunder. Such costs and expenses shall include, without limitation, (A) the
reasonable fees and expenses of counsel to the Lender incurred in connection
with any of the foregoing or in advising the Lender as to its rights and
remedies under the Agreement, the Secured Note or any Related Document or any
such other documentation, (B) all reasonable out-of-pocket expenses incurred by
third parties retained by the Lender in connection with any review of the
Borrower's books and records and paid to third-parties engaged by the Lender,
(C) all out-of-pocket costs and expenses incurred by the Lender and its agents
in connection with the foregoing, and (D) all stamp or other taxes (other than
taxes based on income) incurred by any Indemnified Party in connection with this
Agreement, the Secured Note or any other Related Documents.
(c) The provisions of Sections 10 (a) and (b) shall survive the
termination of this Agreement.
Section 11. Power of Attorney. The Borrower hereby (a) authorizes the
Lender, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Lender at its option may deem appropriate, and (b) appoints the Lender as
the Borrower's attorney-in-fact to execute any such financing statement or
statements in the Borrower's name and to perform all other acts which the Lender
deems appropriate to perfect and continue the security interest granted hereby
and to protect, preserve and realize upon the Collateral, including, but not
limited to, the right to endorse notes, complete blanks in documents and sign
assignments on behalf of the Borrower as its attorney-in-fact. This Power of
Attorney is coupled with an interest and is irrevocable without the Lender's
consent.
Section 12. Participation; Assignments. (a) The Lender may sell,
pledge, sell subject to a repurchase arrangement, or otherwise hypothecate (any
such event, a "Hypothecation") to one or more entities (each, a "Participant")
participating interests in (i) the Facility Balance owing to the Lender, (ii)
the Secured Note held by the Lender and (iii) any other interest of the Lender
hereunder or under the Guaranty Agreement, without notice to, or the consent of,
Borrower or Guarantor. In the event of any Hypothecation by the Lender of a
participating interest to a Participant, the Lender shall be obligated to act as
the sole representative of any and all Participants and shall be entitled to
unilaterally exercise all of the
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rights, and perform all of the obligations of, the Lender hereunder. In no event
shall the number of Participants at any one time exceed 25.
(b) The Lender may assign this Agreement or any of its rights or
obligations hereunder without notice to, or the consent of, the Borrower. The
Borrower shall not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the Lender.
Section 13. Notices. Except as otherwise specified in this Agreement,
all demands, notices and communications relating to this Agreement shall be in
writing and shall be deemed to have been duly given if mailed, by registered or
certified mail, return receipt requested, or by facsimile transmission or by
overnight courier, or, if by other means, when received by the other party or
parties at the address shown below, or such other address as may hereafter be
furnished to the other party or parties by like notice. Any such demand, notice
or communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the
case of registered or certified mail, by the date noted on the return receipt).
If to the Borrower:
Green Tree Residual Finance Corp. I
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102-1639
Attention: President
Telephone: (612) 293-3400
Facsimile: (612) 293-5746
If to the Lender:
Lehman Commercial Paper Inc.
200 Vesey Street
8th Floor
New York, NY 10285-0900
Attention: Gene Nagotko
Telephone: (212) 526-9249
Facsimile: (212) 526-7423
101 Hudson Street, 30th Floor
Jersey City, NJ 07302
Attention: Chris Czako
Telephone: (201) 524-4494
Facsimile: (201) 524-4439
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Section 14. No Oral Modifications; Successors and Assigns. No
provisions of this Agreement shall be waived or modified except by a writing
duly signed by the authorized agents of the parties hereto. This Agreement shall
be binding upon the successors and assigns of the parties hereto.
Section 15. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 16. No Waiver. No delay or omission of the Lender to exercise
any right or remedy accruing under this Agreement (including upon any Event of
Default) shall impair any such right or remedy or constitute a waiver of any
such right or remedy or an acquiescence therein. Every right and remedy given by
this Agreement or by law to the Lender may be exercised from time to time, and
as often as may be deemed expedient, as permitted under the terms hereof, by the
Lender.
Section 17. Governing Law; Agreement Constitutes Security Agreement.
This Agreement is intended by the parties hereto to be governed by the
laws of the State of New York, without regard to principles of conflicts of law,
and to constitute a security agreement within the meaning of the New York
Uniform Commercial Code.
Section 18. Jurisdiction.
The parties hereby irrevocably submit to the jurisdiction of any
federal court sitting in New York, New York in any action or proceeding arising
out of or relating to this Agreement, the Secured Note or any other Related
Document, and the parties hereby irrevocably agree that all claims in respect of
such action or proceeding may be heard and determined in such federal court. The
parties hereby irrevocably waive, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of such action or
proceeding and irrevocably consent to the service of any summons and complaint
and any other process by the mailing of copies of such process to them at their
respective address specified in Section 13. The parties hereby agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 18 shall affect the right of the Lender
to serve legal process in any other manner permitted by law or affect the right
of the Lender to bring any action or proceeding against the Borrower or its
property in the courts of other jurisdictions.
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Section 19. WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT
DELIVERED HEREUNDER OR THEREUNDER.
Section 20. Integration. This Agreement, the Secured Note and the
other Related Documents together contain a final and complete integration of all
prior expressions by the parties with respect to the subject matter hereof and
thereof and shall constitute the entire agreement among the parties with respect
to such subject matter, superseding all prior oral or written understandings.
Section 21. Advice from Independent Counsel. The parties understand
that this Agreement, the Secured Note and each of the other Related Documents to
which it is a party is a legally binding agreement that may affect such party's
rights. Each party represents to the other that it has received legal advice
from counsel of its choice regarding the meaning and legal significance of this
Agreement, the Secured Note and each of the other Related Documents to which it
is a party and that it is satisfied with its legal counsel and the advice
received from it.
Section 22. Judicial Interpretation. Should any provision of this
Agreement, the Secured Note or any of the other Related Documents require
judicial interpretation, it is agreed that a court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against any Person by reason of the rule of construction that
a document is to be construed more strictly against the Person who itself or
through its agent prepared the same, it being agreed that all parties have
participated in the preparation of this Agreement, the Secured Note and each of
the Related Documents.
[SIGNATURE PAGE FOLLOWS]
-33-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
GREEN TREE RESIDUAL FINANCE CORP. I
By:_____________________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.
By:_____________________________________
Name:
Title:
-34-
<PAGE>
Exhibit A
FORM OF INSTRUCTION LETTER
- --------------------
- --------------------
Dear Ladies and Gentlemen:
Pursuant to Section 2(a)(ix) of the Asset Assignment Agreement dated
as of February 13, 1998 (the "Agreement") by and between Lehman Commercial Paper
Inc., as Lender (the "Lender") and Green Tree Residual Finance Corp. I, as
Borrower (the "Borrower"), the Borrower hereby notifies you under the Trust
Agreement, dated as of ___________, 1998, by and among _______________,
_______________ and you (the "Trust Agreement") that, pursuant to the Agreement,
the Borrower has pledged to the Lender all of the Borrower's right, title and
interest in and to the Certificates [Guarantee Fees] [Release Amounts] issued or
payable pursuant to the Trust Agreement.
Pursuant to Section 2(a)(ix) of the Agreement, the Borrower hereby
instructs you to pay by wire transfer all amounts to be received by it pursuant
to the Trust Agreement and payable thereunder to the registered owner of any of
such Certificates, to the Lender as specified below, unless otherwise instructed
by the Lender from time to time to you. Such payments to the Lender shall be
made by you on the same day on which such amounts would otherwise be payable by
you to such owner. The payment instructions contained herein shall remain
effective until the Lender otherwise instructs you.
The Lender's wire instructions for purposes of all payments related to
such Certificates are:
Citibank NYC ABA 0 21 000089
LCPI
Acct #40615659
Attention: Chris Czako, re: Green Tree Residual Financing
Very truly yours,
By:___________________________________
Name:
Title:
Acknowledged and Agreed by:
__________________________, as the Trustee
By:___________________________________
Name:
A-1
<PAGE>
Title:
cc: Lehman Commercial Paper Inc.
200 Vesey Street
8th Floor
New York, New York 10285-0900
Attn: Gene Nagotko
Facsimile: (212) 526-9249
A-2
<PAGE>
Exhibit B
SECURED NOTE
February 13, 1998
FOR VALUE RECEIVED, the undersigned, GREEN TREE RESIDUAL FINANCE CORP.
I, a Minnesota corporation, whose address is 1100 Landmark Towers, 345 St. Peter
Street, St. Paul, MN 55102-1639 (the "Borrower"), promises to pay to the order
of LEHMAN COMMERCIAL PAPER INC., a New York corporation, whose address is 200
Vesey Street, 8th Floor, New York, New York 10285 (the "Lender") on or before
the Maturity Date, in lawful money of the United States of America, the
principal sum of $500,000,000 (or such lesser amount as may in the aggregate
have been advanced by Lender to Borrower pursuant to the Agreement referenced
below) plus interest, as follows:
DEFINITIONS. Unless otherwise defined, capitalized terms used herein
have the meanings assigned to them in the (a) Asset Assignment Agreement dated
as of February 13, 1998 (the "Agreement") by and between the Lender and Borrower
named therein.
GENERAL TERMS. (i) Principal is payable in accordance with the
Agreement, provided the Facility Balance outstanding on the Maturity Date shall
be due and payable on the Maturity Date.
(ii) Interest shall accrue daily on the Facility Balance a rate per
annum equal to the Interest Rate computed in accordance with the Agreement.
MAXIMUM RATE OF INTEREST: If the Borrower shall have paid or agreed to
pay any interest on the Facility Balance in excess of that permitted by law,
then it is intended with respect thereto that (i) to the extent possible given
the term of the Facility Balance, all excess amounts previously paid or to be
paid by the Borrower be applied to reduce the Facility Balance and the
provisions thereof immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the then applicable law, but so as to permit
the recovery of the fullest amount otherwise called for thereunder and (ii) to
the extent that the reduction of the Facility Balance and the reformation of the
provisions thereof described in the immediately preceding clause (i) are not
possible given the term of the Facility Balance, such excess amount shall be
deemed to have been paid with respect to the Facility Balance as a result of an
error and upon the Lender obtaining actual knowledge of such error, such amount
shall be refunded to the Borrower.
SECURITY: This Note is issued pursuant to the Agreement and is secured
by a pledge of the Collateral described therein.
DEFAULTS: Upon the happening of an Event of Default, the Lender shall
have all rights and remedies set forth in the Agreement.
B-1
<PAGE>
The failure to exercise any of the rights and remedies set forth in
the Agreement shall not constitute a waiver of the right to exercise the same or
any other option at any subsequent time in respect of the same event or any
other event. The acceptance by the Lender of any payment hereunder which is less
than payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of the right to exercise any of the foregoing
rights and remedies at that time or at any subsequent time or nullify any prior
exercise of any such rights and remedies without the express consent of Lender,
except as and to the extent otherwise provided by law.
WAIVERS: The Borrower waives diligence, presentment, protest and
demand and also notice of protest, demand, dishonor and nonpayment of this Note,
and expressly agrees that this Note, or any payment hereunder, may be extended
from time to time, and consents to the acceptance of further Collateral, the
release of any Collateral for this Note, the release of any party primarily or
secondarily liable hereon, and that it will not be necessary for the Lender, in
order to enforce payment of this Note, to first institute or exhaust Lender's
remedies against the Borrower or any other party liable hereon or against any
collateral for this Note. None of the foregoing shall affect the liability of
the Borrower and any endorsers or guarantors hereof. No extension of time for
the payment of this Note, or any installment hereof, made by agreement by the
Lender with any Person now or hereafter liable for the payment of this Note,
shall affect the liability under this Note of the Borrower, even if the Borrower
is not a party to such agreement; provided, however, the Lender and the
Borrower, by written agreement between them, may affect the liability of the
Borrower.
TERMINOLOGY: Any reference herein to the Lender shall be deemed to
include and apply to every subsequent holder of this Note. Words of masculine or
neuter import shall be read as if written in the neuter or masculine or feminine
when appropriate.
GUARANTEE: Principal and interest and all other amounts due to Lender
by Borrower under this Note or under the Agreement are fully and unconditionally
guaranteed by Green Tree Financial Corporation (the "Guarantor") pursuant to a
Guaranty Agreement, dated the date hereof, between Guarantor and the Lender.
AGREEMENT: Reference is made to the Agreement for provisions as to
mandatory prepayments, collateral and acceleration.
THIS NOTE IS GOVERNED BY THE PROVISIONS OF THE AGREEMENT WHICH IS
INCORPORATED HEREIN BY REFERENCE, AND IN THE EVENT ANY TERMS OF THIS NOTE ARE
INCONSISTENT WITH THE TERMS OF THE AGREEMENT, THE TERMS OF THE AGREEMENT SHALL
GOVERN THIS NOTE. NOTWITHSTANDING THE FOREGOING SENTENCE, NO REFERENCE HEREIN TO
THE AGREEMENT AND NO PROVISION OF THIS NOTE OR OF THE AGREEMENT SHALL ALTER OR
IMPAIR THE OBLIGATION OF THE BORROWER, WHICH IS ABSOLUTE AND UNCONDITIONAL, TO
PAY THE PRINCIPAL OF AND INTEREST ON THIS NOTE AT THE RESPECTIVE TIMES AND AT
THE RATES HEREIN AND THEREIN PRESCRIBED.
B-2
<PAGE>
APPLICABLE LAW: This Note shall be governed by and construed under the
laws of the State of New York, without regard to principles of conflicts of law,
whose laws the Borrower expressly elects to apply to this Note.
GREEN TREE RESIDUAL FINANCE CORP. I
By:______________________________
Name:
Title:
B-3
<PAGE>
SCHEDULE OF LIQUIDITY LOANS AND
PAYMENTS OF PRINCIPAL UNDER LOAN
NOTE OF LEXINGTON PARKER CAPITAL COMPANY, L.L.C.,
DATED December 30, 1997
Principal Amount of Maturity of Principal Unpaid
Date Liquidity Loan Interest Period Amount Paid Balance
- --------- ------------------- --------------- ----------- -------
B-4
<PAGE>
Exhibit C
Monthly Principal Payment Schedule
Month Monthly Principal Amount
----- ------------------------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
C-1
<PAGE>
Exhibit 12.
GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three months
ended
March 31, 1998
--------------
(unaudited)
Earnings:
Earnings before income taxes $102,376,000
Fixed charges:
Interest 48,492,000
One-third rent 1,239,000
------------
49,731,000
------------
$152,107,000
============
Fixed charges:
Interest $ 48,492,000
One-third rent 1,239,000
------------
$ 49,731,000
============
Ratio of earnings to fixed charges (1) 3.06
============
(1) For purposes of computing the ratio, earnings consist of earnings
before income taxes plus fixed charges.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GREEN TREE FINANCIAL CORPORATION AND SUBSIDIARIES FOR
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,122,937,000
<SECURITIES> 1,412,280,000
<RECEIVABLES> 2,154,646,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,255,242,000
<CURRENT-LIABILITIES> 0
<BONDS> 510,484,000
0
0
<COMMON> 1,419,000
<OTHER-SE> 1,347,800,000
<TOTAL-LIABILITY-AND-EQUITY> 5,255,242,000
<SALES> 129,116,000
<TOTAL-REVENUES> 285,754,000
<CGS> 0
<TOTAL-COSTS> 134,886,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,492,000
<INCOME-PRETAX> 102,376,000
<INCOME-TAX> 38,903,000
<INCOME-CONTINUING> 63,473,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,473,000
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
